"Why in the world are schools building new buildings? What is required in a business school classroom that is any different than the classroom for psychology or sociology or english or any other number of classes?"
This question is easy to answer. In a time of declining public funds universities are trying to attract students, because tuition is about the only funding source left. Consequently, universities have to look appealing to students, and that means cushy dorms, spiffy libraries, the lot.
Again: these are investments made from the general fund, and the university tries to recover these through increased tuition income. A classic market failure.
For starters, the gratuitous building and renovation does nothing to improve the quality of the degree, and certainly increases cost of tuition. The university isn't better off, and the students undoubtedly are worse off. If that isn't a market failure I wouldn't know what is.
Market failure is a concept within economic theory describing when the allocation of goods and services by a free market is not efficient.
Colleges are not operating in a market system. They get money rationed to them by the government in various ways. Therefore it is not a market failure.
Another revenue-related reason is that many large donors want their money put towards construction. A lot of donations >$10m are specifically earmarked towards construction of a building named after the donor.
You especially see this phenomenon at state universities. The university gets a new building, and the politician gets a photoshoot. Renovating an existing building, on the other hand, would save the taxpayer money but doesn't offer opportunities for photo-ops.
Depending on what donors do, what I was arguing is that building the expensive new building is what might actually save taxpayers money, despite costing more overall— because donors are much more generous in funding shiny new buildings than in funding renovations or ongoing operations. An $100m new building where donors cough up $90m of the cost is cheaper to the university (and, for public institutions, to taxpayers) than a $20m renovation that has to be funded internally. When many donated funds are attached to earmarked construction projects and not allowed to be used for anything else, the economics of what's most cost-effective to build change significantly.
This question is easy to answer. In a time of declining public funds universities are trying to attract students, because tuition is about the only funding source left. Consequently, universities have to look appealing to students, and that means cushy dorms, spiffy libraries, the lot.
Again: these are investments made from the general fund, and the university tries to recover these through increased tuition income. A classic market failure.