Sherlock Holmes opined that the vast majority of us look but do not observe. We would do well to observe what is happening to our higher education system. Our state and federal policymakers have looked at our vast public college and university system but have seen only that the number of students enrolled in higher education has increased substantially. They have not observed the damage that has been done to our independent colleges and universities.
At the beginning of this century 4 of 5 students enrolled in higher education in the United States were enrolled in private colleges or universities. By mid-century enrollment was split about evenly between public and private institutions of higher education. Today 4 of 5 college students are enrolled in public institutions.
That shift has occurred because taxpayers have heavily subsidized public colleges and universities. State government provides nearly 40 percent of the current-fund revenue of public institutions of higher education, while only about 2 percent of the current-fund revenue of private institutions comes from state government sources. As a consequence, the gap between tuition at private and public institutions went from about $800 in 1965 to more than $9,000 in 1995.
That huge tuition gap has had two major effects on private colleges. First, they have gone out of existence at a high rate. Of the 346 institutions of higher education that closed their doors from 1970 to 1993, 312 were private. Second, those private institutions that have remained have generally given up a good deal of their independence as they have had to search for revenue in addition to tuition.
The contraction and stagnation of the independent college system are unintended consequences of our policy of creating large state university and college systems. The loss of private schools leaves numerous vacuums. Private schools, smaller and less encumbered by bureaucracy, are able to respond to changes in market demand more swiftly than are public institutions. Because the private sector cannot rely on tax revenue to survive, it is driven to innovate. Research has shown that students at private schools are more satisfied with classroom instruction and faculty-student contacts than are students at public institutions. The very fact that private institutions still survive despite the large tuition differential shows that they are providing services that are valued by their students.
Higher education services are provided more efficiently by private markets than by government planning. Since private institutions can receive income only if they provide a service that is valued more highly than its cost by their customers or donors, they are forced to be efficient. Government institutions, however, get a significant portion of their resources through taxation; they do not charge tuition that reflects the cost of the resources used in producing the service. As a result, the value of a college education to current students at a public institution is unlikely to exceed, or even match, the value of the taxpayer resources that education consumes.
Furthermore, it is important for our society to have an intellectual base that does not depend on the government for its existence. The role of state institutions is, and must be, to follow the mandates of the political system. The independent college or university can perpetuate the ideals and visions of tradition and morality and provide a forum for discussion of innovative minority viewpoints of independent thinkers. A civil society lets people rely on the natural and voluntary associations that form the social order. It is not within government-owned universities that solutions to social problems — solutions that rely on voluntary coooperation — are likely to emerge.
Assume that government is going to continue to be heavily involved in higher education. Instead of continuing a system of government-owned institutions of higher education, each receiving its revenue and having its program determined through the political process, state governments ought to require their universities and colleges to charge tuition sufficient to cover costs and give direct financial aid to students. (Milton Friedman made that excellent proposal more than 30 years ago.) Such a policy would place private and public colleges on an even footing. Taxpayers would no longer be subsidizing wealthy families and moving them away from private schools. Private colleges and universities could then be bastions of independent thought, vitally concerned about the desires of their consumers and supporters.