By Richard Vedder
I read in the Chronicle a few days ago that the Center for the Study of Education Policy has issued a major (92 page) report on state appropriations for higher education, showing that appropriations have fallen relative to state output levels, relative to costs, etc., over the period 1979 to 2004. The report laments this, discusses strategies to restore appropriations growth, calls for developing new champions for higher education, etc., etc. While the statistics in the report are interesting and revealing, the recommendations themselves are bad, bad, bad, bad.
There is no real discussion of the reason costs are rising in higher education, the decline in productivity, etc. The study accepts this as a given, and that somehow we must meet the financial needs of this inefficient system without question in order to maintain and improve student access (never mind the fact that over 40 percent of students entering four year schools have not graduated within six years). There is no discussion of the rent-seeking behavior that has led to falling teaching loads and rising compensation, particularly at the research-oriented institutions.
Moreover, the Whiz Kids and I are in a very elaborate and intense research exercise looking at the relationship of educational appropriations to economic growth. Jonathan Leirer, in particular, is running pooled cross section/time series regressions with well over 1,000 observations, spanning a good deal of time and space. We are working on a major study-- CCAP's first-- on this topic. Suffice it to say here that we will not accept the hypothesis that is widely assumed to be true, namely that state appropriations for higher education are positively associated with economic growth. In fact, we will actually go farther than that, I think, but I should be cautious until we complete our rather extensive econometric analysis.
Indeed, what we are finding so far is that the behavior of states towards universities --gradually reducing their spending in relation to personal income, state output, or state budgets -- is actually good, not only politically, but economically as well. Why take funds away from hard working people who earned their money in the highly efficient market-based competitive market sector and give them to people who are operating an enterprise that is falling in productivity, that has no bottom line, that is largely unaccountable to anyone, etc., etc. etc.? Why allow the inefficient Soviet-style sectors to crowd out activity in the productive market-based economy?
We love universities, and I, for one, started attending one nearly one-half century ago and liked it so much that I never left the academy, still teaching more than 10,000 students later (not to mention doing research that most university persons wish I would stop doing). But the actions of legislators, rather than a sign of shortsightedness and neglect of our nation's future, may actually be a necessary and desirable action which, in time, will force some needed efficiencies into the delivery of higher educational services.