Posted by: Discover Scholars | August 18, 2008

Experts call for subsidizing students directly

The John William Pope Center for Higher Education Policy recently asked four economists to discuss the current state of higher education. Though the panel focused on the tradeoff between teaching and research at universities, Florida State’s James D. Gwartney made the following comment:

By and large, the government subsidizes colleges, not students. Federal and state financial support, although based on the enrollment of each student, goes to the university, and the university administration allocates it. If the government actually subsidized students, the payoff from undergraduate teaching would be higher, because students would seek to spend their subsidy dollars at schools emphasizing undergraduate education and not at schools emphasizing research. It would also lead to more of the specialization that Dirk mentions, which makes a lot of sense. (emphasis ours)

In other words, the current public university system makes it very difficult for students to cast dollar votes for excellence in teaching.

Gwartney’s larger point is that government interference has undermined the market forces and led to a lower quality of teaching than students would otherwise receive. Though Gwartney focuses on government subsidies, the same basic principles apply to private donations: when made directly to colleges, they enable administrations to fund projects of little benefit to students. These projects include:

  • bloated bureaucracies that directly benefit the administrators,
  • research projects that directly benefit the faculty, with only questionable benefits to most students, and
  • ever more luxurious student amenities, in what Richard Vedder calls the countryclubization of universities.

These measures increase costs without improving education, and are especially damaging when a college experiences a decline in donations and has to make up budget shortfalls with tuition increases.

Gwartney’s suggested solution for government spending mirrors the concept of donors, including the government, should subsidize students directly. By giving students the power to vote for the best teachers with their tuition checks, incentives would again be properly aligned.

Administrators and professors would devote resources to improving education and lowering costs, rather than spending on their pet projects or cozy amenities. (There would still be room for such institutions, of course – some students want a college experience that includes luxuries and networking). Donors wishing to support research would similarly focus on research laboratories and think tanks, instead of conflating research with teaching at universities.

Most importantly, as we discussed in a recent post, students would be able to choose schools based on the education they would receive there – education that would become cheaper as such colleges begin competing over discriminating students armed with donor money.


  1. […] on blog, we discuss how government interference has undermined market forces and led to a lower quality of teaching than students would otherwise receive.  Here’s a […]

  2. […] Because any government aid, whether in forms of subsidized loans or Pell grants, simply drives up tuition, concepts like those of become even more important. By subsidizing students, we empower them to choose among schools, forcing those schools to lower tuition and improve instruction, rather than charge more and spend on frivolous perks. […]

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