Foellinger Auditorium at the University of Illinois
Jon Marcus has a lengthy feature in the Washington Monthly that is in effect a plea for more government funding for universities, especially research, with a focus on Midwest institutions.
But university research is in trouble, and so is an economy more dependent on it than many people understand. Federal funding for basic research—more than half of it conducted on university campuses like this one—has effectively declined since 2008, failing to keep pace with inflation. This is before taking into account Trump administration proposals to slash the National Science Foundation (NSF) and National Institutes of Health (NIH) budgets by billions of dollars more.
Trump’s cuts would affect all research universities, but not equally. The problem is more pronounced at public universities than private ones, and especially at public institutions in the Midwest, which have historically conducted some of the nation’s most important research. These schools are desperately needed to diversify economies that rely disproportionately on manufacturing and agriculture and lack the wealthy private institutions that fuel the knowledge industries found in Silicon Valley or along Boston’s 128/I-95 corridor. Yet many flagship Midwestern research universities are being weakened by deep state budget cuts. Threats to pensions (in Illinois) and tenure (in Wisconsin) portend an exodus of faculty and their all-important research funding, and have already resulted in a frenzy of poaching by better-funded and higher-paying private institutions, industry, and international competitors.
Marcus argues that elite private universities both already get more research dollars and have gigantic endowments that will put them at an advantage in an era of diminished state and federal support, positioning the Midwestern state schools as relative losers in the future.
He gets at a real problem. I agree with him on the need for increased STEM funding, the criticality of Midwest universities to their states’ economic futures, and the fact that they are under threat. But unfortunately he misses a lot of very important, and more important, points.
1. The “Superstar Effect.” I’ve been doing a series on how many domains are becoming increasingly subject to superstar economics in which the very top of the pyramid is pulling away from the rest. We see this in everything from venture capital to tennis.
Marcus brackets Harvard, MIT, and Stanford with Iowa, Illinois, Ohio State, and Wisconsin. But these are not comparable institutions. The former are superstars, the latter are very good but definitely in a lower league.
I note in a forthcoming article in City Journal:
The heartland suffers because of the “superstar” effect. In today’s world, the spoils often go to the very top of the hierarchy. The heartland is too often good, even very good, but not the best. An exception that proves the rule is Carnegie Mellon University’s computer-science department, which attracted companies like Uber and Google to set up shop in Pittsburgh. The heartland needs to develop more such leading departments in its universities and attract some top talent. To do this, changes in cultural attitudes will be critical.
This problem has a money dimension, but it’s not primarily a money problem. (Culture plays a large role in keeping these institutions from rising to the top as well, something I can’t go into right now). The imbalance of funds is as much an effect as a cause. Pouring more federal funds into the current system might in fact fuel greater divergence, not less. And there’s the simple math problem that there can by definition only be a handful of elite programs in any specialty.
2. The state-university divorce is mutual. Marcus brings up the Morrill Act and land-grant universities. Part of the goal of that was to educate the residents of these states in the agricultural and industrial arts. But state universities today increasingly are not interested in educating their own small-town farm boys and the like. They are looking to attract the best students from around the country and the world. This both increases their reputation, and brings in much greater revenue because of the vastly higher tuition paid by out of state students.
Foreign students from places like China are now aggressively recruited to universities like Illinois, in part because they are paying very high rack rates with cash. Indiana University, my alma mater, was largely populated with working and middle class Hoosiers and some Chicago suburbanites when I went there. Today it has a much more upscale vibe and has become a destination for East Coast kids who can’t get into the Ivies. (“From Bloomingdale’s to Bloomington” as the Journal once quipped).
Similarly, there’s a conflict in institutional interest between state government and flagship universities when it comes to the destinations of graduates. States want graduates to stay local. Marcus touts this as one of the university’s benefits:
More than one in five graduate students who worked on sponsored research at eight Big Ten universities studied by Ohio State economist Bruce Weinberg, including Indiana, Michigan, Minnesota, Purdue, and Ohio State, stayed in the state where they attended school—13 percent of them within 50 miles of the campus. That may not sound like a lot—and, indeed, the exodus of highly educated people is a serious problem—but it’s significant when considering that the jobs for these students exist in a national labor market. People with engineering Ph.D.s from Minnesota could take their talents anywhere. If even 20 percent stick around, that’s a big win for states that can’t expect an influx of educated elites from other parts of the country. These graduates provide an educated workforce that employers need, create jobs themselves by starting their own businesses, and pay taxes.
