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> 1. Revenue is a huge problem, which means academia will become a zero-sum game even (especially!) for higher-compensated labor. Academia's revenue streams come from three sources that are decreasing in real terms. Those revenue streams will likely begin decreasing even in nominal terms even as inflation reaches a higher steady-state! Government budgets for higher education and academic R&D are more likely to decrease than to increase, and even if they increase almost certainly won't keep up with inflation. Meanwhile, due to demographics, the USA in particular is about to enter a period of decreasing college enrollments (unless the percent of the college-going population can increase substantially, which is unlikely).

On the other side, spending is a huge problem as well. Like... professional grade sports teams? As an European: WTF does that kind of shit have to do with universities? Yes, I get it, it attracts students, but you could also carve out the sports teams into separate commercial entities. And the bill isn't small either - the US government helped out with 6.5 billion dollars and student fees with another 1.5 billion dollars [1] in 2018! That is, frankly, insane.

Also, at least Ivy League universities have endowments valued at literally dozens of billions of dollars [2]. The US needs a complete reform of university financing.

[1] https://www.axios.com/2020/03/11/college-sports-financing-st...

[2] https://en.wikipedia.org/wiki/List_of_colleges_and_universit...

> On the other side, spending is a huge problem as well.

Of course. But universities will 100% fire tenured faculty before they kill off a D1 football program or spend down endowment principal. So from the perspective of academic laborers, it's a moot point.

Government could enforce both of these. Threaten universities to either split off their commercial activities or to lose tax benefits. And tax endowments.

No arguments here. Your European is showing ;-)

> 2. There is an oversupply of academic labor and labor is the primary controllable expense.

Can't say I agree with that statement. It was true for decades, but academic employment had been losing its status for years, and the pandemic greatly increased that. There are lots of examples of research positions having few or no applicants. Grad students these days are much less intent on getting academic jobs than even five years ago.

Now, that's not to say that deans across the country aren't continuing to plan as if that's the case, but they may find themselves with a serious problem a decade from now.

> There are lots of examples of research positions having few or no applicants.

I've mostly heard of this happening for two types of roles. The first are post-docs. The second are low-paying primarily teaching positions at exactly the types of places that will probably blink off the map in the 2030s.

In both cases, the hard truth is that the institution will simply leave the position unfilled before increasing pay or improving job security. Compensation is nearly perfectly inelastic and job security cannot be guaranteed.

> a decade from now

A decade from now their enrollments will have declined due to the post-2008 baby bust, in many cases by double digits. They'll be more worried about who they have to lay off than who to hire.

Particularly true for those instructor and other teaching-oriented positions.

Why will academic R&D begin falling below the rate of inflation? I get that it can't outpace it forever without overtaking the economy.

> Why will academic R&D begin falling below the rate of inflation?

Debt-to-GDP ratios and the cost of servicing existing debt together mean that there are difficult budgeting decisions on the horizon for many western governments. Academic R&D just doesn't have the constituency needed to save it from cuts.

I will be a bit astounded if NSF/NIH don't take nominal cuts during the debt ceiling negotiations, and they certainly won't get budget increases to keep up with inflation. Even defense spending, a massive sacred cow, might take a cut. There is just no way that base closures happen without DARPA et al. also taking it on the chin.

There may be one-time infusions into critical sectors here and there (CHIPS, probably energy, etc) and the STEM fields may benefit from a systematic defunding of humanities departments in certain states, but it's not enough to make up for secular headwinds.

The only saving grace for budgets might be if universities could create and capture the value that their R&D spend generates. But most research doesn't provide any value to society, and for the research that does capturing that value is often harder than creating the value in the first place. And even in that case, the change in management culture and workforce dynamics mean that the "relaxed tenured professor" is quickly going extinct.

The only thing academic hustle will get you in the 2030s and 2040s is a relatively low-paying job that requires even more hustle.

> Debt-to-GDP ratios and the cost of servicing existing debt together mean that there are difficult budgeting decisions on the horizon for many western governments. Academic R&D just doesn't have the constituency needed to save it from cuts.

Wouldn't this be a plausible story immediately post-WWII?

Perhaps, but couldn't be less comparable from the perspective of higher ed:

1. The budgetary context in that case was the end of total warfare. Debt was high, yes, but a TON of the war expenditures from the last half decade were being unwound. So the place that the cuts would come from was very obvious and directly related to the reason for the high expenditures in the first place. You could unwind deficits while simultaneously increasing spending on everything except total warfare. Cf now: the US isn't going to cut SS or Medicare, and cuts to Defense would hit university funding streams hard.

2. The political environment is radically different. The success of the Manhattan Project, RADAR, etc. created a political environment that was amenable to shifting spending from wartime manufacturing to peacetime R&D. Cf now: there is an enormous amount of political animosity toward the academy coming from the political coalition holding most of the structural advantages. Even through the Bush presidency, Science funding was largely bipartisan. That isn't true now. At all. I think many academics under-appreciate just how toxic NSF/NIH/etc have become to roughly half of this country.

3. The GI bill infused tons of demand (and money) into the academic system, and was followed by the Baby Boom. Cf now: there's a massive demographic collapse on the horizon and people are seeking out alternatives to university education due to the cost.

What was the scale of academic research post WW 2 compared to now? I’d imagine our research budgets are a significantly higher fraction of GDP now.

The fourth sector is still growing though:

https://en.m.wikipedia.org/wiki/Quaternary_sector_of_the_eco...

I don't see things going back towards the first and second sectors human labor wise, so it would have to all be taken up in the third sector (service sector)? I guess it is plausible with healthcare.

> Wouldn't this be a plausible story immediately post-WWII?

> "I feel I must remind you that it is an undeniable, and may I say a fundamental quality of man, that when faced with extinction, every alternative is preferable." - Dr. Leonard Church

It turns out that debt and money are no problem when your existence is threatened by an enemy who ideologically is committed to your total extermination. The Cold War made spending on military tech a non issue because the alternative was falling behind the Communists and possibly losing a war.

> Debt-to-GDP ratios and the cost of servicing existing debt together mean that there are difficult budgeting decisions on the horizon for many western governments

That's not at all how modern money and economics work. There is no transfer mechanism from Debt:GDP to economic productivity. That's not to say that a sovereign currency issuing government can't shoot itself in the foot any number of ways of course.

It's definitely how the US Congress works, which is really the only relevant consideration since the purse strings are controlled by Congress. Debt servicing costs and the cost of new debt have a direct impact on spending levels via the debt ceiling, which is controlled by Congress.

On an unrelated note, I'm not sure what modern money theories you're referring to, but the theories which purported that we didn't have to worry about inflation seem to be... slightly more out of favor than they were 1-2 years ago.

Many of the grants haven't been inflation-adjusted to begin with.

The R01, the workhorse grant of the NIH, has had the same "modular" budget since 1999.