Phi Beta Cons

Can We Measure the Economic Value of Universities?

My Pope Center colleague Jay Schalin takes a skeptical view of one such effort in this piece.

State university system presidents want people to think that their institutions are great “economic engines,” but my hunch is that if there were a state with no public university system, its economy would be at least as robust, ceteris paribus, as states with gigantic systems. I think that’s true because individuals will find their optimal levels of human-capital investment in any event; public colleges and universities tend to be very inefficient in delivering educational value.

As Thomas Sowell has long argued, government-run educational systems (K-12 and higher) come to be dominated by the interests of those who work in them. That’s why we find in higher ed very low teaching loads, lots of courses of dubious benefit (in the catalogue just because some profs wants to teach them), extraordinarily high administrative spending, and so on. Attributing great economic benefits to state university systems is logically questionable — as Jay observes, many students who graduate would have been successful anyway — and obscures the comparative inefficiency of governmentally subsidized institutions.

Moreover, studies of the sort that Jay critiques are usually hauled out to justify increases in state university spending. As Richard Vedder has shown, however, there is a negative relationship between state higher-education spending and state economic growth. (See my review of his book Going Broke by Degree here.)

Even if a case can be made for some public higher education (and I’m not saying that one can be), governments by nature tend to go well past the optimal point in spending, especially where strong interest groups stand to benefit from increasing allocations of tax dollars. I think North Carolina would be better off without the UNC system. There wasn’t a SUNY system until 1948, but New York was one of the economic titans in the nation prior to that time.

George Leef is the the director of editorial content at the James G. Martin Center for Academic Renewal.

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