What does higher education cost? Here's why we're not getting an answer to that question just yet. (Viewpoint).

WHEN I TALK ABOUT HIGHER EDUCATION WITH FRIENDS FROM outside the field, they invariably want to talk about money. Why is college so expensive? they'[[ ask. Isn't anybody watching the books?

I try my best to explain the eccentric economics of higher education. I point out that college isn't as expensive as most people think. (The ACE surveys say Americans in general overestimate it.) Invariably, though, some business-oriented neighbor will pose the killer question: How much does it cost to educate a typical undergraduate? At that point, I have to concede that universities haven't quite come up with an entirely satisfactory answer to the question. The reaction to this observation is always disbelief. How can they not know? What kind of way is that to do business?

That, too, is a hard question to answer. The truth goes to the heart of why IHEs are so uncomfortable with the very idea of thinking of themselves as businesses. Here are some of the reasons:

* The cost question is based on a business model most IHEs don't agree with. That model can imply that institutions are in the instruction business: that they earn their money by parking a talking head in front of a classroom for a set number of hours. Certainly this is part of what colleges and universities do, but not all of it, and anyone who cares about real education is right to fear what will happen if the instruction model becomes a primary way colleges and universities think about themselves.

* Educational institutions still regard themselves as organic, In many ways, a university is stilt its faculty, and its function is still whatever its faculty members happen to do. To break down costs is to accept the idea that there's an alternative to the organic conception of higher education; that it is about its functions and products rather than about the faculty. For many in higher education, that's an idea worth resisting.

* Higher education operates on an intricate network of cross subsidies. In other words, things that attract enrollments, tuition dollars, and grants help pay for things that don't. Freshman Camp helps pay for the Classics department. The big lecture class makes it possible to conduct the intimate seminar. That's a strategy consistent with higher ed's desire to base decisions on academic rather than market standards. If cost data became available in any kind of detail, the results could be dreadful (Imagine parents of freshmen trying to demonstrate that their children are paying the same tuition for instruction that costs less to produce than the instruction of upperclassmen.) A nightmare scenario would be some sort of variable pricing scheme, wherein tuition is based on the actual cost of delivering each course. That system that might look perfectly reasonable to consumers, but would undercut academic standards, leading curriculum decisions to be made on the basis of cost.

* The main reason to ask about costs is to cut them. This is the lesson that everyone in higher ed--or any nonprofit enterprise--has learned too well over many years. But higher education's mission, as the economist Howard Bowen described it, is to turn money into public goods. Less money means fewer goods--or at least that's how it usually looks from inside the institution.

Still, however higher education feels about cost data, it's going to have to provide more. Education is too expensive, and too important, for stakeholders to just hope for the best. Alternatives to traditional IHEs (e,g., University of Phoenix and DeVry) offer compelling evidence that the cost of instruction can be measured and controlled. And after Enron, it is reasonable to expect greater transparency in financial reports. For higher ed, that demand will probably mean new scrutiny of sponsored research, and renewed pressure for straight answers on the cost of undergraduate instruction.

Fortunately, tools for providing some answers are now available. The National Association of College and University Business Officers (NACUBO) has announced a new methodology for tracking undergraduate costs; it allows institutions to track the cost of instruction, and enables peers to compare themselves. But the methodology is not intended for the generation of aggregate cost figures, or in-depth comparisons between or within institutions or departments.

In the long run, institutions will need to discover far more than they know about costs today--maybe more than they want to know. And to count the beans a new way and still keep a sense of mission, standards, and the organic nature of education won't be easy. To fail, however--well, that would carry a cost we really can't afford.

Patrick Clinton is a consultant to leading trade/consumer publications, end author of Guide to Writing for the Business Press. He has been on assistant professor at Medill School of Journalism, Northwestern University, and editor of this publication.