Why Do We Have Business or Education Schools in Universities?

Walk into the Faculty Club at a major university and ask the occupants, “What do you think of your business school?” In a large percentage of instances, the reaction likely will be negative. The perceived intellectual content of business courses is vacuous, with low standards of rigor. Often there is anger because business schools pay their faculty more, and have luxurious office and classroom facilities. The general reaction is, “They teach less for more money in fancier facilities.”

Yet the disdain for the business school is often exceeded by that for the school of education. At the top schools such as those in the Ivy League, there is typically either no education school or it is limited to those already having undergraduate degrees in a respectable subject (that is true with respect to business schools too at most top universities). To the rest of the university, the education school is often viewed as the intellectual bottom of the heap, teaching pablum and applying ludicrously non-rigorous standards to evaluate students, who often are perceived as being less qualified than those majoring in the liberal arts, fine arts, or engineering.

These perceptions have had an impact on enrollments. While business school enrollments soared for several decades, there is some souring on business degrees. The M.B.A., previously the ne plus ultra of executive education, has fallen into some disfavor, with a number of respected universities (e.g., the University of Illinois, University of Iowa) essentially abandoning their full-time programs. There has also been a precipitous decline in the education schools’ market share of undergraduate enrollment over time, although talk of teacher shortages may be changing that.

My profession of economics is at the core of business education, but economists often feel more comfortable in liberal arts colleges, rebelling against the narrow materialistic mindset and perceived modest academic standards prevailing in business schools. My own department voted to move from the business school to the arts and sciences college decades ago, despite some trepidation it may cost it resources (it has).

Steven Conn, a historian at Miami University, has written a provocative new book, Nothing Succeeds Like Failure: The Sad History of American Business Schools, arguing that the case for collegiate business schools was weak from the beginning. Some late 19th and early 20th century writers argued the growing complexity and scale of American business necessitated collegiate training in running commercial enterprises. Conn argues in reality business leaders wanted college degrees in order to elevate their social status, helping them, for example, attain admission to the best clubs. Some private clubs (full disclosure: I belong to one) formed in the early 20th century required members to have a college degree.

The broader question is: should universities be sophisticated trade schools, preparing students for specific vocations? Few today, I think, question the value of collegiate training of engineers or those studying the hard sciences. Why is business or education training any different? One answer: those trained as teachers often do no better or even worse than those with a college degree in a subject matter instead of education, and some prominent business leaders did fine with degrees in history, philosophy, or perhaps a liberal arts-oriented economics degree.

Many, most notably Bryan Caplan (The Case Against Education) note, I think correctly, that a college diploma is primarily a signaling device, not any indication of vast and productive “human capital formation” arising from collegiate learning of practical things. My read of the data on worker earnings suggests that a very large portion of the nation’s stock of human capital is created on the job, not in school. To learn on the job, one needs to be able to reason critically and have a knowledge base aligning worker perceptions with real world realities. I think that a broad liberal arts education may be better in achieving that than one centered on courses in management and marketing. While some accounting and finance training probably is vocationally useful and even necessary for success in those areas of business, I find that less true in other business areas. Maybe Conn is right, and the history of business schools is indeed “sad.”