NOW WORK OUT THE PROPER VALUE PROPOSITION.

A recent Washington Monthly article might be offering praise for the regional comprehensives and the mid-majors.  "New research shows that regional universities deliver the greatest return for our tax dollars."  Unfortunately, the concept of "greatest return" in the research is an ancient mercantilist myth.

Colleges and universities are under enormous pressure, from demographically driven admissions declines to accusations of “wokeness” to mounting public doubts about the value of a four-year degree. Public universities like [Grand Valley State] took big hits to their budgets after the Great Recession, and while overall per student funding has returned to pre-recession levels in most of the country, debates continue over whether higher education is a sound investment. Many Republican state lawmakers, especially those representing rural areas, argue that public universities contribute to “brain drain,” when students earn college degrees on the taxpayer’s dime and then move out of state to pursue their careers. Those dollars would be better spent, they say, by cutting taxes and subsidizing companies to relocate to their states.

Are they right? The Upjohn Institute, a nonpartisan research organization focused on policy-related issues of employment, set out to answer that question. Using innovative research methods, a group of scholars led by the Upjohn senior economist Brad J. Hershbein found that students at brand-name public flagships—places like the University of Michigan, University of Wisconsin–Madison, University of Kansas, and University of North Carolina at Chapel Hill, to name a few—do tend to leave those states after graduation. But alumni of less-renowned regional public universities, like GVSU, generally stick around.

There's a lot going on in those two paragraphs, and in 22 years of Cold Spring Shops we've looked at a number of them.  It is a sobering thought that Illinois was once a destination state for ambitious graduates of Michigan's institutions.

Shiver me timbers, there are drawbacks in attempting to capture 25 years of creative destruction in two data-points. One state has a manufacturing economy dominated by motor vehicle assembly. The other has a diversified economy including much of the financial and logistical infrastructure for Michigan. Does it surprise that the incentives to finish high school and attend university are different?

The balance of trade in higher education obsesses policymakers in the upper Midwest, as my beggar-thy-neighbor series of posts points out. University administrators throughout Wisconsin fret about graduates accepting jobs out-of-state, particularly in Illinois (but did any of their campuses see fit to offer me a post as space-cadet-theorist-in-residence?) and Amtrak's Michigan corridor service exists to transport flatlanders to Kalamazoo and Ann Arbor.

The comparison of Michigan with Illinois misleads in another way. Consider Michigan, Michigan State, Wayne State, and Michigan Tech. At one time Michigan attempted to maintain four research universities in-state. There are also three Mid-American members and a number of regional state universities and colleges. (It was clear that Wayne was going to lose out to the other three in the retrenchments that were in progress 20 years ago.) Public policy in Illinois has tended to favor Illinois at Urbana as the research university, with perhaps a few specialty programs in Chicago. But there's enough discontent among students good enough for Illinois who don't get in, and their parents, that Northern, Southern, and Illinois State can make the case to be additional research comprehensive universities. But that public policy has not maintained academic departments in Urbana at the same level that Ann Arbor has managed to maintain, let alone competitors that could be viewed in the same way as Michigan and Michigan State. Question: if not for Michigan, State, Tech, and Wayne, would the exodus from Michigan have been worse? Different question: How much Illinois human capital is being developed in Madison and Ann Arbor and East Lansing and Kalamazoo?

Michigan continues to attempt to maintain more university capacity than they can support, and the rent-seekers predictably are wetting their beaks.

Robert Genetski, a former schoolteacher and Michigan state representative, provided one explanation: political clout. Larger universities have more money to employ highly paid lobbyists to influence state appropriations. For example, in 2011—the year that the legislators considered the 2012 budget—the University of Michigan, Michigan State University, and Central Michigan University together outspent every other school combined on lobbying in Lansing. These lobbyists can have quite an impact. Genetski explained to me that while the original higher education budget for the following year, 2013, contained the largest increases in state support for high-performing regional universities like GVSU and Ferris State University, lobbyists for more influential universities successfully killed his budget. Instead, the legislature boosted overall higher education spending by a bit, but with the largest research universities receiving the overwhelming majority of the new money. Over the next few years, [former governor Rick] Snyder signed additional modest increases in higher education spending, but at levels below what they had been when he was first elected, and with the lion’s share going to the universities with the best political connections, not the highest performance.

