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The End of the University of … [insert your state]

The Washington Post reported [here, Dec 14th] on the budgetary crunch at Berkeley, amidst a claimed more general trend towards less state support for higher education. As an economist, I wonder why this trimming of support took so long – not because it’s laudable, but rather because it is what basic economics permits. After all, why should my state spend money to educate someone who with high likelihood will work in someone else’s state? If we close down all of our state schools, businesses may have a harder time recruiting managers, but given current unemployment levels…we here in Virginia can be free riders. But the logic is the same for each and every other state: all will cut. And if the Post is on target with its story, they are doing so.[1]
Can we find other evidence of this sort of behavior? Yes.
The generally abysmal quality of education in the old cotton-and-tobacco South reflects this logic. Plantation crops in the old days relied on brute labor, not brains; why pay for fieldhands to learn to read? That would increase their mobility, threatening the ability to get the crop harvested rather than making the local economy more productive. Equally important, a body is able to work by high school, if not by age 12 or 13. You want to spend money to keep them out of the fields?? That was true for coal mining and textile towns, too. Even in the north, my grandfather had to leave the farm to board in the city so that he could attend high school. Why, today, should residents of Florida retirement communities tax themselves to pay for the education of someone else’s grandchildren? My sense is that, increasingly, they don’t.
At the global level, society benefits from the constant stream of innovation that has lifted incomes for the past two centuries in industry after industry. Furthermore, by the late 1800s “basic” research underlay invention. But basic science in itself is unproductive. Few research projects pan out; those that do may have no obvious application. Even if they do, there’s a (large) gap between laboratory bench and commercial product.[2] So why bother with basic science? The answer is that most of the world doesn’t. Would Mongolia benefit from spending 2% of GDP on R&D? Instead, just buy the finished products, or use hints and the poaching of the odd employee. Of course basic research provides a great training ground for high potential grad students. But such workers are internationally mobile. Why should we pay?
To use jargon, education creates a positive externality: the benefits to society increase by more than the output of the (marginal) individual. We’re much more productive when we can assume that employees, suppliers and customers are literate and numerate and (nowadays) know how to use computers.
The incremental benefits to education diminish with more years of schooling. Part of the reason is that job skills aren’t generic, and so it’s not realistic to think that college will provide them: you can add more knowledge, and an improved ability to learn and to communicate. Valuable, but only incrementally so. Now occasionally community colleges will pair with local employers for discrete programs, particularly when there are several companies with similar needs. That helps offset one of the defects of on-the-job training, that employees will take their skills to firms that pay a bit more, enabled because they train a bit less. In general, though, college cannot, and does not try to give, “day one” job capabilities.
That doesn’t mean a college education does nothing. It also socializes students (generally for the better, unlike high school) and generates a pedigree that reflects some combination of acumen, ambition, persistence and willingness to do grunt work. Employers generally value all four. So even if a diploma provides little insight into the mix, employers are nevertheless willing to pay something for a diploma. However, now that everyone who is anyone has a diploma, that alone doesn’t distinguish a graduate: you need higher higher education, a masters…
So why should we fund universities when their graduates have a hard time finding jobs, when many of the courses are esoteric and unworldly – as though the Greek and Latin education of the 19th century elite wasn’t! Maybe we are educating too many for too long. But cutting back on funding won’t somehow lead to more “practical” training – the sheer diversity of needs in today’s economy precludes that – or to would-be employers not asking to see that diploma. Instead turning our public schools private will squeeze out those youth whose parents don’t have the wherewithal to pay tuition,[3] or the sophistication to push them while young to win the scholarship marathon.
Mike Smitka
[1] California is remote from the East Coast, at least as reflected in the job hunting practices of my seniors. Now Washington and Lee is far from average, so I don’t want to read too much into that – indeed, my suspicion is that Hollywood and Silicon Valley pull workers from throughout the US, if not from throughout the world. But to the extent it’s true for the state as a whole, then Californians should be less willing to see the UCal and CalState systems pared than the rest of the country.
[2] Complete Digression: Xerox
The photoelectric electric effect relied upon lab results, and the lunchtime jottings of an employee of the Swiss patent office in 1905. The cost: a pencil and some paper. While it led to a Nobel prize for Einstein in 1921, there were no practical applications. Turning it into an invention relied up the efforts of Chester Carlson, working in the family kitchen in Queens during 1936-39, to succeed in developing a “proof of concept” using light to turn words into static charges on a selenium plate in 1939, to which sulfur dust could be made to adhere. Now this work involved a bigger budget than did Einstein’s, but it was within the realm of his modest Depression-ear salary. Further development at the Battelle Institute ate through rather more, at least $200,000, a tidy sum in those days. In the process they developed a better plate, an effective toner and other core pieces of a working machine. However, the first commercial product didn’t arrive until the Haloid Corporation took over development work, and invested much more money. The first shipment of the Xerox Model A Copier came in 1949; the first really successful version took until 1959, after significant additional investment. Now some of this required individuals with a knowledge of physics, and chemistry, and mechanical engineering, drawing in fact from many fields. But it drew upon the stock of knowledge, and lots of good engineering. For this I draw upon Hillkirk, John and Jacobson, Gary (1986). Xerox: American Samurai. New York: MacMillan. But I double-checked this` out of curiosity against Wikipedia.
[3] Some might object that the market will handle everything: academically able students can borrow and succeed even without financially able parents. But in today’s environment of dim job prospects, don’t the risks to both the bank and the would-be student mean that the only sensible strategy is “to neither a lender nor a borrower be?”