But there’s a name for a school whose graduates predominantly stay local: community college. If a large percentage of students are staying in local second tier economic markets, that’s not necessarily a good thing for the institution’s standing. For example, in some fields, schools are ranked in part by the average salary of graduates, something that benefits schools that send grads to the most elite markets. To become superstars, their level of talent export would need to increase, not decrease.
This is a structural conflict. In a superstar world, universities are facing pressure from the market to try to move upwards toward MIT and Harvard. But states give them money in part to carry out a local mission of educating the state’s children and producing talent for the local market, activities that tend not to promote elite status.
To the extent that state universities want to cater to foreign students, rich East Coast kids, and elite market employers, state governments are right to question whether their funding levels make sense. The Michigan model (mostly private and less public money at an institution that is trying to be elite) or outright conversion into a private school (trading public funds for freedom to pursue elite status) might actually be a painful but realistic solution for some schools. (Note that Ivy League Cornell was a rare private land grand college).
3. Conflation of “universities” with STEM research. The article opens with a description of biomedical research in progress at Ohio State University. But the reality is that the STEM research that leads to spinoff businesses is a small part of what universities do. A lot of schools have seen rapidly rising tuition as they’ve splurged on luxury facilities to attract students. Universities have also seen vast expansions of their administrative staff, who are often very well paid. Many university departments don’t do research at all in terms that the average person would understand it. Significant tracts of the humanities, social sciences, and cultural studies fields are basically political activism in academic garb.
These would all be areas that could be cut without affecting a university’s ability to spin off the next high tech startup or cure a disease. They might all be good things to do, but they aren’t entitled to funding on the basis of a STEM research halo.
In short, the university needs to be seen in part as a disaggregated set of entities and activities, of which hard STEM fields are only one. Universities themselves are making some of their own choices to fund things other than STEM research.
4. Universities need to be reinvented for the 21st century. Marcus’ article doesn’t mention any reform of universities, merely talks about the threat represented by decreased funding. But in light of all of the above, plus many more things such as the potential for technology to revolutionize teaching, one would think there’s be more focus on how these institutions should be reinventing themselves.
He could have, for example, interviewed Purdue University president Mitch Daniels, who somehow managed to get a handle on costs and has frozen tuition since his arrival. He’s also making forays into online learning and even setting up a high school in Indianapolis to try to better prepare minority students to qualify for admission. Some of his ideas might work, others might not. But reinvention needs to be on the table.
The truth is that from a teaching perspective, it’s not clear at all the value that universities provide. The biggest function they serve is credentialing. The value of your education in the marketplace is really the value of the brand of the institution you attended, especially in an era of grade inflation. As one of my buddies noted, “The hardest part about Harvard is getting in.”
As Naval Ravikant of AngelList put it in a tweetstorm:
If the primary purpose of school was education, the Internet should obsolete it. But school is mainly about credentialing. Schools survive anti-educational thinking (e.g., groupthink) due to symbiosis between institutions that issue and accept credentials. Employers looking past traditional credentials can arbitrage the gap. The more meritocracy an industry, the faster it moves past false credentialing, i.e., the MBA and tech startups. A generation of autodidacts, educated by the Internet and leveraged by technology, will eventually starve the industrial-education system.
Naval is known for provocative predictions, and admits this won’t happen soon. Who knows if it ever will. The key point is that the legacy university business model is not guaranteed to last forever, any more than anyone else’s legacy model is. The landscape in which our universities operate is changing around them. While I am on board with Marcus with spending more on STEM research, there are a lot bigger problems than government money and threats to tenure in Wisconsin bearing down on the Midwest public university.
from Aaron M. Renn