This week we explore the value of research in the humanities with Dean Chris Yeomans. Relative to more ‘utilitarian’ research, how does research in the humanities create value for society? How can higher education better make the case that humanities research is important? We will hear from Chris on these questions and more.

Our Six Questions posts include the unedited video of our conversation, and a link to a verbatim transcript. Below you can find a condensed transcript generated from that video with the help of the Gemini AI tool. All participants have reviewed the condensed transcript for accuracy. Let us know what you think!

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Jay Akridge: Hello everyone, I’m Jay Akridge, joined here by my colleague and co-author, David Hummels. We write the Substack, Finding Equilibrium: Two Economists on the Future of Higher Education. We’re trying something new for Finding Equilibrium by creating some podcasts to experiment with that format for sharing insights on higher ed with our audience.

We’re going to be talking about some of the key issues in higher ed with experts who have unique insight on those issues, and we’ll be working to cut to the essence of the issue by focusing on six questions in our conversation. Or at least we’re going to try to keep it to six questions.

Today, our topic is research in the humanities. You know, the value of research in the humanities has been increasingly called into question. Some critics argue that humanities research doesn’t create value for society, and therefore faculty shouldn’t be doing it, and the public shouldn’t be funding it. Elected officials are listening, and such opinions look to underlie some policy decisions, such as mandating higher teaching loads and budget decisions, such as increasing the focus on STEM.

To help us take a careful look at humanities research and address some of these perspectives, our guest today is Dr. Chris Yeomans, the Justin Smith Morrill Dean of Purdue’s College of Liberal Arts. Dean Yeomans moved into this role this past December and had previously served as head of Purdue’s Department of Philosophy. His scholarship has focused on the history of German philosophy and the work of Hegel, among other areas. Chris, welcome, and right up front, congratulations on your new appointment.

Chris Yeomans: Thank you, it was three months on Monday. So, I’m just in. David and Jay, thank you so much for having me; I’m a big fan of the Substack.

Jay Akridge: Really great to have you today, and so we’re going to jump right in. I think it’s natural for people outside the Academy to focus on the more utilitarian aspects when they think about the value of research. So, we cured a disease, we built a longer-lasting battery. How do you make the case for scholarship that doesn’t have the same obvious connection to outcomes and material things that people value?

Chris Yeomans: Yeah, it’s a great question. One thing that I’ll say—not to dodge the question, I promise, but to drag some other people into the foxhole with me—is most STEM research is also not like that. Most STEM research is basic research. In a lot of ways, private industry is better at building the battery or producing the actual drug that is going to help you, and it’s based on basic science that happens at the university. So, this is an issue, and particularly a public relations issue, but not just for the liberal arts; I think this is true for the sciences as well.

I’ll say a few things about it. First, it turns out to be surprisingly difficult to tell in advance what kind of knowledge will be useful. There’s a sort of false picture that we start with some real practical problem, like battery life, and we somehow reverse engineer the basic science around it. It almost never works that way. The cameras in our cell phones work on the photoelectric effect, which Einstein explained in 1905. GLP-1s like Ozempic work on research that was done into Gila monster venom. You get all of these things that didn’t look that useful at the time, but as you start piecing them together, you get a different context.

Humanities research is a lot like that. A few years ago, it seemed like the most useful thing in the world was learning how to code a computer, but now with “vibe coding,” it’s not clear that that’s the most useful thing in the world.

I also think people actually value a broader range of things than we generally give them credit for. Speaking to a couple of economists, here’s an interesting data point: Heritage tourism—tourism around historical and cultural interest—is a $600 billion market. That is over a third of all tourism geared towards people trying to take in history and culture. If you look at fiction sales, historical fiction has a huge market share and massive fandom.

I actually think the things that people care about are more than just a longer battery life. People care about self-government; they care about natural and cultural identity. They care about history, the history of their nation, and understanding things like the Civil War. In the end, I think that’s because humans live more in the world of meaning than they do in physical objects. The number of human problems that you can solve with physics is actually remarkably small versus the number of human problems that you can address with literature, understanding history, or getting clearer about political concepts.

So, I actually think the humanities have a more direct connection to the world of our experience than many other fields in the university. My view is that our main problem is not one of content, but of form. Our research outputs are largely inscrutable for anybody outside of our sub-disciplines. Maybe even people in other areas of philosophy can’t make heads or tails of what I write, and vice versa.

