Spend more and get less

Steven Miller

For over four years now, Nevada System of Higher Education Chancellor Jim Rogers has been bullying, sweet-talking, threatening, celebrating, decrying, politicking, quitting, un-quitting, donating his money, un-donating his money, and, even by his own account, being regularly unreasonable – all in the service, the public has been given to understand, of turning Nevada's taxpayer-supported universities and colleges into research and education wonders that will attract the brightest people from afar and spark massive economic growth in the state for decades to come.

During all this, Nevada's business community has, by and large, given the chancellor the benefit of the doubt. That's not surprising. What Rogers preaches, after all, is a major tenet of conventional wisdom – and few business people have the time to actually go off and research whether it is true.

One of America's leading economists, however, has done just that. Dr. Richard Vedder, distinguished professor of economics at Ohio University and former economist with the Joint Economic Committee of Congress, is president of the Center for College Affordability and Productivity (CCAP). He says that while the investment-in-public-universities argument may sound rhetorically strong, it is empirically quite weak.

"For several years, I have developed increasingly elaborate and sophisticated statistical models analyzing the relationship between public expenditures on universities and economic growth," writes Vedder in a recent CCAP report. Even when it is acknowledged that spending money on colleges cannot be expected to have an instant payoff, he says, the correlation remains overwhelmingly negative.

"Looking at hundreds of regression results," writes Vedder, "the overwhelming majority show a statistically significant negative correlation between state government appropriations and economic growth – the more states spend on higher education, the lower the growth in personal income per capita in future time periods."

Even when the statistical regression results are not significantly negative, the economist notes, they never support the conventional wisdom that university spending promotes economic growth.

The implication is clear: To the extent that Rogers succeeds in getting new tax dollars for the Nevada System of Higher Education, to that extent Silver State businesses can expect less economic growth in their future.

On reflection, however, are Vedder's findings really that surprising? Economists have long understood that tax increases, other things equal, reduce economic growth. And all of us, by now, ought to be wise to special interests promising we can all return to Eden if they get the key to the public treasury.

Perhaps the real value of Vedder's research is its specificity: Slicing through the self-interested propaganda that usually dominates higher-ed talk, it spotlights the disproportionately large waste of public resources associated with the higher-education industry, as it is currently constituted.

Viewed as businesses, after all, universities are notoriously inefficient.

"While it takes far less time for workers to make a ton of steel, type a letter, or harvest a bushel of corn than it did a generation ago, it takes more professors and college administrators to educate a given number of students," notes Vedder in his 2004 book, Going Broke by Degree, Why College Costs Too Much.

"In a very real sense, the industrial age has largely passed the university by," points out Dr. James J. Duderstadt, president of the University of Michigan for many years and a member of the National Commission on the Future of Higher Education.

Duderstadt, a prolific author, notes that higher education is still today – as it has been through most of its history – conducted as a cottage industry.

"Individual courses are a handicraft, made-to-order product," he observes. "Faculty members design from scratch the courses they teach, whether they be for a dozen or several hundred students. They may use standard textbooks from time to time – although many do not – but their organization, their lectures, their assignments, and their exams are developed for the particular course at the time it is taught."

Duderstadt argued a decade ago that such an approach was already obsolete. In the last five years, much more productive education technology developments in universities around the world have strongly borne him out.

Yet, go online and read the Nevada System of Higher Education's master plan.

There, the 15th Century model is alive and well. And it's not going to be attracting academia's brightest minds.

Steven Miller is vice president for policy at the Nevada Policy Research Institute. This article was originally published with the Las Vegas Business Press.

Steven Miller

Senior Vice President, Nevada Journal Managing Editor

Steven Miller is Nevada Journal Managing Editor, Emeritus, and has been with the Institute since 1997.

Steven graduated cum laude with a B.A. in Philosophy from Claremont Men’s College (now Claremont McKenna). Before joining NPRI, Steven worked as a news reporter in California and Nevada, and a political cartoonist in Nevada, Hawaii and North Carolina. For 10 years he ran a successful commercial illustration studio in New York City, then for five years worked at First Boston Credit Suisse in New York as a technical analyst. After returning to Nevada in 1991, Steven worked as an investigative reporter before joining NPRI.