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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, 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. The revenue theory of cost has thus been offered as an explanation for rising costs at universities, including rising tuition.