Institutional Design: Overview

Abstract

Administrators at private universities wish to send new alumni off with a sense that their alma mater truly values them specifically and undergraduate education generally. The turnout of professors at departmental diploma ceremonies sends a visible signal about their interest in the new graduates. Yet attendance at these ceremonies may involve inconvenience or perhaps even substantial opportunity costs. The two departments with which I am most familiar at my university deal with this public goods problem in very different ways. The political science department has developed a strong norm that usually turns out the entire faculty for the diploma ceremony year after year. The economics department has not had an attendance norm in recent years. Several years ago, prompted by several graduations with embarrassingly small faculty turnouts, the chair of the economics department increased attendance substantially by introducing a financial incentive system: each professor contributes a sum of money to an interest- bearing departmental account in September; those who attend the diploma ceremony share equally in the money accumulated in the account