Authority and Commitment: Why Universities, Like Legislatures, are Not Organized as Firms

Abstract

This paper explores the functions and limitations of democratic governance by analyzing the allocation of decision-making authority in colleges and universities. Contrary to the conventional perception that large numbers and heterogeneity of voters and issues undermine the efficiency of democratic decision making, data on the allocation of authority for thirty-one decision areas in 826 U.S. colleges and universities show democratic governance to be more prevalent in larger, full-service research universities than in smaller liberal arts colleges and special-curriculum institutions. State- and church-affiliated institutions, meanwhile, tend to be governed more like firms. The results overall are consistent with economic theories of political organization that view democratic governance primarily as a means of enhancing the credibility of commitments rather than as a method of aggregating preferences.

Keywords: higher education, organization, governance, democracy, authority

JEL Classification: L2, L3, I2, D7