Tuesday, February 11, 2014

Higher Education: A Public Good or Commodity?

According to the New York Times, the American states, much more so than their European counterparts, began a gradual trend of what the paper calls “withdrawal” from higher education during the recession in the early 1990s. It is perhaps more accurate to say “decreased financial support” as the governments have not cut off their own universities. Even so, the change has been significant. The Times reports that the governments’ appropriations for their colleges and universities decreased by 7.6% in 2011-2012. This represents the largest annual decline in at least the previous fifty years—since the time of JFK—according to a report issued by Illinois State University. As of 2012, Arizona had decreased its higher education budget by 31 percent since the recession began in 2007. The housing market decline hit Arizona hard. I would not be surprised to find similar numbers in California, Florida and Illinois. California’s decreased spending on education in general was well publicized in 2011 by Jerry Brown, the head of state and chief executive.

As a result, even as universities have found ways to hold costs per student relatively steady—hovering around an inflation-adjusted $10,000 in the 1985-2012 period—the share of instruction costs paid for by tuition (aside from financial aid!) nearly doubled to 40 percent from 23 percent. The head of the University of California at Santa Cruz admitted that the reality is that students are paying more and getting less.

The trend evinces a shift from the belief that societies (or polities) benefit from higher education to a belief that the people receiving the education benefit primarily and thus should foot the bill, according to a trustee of the State University of New York. In their letters, John Adams and Thomas Jefferson agreed that an educated and virtuous citizenry is vital to a republic. By educated, they did not just mean in civics. Indeed, the ensuing tradition in American higher education has been that a broad foundation in the liberal arts and sciences should be in addition to, rather than merely in lieu of, an undergraduate degree in a professional school such as law, medicine, education, or business. As a result, an American physician or lawyer has two undergraduate degrees, whereas his or her European counterpart has only an undergraduate degree in medicine or law. The relative emphasis on liberal arts and sciences in America reflects the view of Adams and Jefferson that societies not only benefit from a broadly educated citizenry, but if the form of government is that of representative democracy (i.e., a republic), then such education is necessary. The shift in belief toward higher education as a product to be purchased like a car or soap goes against the tenet of the Founding Fathers and thus does not bode well for the continued viability of the American republics in the twenty-first century.

I would add an economic argument that treating healthcare or years of full-time higher education as though they were products to be purchased on the market like an ipod or smartphone misapplies the market mechanism because of the huge gap between the prices of healthcare and education and the wherewithal of the typical consumer to cover them financially, even in the form of debt. Just because communism fell to capitalism does not mean that absolutely everything is justly or even feasibly a commodity. Public goods, such as defense for instance, are just one case of an ill-fit with the market mechanism, even though it can serve a subsidiary role as a government purchases goods on the market to be used by the military. Similarly, the market mechanism can be used only in a limited way in regard to public colleges and universities.

While the market mechanism can be useful as colleges and universities compete with each other for faculty as well as students, this does not require that the students themselves foot the entire bill. There are non-price competitive elements, such as the quality of a faculty. Moreover, if Adams and Jefferson were correct, requiring students to pay so much tuition subsidizes people who do not go to college but reap the more general benefits of living in a free society (which benefits from its educated inhabitants).

The Times reports that economists “have found that higher education benefits communities even more than it benefits the individual receiving the degree. Studies show that an educated populace leads to faster economic growth and a more stable democracy, and benefits the poorest workers the most. The post World War II economic boom, for example, has been attributed to increased college enrollment thanks to the G.I. Bill.” To the extent that society as a whole benefits from there being educated citizens in it, then those citizens who are students at public universities should not have to foot all of the bill. It simply is not fair, or just (see Rawls’ theory of justice), even if such students are effectively subsidizing society’s poor.

A government has a rational interest in making a higher education affordable for its citizens who qualify educationally. The extent to which society as a whole benefits from the educated within it justifies the public funding. This is not to say that every citizen has an entitlement to go to an Ivy League university. However, just as in health-insurance it is possible to guarantee every citizen a basic coverage while the wealthier are free to buy “Cadillac plans” for additional coverage, governments in America could offer any educationally qualified citizen a significant subsidy in attending one of the “in-state” public universities because of the benefit to society. Of course, in a federal system the matter is complicated by the question of which scale of society can be expected to benefit, though in the American case the spending clause of the U.S. Constitution, while being for the general welfare, may be limited to the enumerated powers listed for Congress. In any case, I think Europe is barking up the wrong tree in following America in relying more on tuition at state universities.

Catherine Rampell, “Where the Jobs Are, the Training May Not Be,” The New York Times, March 2, 2012.