Guest Commentary: Public university spending doesn't help the economy

By Rob Natelson
Posted: 03/13/2011 01:00:00 AM MST

A bill granting subsidized tuition at Colorado state universities to illegal immigrants will promote economic development. At least that's the claim of the bill's co-sponsors.

This is the latest example of a claim drummed into the public incessantly — that giving state colleges and universities more tax money will help the economy.

Is it true?

After 23 years as a professor at a flagship state university, I doubt it. I saw too much of the waste that afflicts state universities, and learned too much from colleagues at other institutions about how their universities were operated.

Some of the waste is nothing more than waste: frittering away hours of faculty time in meetings that begin nowhere and end nowhere; course offerings with little real benefit; overstaffing; irrational pay scales; inefficient use of technology; and poor contracting procedures. But some does positive harm to the economy, such as politically motivated hiring and academic hostility toward free enterprise.

Another reason for believing that public university spending doesn't help the economy is the weakness of the "research" that university lobbyists offer to support their claim. Some merely shows a link between higher education and prosperity, without separating out private and tax-funded components. Most of this "research" violates elementary economics by counting putative benefits but ignoring some or all economic costs.

What are those costs? First, when people and companies have to pay higher taxes to support state universities, they lose the opportunity to consume or invest those funds. They also have less incentive to produce in the future. The economy loses the benefit of this consumption, investment, and production.

University lobbyists like to talk about specific businesses that benefit from university services, but I have never known one to mention any of the thousands of businesses that do not benefit but must pay the tab.

Another cost derives from the fact that the higher the number of public university faculty, students and staff, the more likely that many of these people would be more productive in private sector jobs. Also, the larger the state university system, the more it crowds out private schools, which can be more innovative and responsive than public institutions. In other words, the wider the reach of the University of Colorado, the harder it is for the University of Denver.

Ohio University's Richard Vedder examined the economics of public university spending in four different statistical models and three case studies — each comparing the economies of states with heavy public university spending with the economies of states that spend less. He reports the results in his book, "Going Broke By Degree": There were strong negative connections between higher state spending on universities and both contemporaneous and subsequent economic growth. In other words, heavy government spending on universities more likely hurts the economy than helps.

I admit that there is a good argument for subsidizing some fields of higher education — but not for economic reasons. Studies such as pure science, literature and classical languages, theology and philosophy, and Western civilization and history have little immediate economic value but are necessary to the health of American culture. However, state universities today are doing many things outside of, and sometimes even hostile to, such subjects. Those programs that are essentially vocational in nature (such as my own field of law) are better provided by the private sector.

As Coloradans focus on state budgetary programs, they should consider how public colleges and universities could be downsized to allow Colorado's private education providers room to flourish and grow. Now, that's a step that would really promote economic development.

Rob Natelson is a senior fellow in constitutional jurisprudence at the Independence Institute.

http://www.denverpost.com/opinion/ci_17 ... z1GVJ09cMo