That Upjohn study, though?  That Institute, which has hired some solid economists over the years, comes close to making a mercantilist argument.

On a basis of return on tax dollars, regional universities outperform flagships. For every $100,000 of state funding, the researchers found, regional universities retain nearly two college graduates in the state for every one flagships keep. “From the lens of a state policymaker,” they concluded, “we show that regional public institutions tend to produce the greatest number of graduates who stay and work in-state per dollar of state funding, suggesting investments in these institutions could have particularly high local returns.” (While the best community colleges have similarly high ROI, many others don’t because their students graduate at lower rates and earn less after college.)

I've never been a fan of keeping the human capital home.  "Michigan exports human capital to Washington. Washington exports jet planes and computer software to Michigan. If Washington's products improve life, including work life, of Michigan's residents, the proportion of adults with degrees in Michigan does not have to signal a decline in the economic health of Michigan."  I've also urged caution in evaluating the degree programs at those regional comprehensives, as well as caution in comparisons involving community colleges: "Note the distinction between a four year college and a community college or vocational school. The Five-Year Party also cautions readers not to conflate a subprime party school with a community college: open access does not equate to open kegs."

Next, dear reader, consider the political economy of college admissions.  The Monthly article suggests that state flagship universities deal with legislative stinginess by expanding their admission of nonresident students who pay full freight.  There's some truth to that, and more than a little of it might be driven by the U.S. News problem.  We saw that playing out in Wisconsin some years ago.

Higher education, however, likes to labor under the conceit that nobody meritorious should be deprived of an opportunity to matriculate for something as crass as lack of money.  At the same time, admissions officers have opportunities to tweak aid packages for students in ways that would make the manager of a frequent flyer program blush.  Whether Madison posts the same list price as Oshkosh or a different list price probably doesn't matter much: cheeseheads and Coasties alike know which is the hardcore party school and which is the subprime party school.  But if Madison posts a higher list price, with the excuse that Urbana and Ann Arbor do it, and then offers its promotional discounts financial aid using a different formula than Oshkosh is obligated to do so, the yield it makes from the buckets of seats it sells (yeah, I'm talking like an Amtrak reservation manager, deal with it) might be higher than the yield it could have obtained under a standard formula applied for all Wisconsin universities.

That post came with a sting in the tail.

Suppose for the sake of discussion that Madison is adapting to the excess demand for perceived quality by admitting more out-of-state students, thereby enhancing its own coffers (the out-of-state tuition is calculated on a fully allocated cost basis: allocate on the basis of a small bucket and admit a large bucket and you're money ahead) and compensating for the state's stinginess, and at the same time displacing Wisconsin residents who on the basis of the small bucket of Coasties would have a space at Madison to Milwaukee. It is then likely that Milwaukee is admitting students who could cut it at Madison, and to offer them a less demanding course of study is to shortchange them. Thus the policy discussion Wisconsin ought to be having is whether Milwaukee is set up to serve strong students.

That's germane to the Monthly article in two ways.  First, the young lady whose story opens the article had ambitions to study at Alabama "to get the hell out of Michigan" and presumably didn't consider Michigan or Michigan State.  Thus the article is not able to comment on whether she was a Michigan resident displaced by Ann Arbor or East Lansing going after the revenue first: and that is outside the scope of the Upjohn research.  Second, the concluding paragraphs of the essay include a troubling observation.

Richard Florida, an urbanist who rose to prominence for his 2002 book, The Rise of the Creative Class, told me that more skilled workers will be necessary to make this strategy succeed. While research universities are critical for producing top-end talent, Florida explained, “the knowledge economy requires talent of all stripes. You not only need the kids in Ann Arbor doing all the coding, you also need people in Grand Valley who can make shit work.”

Catch the social stratification inherent in that? "At the same time, the least selective institutions -- the "party schools" that Brandon denigrates -- are turning into educational reservations for the poor and working-class -- people who are being trained to serve the leadership class."

That's not the sort of thing that interns for The Washington Monthly, probably safely on the inside track to a middle management or higher posting in the Swamp, will notice.  Militant Normals do.  The purpose of higher education is education, and until administrators of the Central Michigans and Grand Valley States twig to that, all the mercantilist talk about keeping the state's graduates in state will be a distraction.