The revenue theory of cost, also referred to as Bowen's law or Bowen's rule, is an economic theory explaining the financial trends of American universities. It was formulated by American economist Howard R. Bowen (1908–1989), who served as president of Grinnell College, the University of Iowa, and the Claremont Graduate School.
The theory posits that costs at universities are almost entirely a function of revenue: universities raise as much money as they possibly can and then spend nearly the entirety of it in an attempt to increase prestige and quality of education. It follows from this that if universities are able to increase their revenue streams, costs will also rise, creating a revenue-to-cost spiral.[1] The revenue theory of cost has thus been offered as an explanation for rising costs at universities, including rising tuition.[2][3][4][5]
^Martin, Robert E. (July 2009). "The Revenue-to-Cost Spiral in Higher Education" (PDF). John William Pope Foundation. Archived (PDF) from the original on May 9, 2021. Retrieved March 25, 2022.
^Matthews, Dylan (September 2, 2013). "The Tuition is Too Damn High, Part VI — Why there's no reason for big universities to rein in spending". The Washington Post. Archived from the original on November 13, 2020. Retrieved March 25, 2022.
^Russell, Josh (April 1, 2015). "Alternative Theories for Rising College Tuition: Baumol's Cost Disease and Bowen's Rule". Ewing Marion Kauffman Foundation. Archived from the original on September 24, 2020. Retrieved March 25, 2022.
^Salmon, Felix (July 9, 2012). "Why is NYU building?". Reuters. Archived from the original on March 25, 2022. Retrieved March 25, 2022.
^Gillen, Andrew (2010). "Financial Aid in Theory and Practice". In Hall, Joshua C. (ed.). Doing More with Less: Making Colleges Work Better. Springer Publishing. p. 23. ISBN 978-1441959591.
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