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If the returns to investment in education were as high as many studies claim - returning many dollars for each dollar invested - then why would anything but exponential growth occur anywhere on the globe? Governments could throw every possible dollar into their university systems, then sit back and watch their societies flourish. Yet this is not happening. This essay assumes that some public investment in higher education is good. Yet the optimal level and sources of that investment are debatable: first, how much total investment is appropriate? Then, how much investment should be private and how much should be public? And which elements of higher education are likely to produce economic growth? Precisely quantified answers to these questions are not readily produced, as shall be shown. Accordingly, the converse of those questions should also be asked: does government spending on higher education have negative effects? Which situations will likely prove infertile territory for creating economic growth through spending on higher education? This paper raises new questions that have not previously been in the spotlight and pinpoints old questions that need further exploration. The discussion also introduces a simple model that helps to illustrate the complex dynamics of the relationship between economic development and state subsidies to higher education.

[This] paper begins with a discussion of popular or prevalent theoretical justifications for government subsidies in general and specifically for subsidizing higher education. It also describes how these justifications are sometimes in conflict with one another. The next major section describes the prevailing model of academia as an 'engine of economic growth'. It raises objections to the model and introduces the key concept of 'agglomeration'. Another important concept known as the 'triple helix', a combination of universities, business, and government, is also examined. The paper then discusses the available empirical research on the relationship between higher education and economic development and subsidies. This research is divided into two types. One uses detailed data to describe specific elements and objects of the relationship between higher education and economic growth; the other focuses on the overall performance of the economy and the overall public support for higher education.

Published summary from the Pope Center website. Show less