This book attempts to measure the internal efficiency of higher education. It focuses on questions such as, firstly, how to allocate educational expenditures between universities and polytechnics, between departments, and between research and teaching, and so on, that is, between quantity, quality and mixed outputs; and secondly, how to produce the given set of outputs at least cost.
The volume is divided into eight chapters. The first is an overview of the role of economic analysis in education and of problems in planning higher education. The second chapter is devoted to a discussion of the measurement of the outputs and inputs of universities. The third presents a model relating costs to outputs (cost functions) and inputs to outputs (production functions). The chapter which follows deals with the data on which the empirical estimates of the model are based. Chapters five and six are concerned with the results of estimation of aggregated and "allocated" cost functions. Chapter seven presents the results of direct estimates of production functions of teaching and research with the use of time by academic staff. The eighth and last chapter concludes the study on university costs and outputs. References, notes, and indexes are appended.
I have found it a difficult task to review this book, for two reasons. Firstly, I am not an expert on the problems of university costs and outputs. Secondly, I have met with some difficulty in following the multi-product approach to university outputs. For these reasons, I find it easier to discuss Verry and Davies' book in general rather than in detail.
Let me start by explaining why the multi-product firm approach of the university seems to me a bit confusing. Assume that each student derives satisfaction from two basic commodities: future earnings and present leisure. To produce future earnings, students combine their own studying time with other people's time, particularly the teaching and research time of the academic staff and goods or services like libraries, dormitories, and so on. Tb produce present leisure students combine their own time (leisure time) and goods or services like entertainment. Corresponding to the derived demand for these inputs by students is the supply of outputs by the university.