Jeffrey Selingoย raises an important point about the distinction between โpublicโ and โprivateโ universities, but I disagree with his analysis and recommendation. Selingo points out that the elite private universities have huge endowments and land holdings, the income from which, because of the universitiesโ nonprofit status, is untaxed. He calls this an implicit subsidy, worth billions of dollarsย according to this study. โSuch benefits account for $41,000 in hidden taxpayer subsidies per student annually, on average, at the top 10 wealthiest private universities. Thatโs more than three times the direct appropriations public universities in the same states as those schools get.โ
I agree that the distinction between public and private universities is blurry, but not for the reasons Selingo gives. First, a tax break is not a โsubsidy.โ Second, there are many ways to measure the โprivate-nessโ of an organization โ not only budget, but also ownership and governance. In terms of governance, most US public universities look like crony capitalists. The University of Missouriโs Board of Curators consists of a handful ofย powerful local operatives, all political appointees (and all but one lawyers) and friends of the current and previous governors. At some levels, there is faculty governance, as there is at nominally private universities. In terms of budget, we donโt need to invent hidden subsidies, we need only look at the explicit ones. If we include federal research funding, the top private universities get a much larger share of their total operating budgets from government sources than do the mid-tier public research universities. (I recently read that Johns Hopkins gets 90% of its research budget from federal agencies, mostly NIH and NSF.) And of course federal student aid is relevant too.
So, what does it mean to be a โprivateโ university? (Aside from this one, of course.)
Peter G. Klein is Carlย Mengerย Research Fellow of theย Mises Institute and Professor in the Division of Applied Social Sciences at theย University of Missouri. At Missouri he also directs theย McQuinnย Center for Entrepreneurial Leadership, and he holds adjunct faculty positions with theย Truman School of Public Affairsย and theย Norwegian School of Economics. His research focuses on the economics of organization, entrepreneurship, and corporate strategy, with applications to diversification, innovation, food and agriculture, economic growth, and vertical coordination. Klein has authored or edited five books and has published over 70 academic articles, chapters, and reviews. Seeย hereย for his complete vita andย hereย for his website at the University of Missouri.
