Page 210 - Crisis in Higher Education

Government’s Role in Higher Education • 181

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luxuries are consuming the 65 cents. In addition, federal programs are
rife with waste, fraud, and abuse. In 2014, leaders at a Florida College were
indicted for receiving $6.5 million from fraudulent student loans and Pell
Grants, and in 2015, an Ohio couple went to prison for defrauding the
government of $2.3 million for student aid at their fly-by-night college. 21
The second point in Table 9.2 is that the link between subsidies for higher
education and economic growth is tenuous at best. Although the link
between educational investment and economic prosperity may seem intui-
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tive, the relationship has many anomalies and outliers. An academic study
of this issue by Harvard University found some support for the hypothesis
that investments in four-year institutions led to increased economic growth
for all states, but no such relationship was found for two-year institutions.
Their conclusion was that “despite the enormous interest in the relationships
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between education and growth, the evidence is fragile at best.” Another
report indicates that educational attainment might account for only 10% of
U.S. growth in GDP. It appears that the impact of government spending
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on economic output does not show up robustly in the data.
Argument can be constructed to support the link between education
and economic growth. Although it would not show cause and effect, a
scatter plot of educational attainment and GDP would show that under-
developed countries with low GDP per capita have low educational attain-
ment. Also, there is logic to support the relationship. At an extreme, it
is difficult to believe that a country where no one can read, write, or do
arithmetic could become an economic powerhouse. Exchanging ideas and
communicating basic information would be difficult, making all aspects
of commerce challenging. At the other extreme, if everyone had a PhD,
who would be available to make plans, create products, and do the work?
It seems clear that the sweet spot for economic growth is somewhere
between these extremes, so each unit of education must have a value or
propensity to stimulate economic growth. It is also likely that the value
or propensity of a unit of education depends on the circumstances. For
example, in the industrial era, where products were simpler and there was
limited variety, education was important for the “work planners,” but not
for the “work doers” who toiled on the factory floor. When the industrial
era began more than 100 years ago, the United States emerged as the eco-
nomic leader, and many of its “work doers” were immigrants who could
not read or write English. The need for education changed in the postin-
dustrial era where complexity and high product variety required more
flexible production systems and university degrees for “work planners”