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In 1873, Johns Hopkins University was started with an inflation-adjusted $144.5 million. In 1884, Stanford University began with an inflation-adjusted $139 million. Meanwhile, in 2009, KAUST was started with $10 billion. There's a difference of two orders of magnitude.

Why did it become so much more expensive to start a university in modern times?

  • Comments are not for extended discussion; this conversation has been moved to chat. – eykanal Sep 12 at 16:36
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Besides all the factors that the other answer already lists, the elephant in the room is that KAUST has explicitly been designed to be a world-class university (rather than organically growing into one, as was the case with your other examples).

In short, it is not so much more expensive nowadays to found just any university - in fact new universities get founded all the time, virtually always spending considerable less money than $10 billion - but founding a university with the expectation that it will compete with the best in the world in a very short time frame is expensive. You need to compensate for all the natural growth in budget and prestige that established universities had over the last one or two centuries.

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    I am not sure why this is inconsistent with my answer. – xLeitix Sep 10 at 5:56
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    In other words, Stanford and Johns Hopkins were modest institutions at the time of their founding, by today's standards. – Anonymous Physicist Sep 10 at 5:57
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    @Allure, I'm not sure how much sense it makes to try to adjust budgets from the feudal 13th century to today, but Cambridge started very small and it doesn't take much budget to sustain a dozen or two lecturers whose only expenses are food, lodgings, parchment, and ink. – Peter Taylor Sep 10 at 6:48
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    @Allure According to Wikipedia, Stanford started with a total teaching staff of 35 and 555 students, while Cambridge had an academic staff of 7913, 12 340 undergraduate and 7610 postgraduate students in 2016. – Arnaud D. Sep 10 at 8:17
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    @Allure What I tried to say in my answer is that traditional top universities had one to multiple centuries to grow into the state that they are in now. If you found a university today your frame of reference is not how these universities started ages ago, but what kind of resources they have today (e.g., in terms of endowment). – xLeitix Sep 10 at 9:53
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I would add two other factors to the good answers already available.

  1. Growth of science into multiple fields and disciplines have resulted in increased costs. Back in the day, for example, mathematics was considered one field. But nowadays, there are many diverse subfields within mathematics (e.g., pure maths, statistics, computational math, etc). Creating a university with various departments and faculties results in more human resources cost as well as facilities and equipment costs.
  2. To make scientific and technological advances possible, research has become more relient on expensive lab equipment in the late 20th century and 21st century in comparison with the early 20th century and before that.
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    "Expensive lab equipment" includes things as commonplace as computers, when you're comparing with 1873. The original mathematics departments at John Hopkins or Stanford needed lots of pens, paper, and blackboards; a new mathematics department today needs computers for all the staff, plus servers/clusters/supercomputers for running simulations/models. – Stobor Sep 12 at 1:35
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    @Stobor: I agree, although I don't consider personal computers for common day-to-day tasks as part of the research equipment. They serve multiple purposes such as communication, documenting, studying, and research simultaneously. However, you are taking about HPC and supercomputers, they are part of equipment dedicated solely to research. – Ehsan Sep 12 at 13:30
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I suspect that you’d probably need to look at the budgets for the institutions in question to get a definitive answer, but I can think of a few potential causes:

  1. Increased administrative and bureaucratic costs. In the days when those universities opened, HR departments weren’t a thing, and there was significantly less regulation on businesses in general.

  2. Increased cost and quality of facilities. Technology marches on - and the cost of building a university building before indoor plumbing was a thing is radically different to building a modern university building with electricity, running water, IT infrastructure, projectors and cameras for the lecture theatres, and all the inspections and certifications being done to make sure that all the work is being done in accordance with code.

  3. Computers, in general. That’s an entire field of costs that didn’t exist back then - not only do they need the physical infrastructure and desktop computers for the staff and students to use, but they also need to pay for licenses for all the software that the students would use for their classes, for the university website, for their online learning system, for their class and room allocation system, for their centralised marking and enrolment system, etc.

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    Land cost. You want your university to be located in an accessible location, and that may involve buying out existing land owners, and they will want to cash in. Another is the huge cost of hiring talents. Talents don't join a new, un-ranked university unless there is a HUGE incentive. – Prof. Santa Claus Sep 10 at 5:28
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    @Prof.SantaClaus Land cost generally has not gone up by 100x in ~100 years. If that was the driving factor, it would cost 100 times the amount to start any business, and not be unique to universities. Talent cost also seems like a very minor factor - setting all salaries 50% above the market rate would be a huge incentive to attract talent, and would increase the overall budget by a few dozen percent at best, not anywhere close to 1000% – Nuclear Wang Sep 10 at 13:20
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    Computers, in general. — Even with all the licensing costs, computers are significantly cheaper than chemistry or biology labs, athletic facilities, modern dorms, bloated administrations, or Elsevier subscription packages. – JeffE Sep 10 at 17:40
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    Computer costs are negligible. A graduate student with salary, health insurance, a desk to work on, etc, costs ~$50k per year. They need a laptop worth $1k every three years. – Wolfgang Bangerth Sep 10 at 21:33
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    @NuclearWang I disagree. May be you should try renting/buying a place/land in big cities. Also, you should check out how much top universities pay for top talents; they easily exceed $1 Million USD per year, not including funding for scholarships, labs, etc. Also, some disciplines require expensive equipment, and huge on-going maintenance cost. So everything adds up. – Prof. Santa Claus Sep 10 at 23:20
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Education inflation is currently running about 7-8% (source). I don't have any data on what this rate was a century ago, so I'll just assume it's been constant. The general rate of inflation in the US for the last century has averaged about 3.2%. This means that education inflation is about 4% in real dollars. If you compute 1.04^100, you get about 50, i.e., about two orders of magnitude in a century. This is pretty much the size of the effect you describe in the cost of starting up a new university.

The deeper question would be why inflation in certain areas, such as healthcare and education, is so much higher than the general rate of inflation. I don't think economists have a universally agreed upon explanation for this. My understanding is that there are several explanations, all of which are probably true:

  • Goods and commodities can always go down in value. The cost of a book, for example, is many orders of magnitude less than it was in the middle ages. But services can't become cheaper without bound. Services are provided by humans, who need to live. Therefore there is always a tendency for the non-service part of the economy to shrink in proportion to the service economy.

  • In most countries, healthcare and education are government monopolies, or nearly so. In such a setup, people are using something that they don't pay for, so there is no tendency to restrain their use of the resource.

  • In healthcare and education, people don't or can't make normal decisions on cost and value. For example, if the price of Greek yoghurt gets too high, I can decide to stop eating Greek yoghurt. But if education gets super expensive, I don't just tell my kids not to go to college.

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  1. Instruments and reagent price is on drastic rise. I purchased students grade compound microscopes at Rupees 7000 (each) around 2010, whereas at 2019 the same instruments costs more than Rupees 20,000. (each) This is immense. Previously if a college or university lacked a facility to provide it to students, it was easier to provide it. Whereas in recent years it is much harder to purchase any instruments except plastic vials or centrifuge tubes or micropipette tips.

  2. Unlike household objects like computer, phone, sewing machines etc; there has been no visible effort to drop the price of scientific instruments. The price is ever rising.

  3. Often a lack of mentainance drastically increases the cost. Say a part of building is damaged. While it could be readily repaired, due to carelessness of authority it is not repaired until and unless some devastating thing happens. Same for electrical wire mess, garbages, household appliences that provides electric shock, etc. Although it may not be the global scenario, inaction or showoff to hide the problem, actually increases the hidden costs.

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