WHAT PRIVATE FINANCING OF HIGHER EDUCATION BUYS

I wrote recently on SCSU Scholars about a graph I saw in a recent copy of Investors Business Daily. It was of spending per capita on higher education in the OECD countries. Unlike primary and secondary education, where we’re quite ordinary, the U.S. spends 2.7% of its GDP on higher education, a full percent more than the OECD average. IBD notes approvingly:

Americans are disappointed with their elementary and secondary schools, which use a lot of money but underperform other nations' school systems. Our university system is another matter. Americans spend more than any other nation on university and college education. It's a key part of our productivity edge.

One of the things I did note in reading the data was that the difference was almost entirely due to private spending on higher education; we’re approximately average (on a share of GDP basis) within the OECD. And as an export service higher education does very well, as the thousands of international students on even middling Midwest state university campuses will attest. So I wondered aloud whether its the private/public sector mix that is giving US higher education a comparative advantage.

Perhaps, says Jon Sanders at the Goldwater Institute. I would avoid the regression analysis he shows -- it looks for an immediate effect of higher education spending on state economic activity, whereas the usual arguments are about long-run effects of increased human capital -- but consider instead his last two tables. Which states had the most growth over the last twenty years? Mostly in the northeast -- Massachusetts, New Hampshire, Connecticut, New Jersey and Delaware. How many top-tier institutions in those states are public universities? Zero. Of the twelve states that increased public spending on higher education by at least $10 per person on an inflation-adjusted basis, the one with the highest level of state economic activity per person is Michigan, 12th in the nation. So maybe that is it?

Think again, says John Bruce. He connects the high degree of private financing to the increasing degree of plagiarism and credentialism on American campuses.

I've seen the observation that in countries where public corruption is common, the corruption itself is seen as an important check and balance against unreasonable government action. The government may pass a burdensome law, and the political system may not provide for mitigation through the normal process, but that's OK, because you can always pay a bribe and get around that law anyhow. It's not an equitable solution, but it works for some, and thus, no revolution. At least for a while.

I think the satisfaction that US higher-education consumers show, by voting with their pocketbooks, is similar. The parents are buying (I am using a synecdoche here) a decal for the back window of their car, which continues to carry a cachet of meritocratic achievement -- although cracks are starting to show in that system.

Readers of L&P are no doubt well aware of the cracks, the breakdown in academic honesty and the rise of coursework that rewards students with high grades and promises of a rich future in the professoriate themselves (though perhaps as adjuncts) simply for parroting their leftist teachers. The question that bothers me, and one I have no satisfactory answer for, is whether that problem is a function of the public or the private part of the financing mix.