A furor has erupted at RMIT University in Melbourne over PhD desk allocations. Administration is swiftly moving from a ‘personal’ desk allocation system towards ‘hot desk’ access and many of these students are unhappy. But some students remain indifferent — it is with these students where the solution lies.
It is ironic that a ‘college of business’ is ignoring basic economic theory about how to solve this problem: Coasian bargaining.
Many students prefer to use their desk each day while others decide to work from home. From the perspective of the university, however, all of the students have homogeneous preferences. Or, more accurately, each doctoral fee is associated with a bundle of services (a desk, internet access, a supervisor, and so on).
I propose that these services should be un-bundled and traded.
The university has recently over-enrolled and over-staffed. The added population has created an obvious space problem.
The soon-to-be-implemented system impacts all students by moving towards hot desks. But the solution to a problem depends on how the problem is framed.
For a moment let us think of university fees as an exchange for a bundle of property rights. It is only once we understand the problem as an ‘exchange’ problem rather than an ‘allocation’ problem does a Coasian (1960) bargaining solution arise.
The problem is that the students who work from home have no incentive to relinquish (or sell) any of their desk rights. These students are indifferent between sitting at their desk or leaving it absent. On the other hand, a vocal group of students highly value their desks and have a strong preference for a personalized space.
It appears the most efficient scenario here would be to allow students to bargain away some of their property rights (in this case, their desk space.). In exchange for no desk space (a diminished bundle of rights) students would be compensated through university fee discounts.
There is no intrinsic reason why all ‘student services’ should be bundled in one package.
Each service—from desk allocations, to internet, to printing—are separate property rights. This implies different optimal levels of each service, and thus gains from trade.
This property rights bargaining solution intuitively seems much cheaper than either building a new building, decreasing your completion rates, or having your best students run off to better-resourced colleges.
There may also be efficiency gains here — the students who value their desk the most will be happy to keep it, while other students will be compensated. If managed correctly, the university will still make more money from this.
Of course the university doesn’t seem to know who uses desks and who does not (i.e. we have transaction costs). So, how would this system work? Well, we’ll probably need an app for that.
If we can better coordinate the property rights of doctoral students through Coasian bargaining everyone (except middle managers who make their money precisely off these transaction costs) can be better off — we’ll have more efficient use of taxpayer funds and a happier (and hopefully more efficient) cohort of doctoral students.
Note that a similar solution is possible for academic staff. Many staff rarely use their office. Office spaces should be provided as an option, and if academic decide to opt-out, they receive extra salary. (this is not completely crazy — the cost of several square meters in Melbourne CBD is extraordinarily high). Asset specificity is a natural problem here, but I am implying that the university could hire more RMIT academics, rather than renting the space out.
*note that the underlying problem is, of course, the disconnect that comes from taxpayer funding and students, but I will leave that for another post.
**I am also assuming the initial allocation of rights doesn’t matter because the current scenario will give all students equal hot desk rights. The problem will be more complicated if we assume the initial rights as different between individuals who have desks and those who don’t (although the bargaining may not lead to ‘optimum’ I still believe we’d reach a more efficient scenario)
***and, yes, if you haven’t seen the analogy — this is the sharing economy for internal organisation of business.