Universities and Wealth

Many interesting discussions to rejoin in the blogosphere in coming posts, but first I pause to give a hat tip to EagleSpeak, one of my absolute favorites, for pointing to me this piece by Victor Davis Hanson, "The Global Throng: Why the World's Elites Gnash Their Teeth." (For those of you on campus, be sure to see Hanson on Tuesday, in a debate with Professor Edsforth. Get the details here.)

As you can tell, my wiring is mostly conservative, and so I am bound to be sympathetic to the slant in this particular history-writing-in-process article. But the part of the piece that caught my eye was more about my own backyard:

What explains this automatic censure of the United States, Israel, and to a lesser extent the Anglo-democracies of the United Kingdom and Australia? Westernization, coupled with globalization, has created an affluent and leisured elite that now gravitates to universities, the media, bureaucracies, and world organizations, all places where wealth is not created, but analyzed, critiqued, and lavishly spent. [emphasis in the original]

It's hard to argue with the characterization of, say, Ivy League faculties as "affluent and leisured," at least compared to the work most people have to (or choose to) do for a living. (Though I'm not feeling particularly leisured these days.) And he's got another solid point with the tendency to analyze and critique--that's part of a good university's mission statement. And certainly we do spend money that arrives as a result of philanthropy or subsidy (in addition to tuition). I don't know how lavish that spending is, but I'll certainly concede the point that we "do without" to an impressively small degree.

But is it really true that universities do not create wealth? My time on campus these days is made up of three activities:

Research: I won't make this characterization for all of it, but certainly there are some papers there that have helped change the way people think through issues related to Social Security, pensions, saving, taxation, executive compensation, and other topics. It is freely available to be used by others as an input to their work, whether through policy, industry, or other academics. To the extent that it is used, it is a productive asset and thus wealth.

Teaching: I am enjoying the heck out of teaching this term. Part of it is the hiatus, and part of it is that the average quality of my students is really high this term. We spend a few mornings a week discussing some challenging finance papers and answering two basic questions: Is there anything in the way this paper is implemented that leads me to call into question whether it has established the empirical fact it claims? Assuming I believe the empirical fact, are there any other competing explanations for that fact that do not require me to accept the authors' explanation? I also push the students pretty hard on their own original research. So, let's see, if any of you out there think that these are valuable skills, by all means, hire my students after they graduate and pay them a lot of money. To the extent that these skills have value in the marketplace (at the very least), they are wealth.

Administration: The Rockefeller Center provides (mainly) extracurricular enhancements to Dartmouth students' and the community's understanding and participation in public policy. Among our many activities, we bring in speakers, we host discussion groups for students and faculty, and we provide hard-skill training for those who seek careers in public policy. There are lots of Centers like this at universities around the country. To the extent that their programs make for better informed decisions, they create wealth.

If we are doing our jobs, then we do create wealth. I would love to figure out a way to measure how much.

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