The Case for Small Government

A Libertarian Perspective on Economic and Social Policy

April 10, 2006

Public Colleges And Universities

The case for government subsidy of education relies on three main arguments.

The first is that society benefits from having an educated populace, beyond any benefits to the person acquiring the education. In economics language, education generates positive spillovers.

The second is that some people obtain too little education because they are myopic; that is, they fail to recognize that education produces a long-term benefit even though it is costly up front.

The third is that some people cannot afford education.

I do not address for now whether these arguments are convincing. Nor do I address the possibility that government support for education generates unintended costs.

Instead I note that even if the usual arguments for subsidy are compelling, and even if subsidy has no unwanted side effects, the case for education subsidies has two important qualifications.

To begin, this case does not mean government needs to own and operate public schools; governments can subsidize education via vouchers, loans, or grants. In addition, the case for subsidy applies more convincingly to young children in low-income households than it does more generally.

Viewed from this perspective, public colleges and universities make no sense. Much of the expenditure for these institutions benefits high-income households, and it benefits students who are old enough to make reasonable decisions, who can borrow to finance an education, and who are beyond the point at which obvious spillovers occur.

Thus, at a minimum, public college and universities should set much higher maximum tuition rates but then offer discounts on a means-tested basis. Better yet, state governments should replace public colleges and universities with means-tested vouchers. And perhaps best yet, state governments should eliminate subsidies for higher education entirely.


At 2:21 AM, Blogger Bob Schubring said...

One of the original arguments for the creation of state universities was that their graduates would serve as officers of the state militia, and therefore, a public security interest was served by funding these institutions. Since all 50 states have federalized their organized militia into the National Guard in return for a federal subsidy, and virtually all commissioned officers in the Guard got their training at a federally-funded ROTC program, or graduated from one of the service academies, this argument no longer holds water.

A replacement argument arose in the 1850's and became popular after the Civil War: State Agricultural Colleges would graduate experts on the subject of farming, who would transfer technology back into rural communities. However, the number of Cooperative Extension Agents is far smaller than the number of Ag College graduates, and has always been, so this too seems a specious argument. Moreover, the public benefit is not evenly distributed. The Cooperative Extension Agent is very helpful for the commercial farmer and the hobbyist who cultivates garden giving away free information. The supermarket customer sees little tangible benefit, as the majority of the cost of purchasing food goes to pay for operating the store, transporting farm products to the store, and advertising what's on special sale this week.

It is always problematic for an institution to justify itself based on public benefits that are not equally shared by every taxpayer. As the Coptic philosopher Augustine pointed out nineteen centuries ago, a king is justified in using force to collect taxes, so long as the taxes are used entirely to protect the taxed population from the further use of force by lawbreakers. If instead, the king uses the proceeds of a tax to enrich himself, he is morally equivalent to a common thief.

At the very minimum, a public university that seeks to continue to receive public funds, must throw open its doors to every person who is taxed to support it. In an age of online learning, there is no limit on how many people can follow the coursework of many classes. I would recommend that public universities do away with admissions screening, and allow all people whose taxes support the university, to attempt their first semester online. Those students who simply are not willing or able to earn a passing grade could then be excluded, and the rest, taken in as students, entirely on the basis of their performance.

At 4:00 PM, Anonymous Anonymous said...

Interesting good post. I agree with everything except maybe the last sentence. I am sympathetic, but is it really true that low income teenagers can pay for university themselves? I am not sure. Maybe it is. I would be happier with means tested vouchers than public universities though.

A lot of kids go to college who are just wasting time and money there being useless. Thats fine if its their money, but its not cool if its my money they are using.

At 7:54 PM, Blogger Mike Huben said...

What a pleasantly fact-free set of assertions.

"Much of the expenditure for these institutions benefits high-income households"

Where are the numbers? And even if it does benefit some of the well off, it does patently serve those otherwise couldn't afford education as well.

"it benefits students who are old enough to make reasonable decisions"

Where are the numbers demonstrating they make reasonable decisions about how much to invest in education? Don't give me "could": give me some information about reality.

"who can borrow to finance an education,"

Which they weren't really able to do until federally insured student loans, another program Miron would oppose.

"and who are beyond the point at which obvious spillovers occur."

Every employer who makes more profit from a highly educated employee than a poorly educated employee is an example of a spillover. Every increased dollar of taxes from higher salaries due to education is a spillover. I'm surprised an economist would say such silly, fact-free things.

Given the nonsensical premises, I don't think the conclusions are worth looking at.

At 9:56 PM, Blogger Brian said...

Your point that there is no need for state universites makes sense.

All the stuff about educational subsidies is not very libertarian and not very small government.

Let every household decide its own educational needs and pay for it themselves. Subsidies screw things up, resulting in too much education to some and too little to others.

At 7:20 PM, Blogger James said...


I sympathize with your reaction to this post. Let me make Miron's point in a way that you might see eye to eye with. The case for a nationalized industry in higher education is silly, fact-free, without numbers and full of assertions. Do you find this kind of argument convincing?

At 6:10 AM, Blogger Mike Huben said...

James, I appreciate the effort you've taken to erect a strawman, but my criticism of Miron's ARGUMENT is that he didn't properly make a CASE.

Now, it so happens that the case for government supported higher education is supported with enormous amounts of historical and economic evidence. Evidence such as higher earnings simply for graduating from high school or college, and evidence of huge increases in enrollment when financial aid has been made available by government. And not just in the USA, but around the world.

It's not an accident that first world nations have something no culture has ever had before: a large, dominant middle class. And it's no accident that they ALL achieved it through socialistically funded education, infrastructure, R&D, etc. Libertarian ideological opposition to these facts is one of the great farces of libertarianism.

At 8:08 PM, Blogger James said...


A strawman overstates or misstates an argument so as to refute it. I've constructed no such thing. You call Miron's argument silly and call it a fact-free set of assertions for lacking numbers. My argument parallels yours in a very straightforward way.

Now you offer a longer argument and manage to commit the same errors you accuse Miron of making. Where are the numbers? Where are the facts? I just see assertions that some kind of evidence exists.

The evidence that you assert only touches Miron's claims in the most tangential way, if at all. We all agree that education can result in higher earnings and that subsidizing something will increase the quantity produced. Miron isn't denying this. His argument deals with the structure of funding for education and the wisdom of government ownership of educational institutions.

Finally, look at you own assertion of causality, "And it's no accident that they ALL achieved [a large, dominant middle class] through socialistically funded ..." Let's just pass over the fact that you don't even define your terms "middle class" and "dominant" in ways that would make possible a test even for correlation. Why should we believe the causation worked as you claim? Why should we believe that the present arangement of ownership and funding of higher ed. (even if good) is better than alternatives?

At 6:39 AM, Blogger Mike Huben said...

James, if I told you the world was round, you'd ask for proof. Sorry, there's plenty of credible common knowledge on the subject. Adopting a simplistic universal skepticism as you seem to do may make it easy to write responses, but abdicates any responsability for knowledge of the real world.

Here's some basic data on how education benefits earnings. There's a huge academic literature on it.

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