I think a lot of it has to do with better public engagement and getting the results of humanities research to people on the topics of the day in a way that your average, educated American can understand. A lot of the things that we’re dealing with, even when they have to do with scientific questions, don’t really have scientific answers.

For example, Jay Bhattacharya, the director of the NIH, was just here a couple of weeks ago, and we were talking about decisions about school closings during COVID. It’s a scientific question what the transmission rate of COVID is or whether certain populations are more or less vulnerable than others. But the question of how we should trade off exposure of older and vulnerable Americans to COVID with education losses from schools that are closed—that’s not a scientific question. That’s a moral question. Research in moral philosophy and ethics isn’t going to tell you exactly what the right answer is, but it’s going to give you a better set of concepts to understand the decisions you’re making and their ramifications.

The use of the humanities is much broader because the things that we care about are much broader.

Jay Akridge: Yeah, I think that’s a great point. There is a disconnect where the lens we look through to place a value on the humanities—maybe just pure economic value—doesn’t align with the value society receives from them. How to bridge that gap becomes the question. I know David’s got a follow-up here.

David Hummels: Yeah, your answer just then was leading in the direction that I wanted to ask about. Your college has gone a long way in touting research and educational programs specifically related to the topic of the day: artificial intelligence. I wonder if you could say more about humanities research conducted specifically to complement emerging understandings in other fields, like STEM.

Chris Yeomans: Sure. I’ll say something about AI generally, and then something a little bit more detailed. I think the way the humanities can best engage with AI is by taking the “I” in AI seriously. This is supposed to be a form of intelligence. Well, we’ve been thinking about what intelligence is for a couple of millennia now. We’ve been thinking about issues like knowledge, reasoning, explanation, and understanding. If there’s an artificial version of this, we should be able to figure out what artificial understanding or artificial explanation is like.

Philosophers have, for a long time, compared human intelligence with other kinds. For most of history, the two comparisons were animal intelligence and God’s intelligence. Animals are not mechanisms; they’re doing something that looks like intelligence even without language. And if there’s a God, God’s no doubt much smarter than we are. Now you have computational intelligence, which you can add in there. It helps us not only understand what artificial intelligence might be like, but also what human intelligence might be like in comparison.

There’s a well-known phrase that AI is not true intelligence, but just a “stochastic parrot”. But human beings do quite a bit of parroting in conversation, as it turns out. So maybe the comparison is a little more complicated.

I think there are really three ways that we engage with machine learning: using it, understanding it, and enabling its advancement.

Regarding using it, there is all sorts of interesting work going on with the application of machine learning techniques in the humanities. For example, Stanislav Pejša won our Distinguished Dissertation Award in history for using machine learning to explain how the boundaries of European countries were redrawn in the Treaty of Versailles. There has been a long discussion about whether this was pure power politics or if there was a real vision behind it. Pejša was able to digitize international affairs journals in a variety of European languages and use machine learning to show that there was indeed a plan presented in different journals. You have to have the language ability, understand the historical context, and be able to use the machine learning techniques.

For understanding it, again, we must take seriously that this is supposed to be a kind of intelligence. It isn’t just a tool; it’s something more extraordinary. Brett Karlan in our philosophy department works on the question of authenticity in AI decision-making. If you’re talking to ChatGPT about what to do with your life, the resulting decision is a combination of what you think and what ChatGPT thinks. Human beings have always made decisions in funny ways—based on parents, roommates, etc.—but we need to take this new interaction seriously. Eamon Duede also has a paper in Science called “After Science” about what happens when machine learning solves problems without explaining them. Are we still doing science when understanding isn’t increased?

Lastly, the humanities have been very important for the advancement of AI. Hubert Dreyfus, a Heidegger scholar, wrote What Computers Can’t Do in 1972. It is widely recognized as having ended the era of “good old-fashioned AI” or symbolic AI. Dreyfus argued that human intelligence is embodied and cultural, and symbolic systems based on logic rules don’t have that. That argument won the day, and the advances we are seeing now come directly out of that intervention.

Today, many think the improvements from “hyperscaling”—just throwing more data at it—are flattening out. The next real acceleration is going to come from cognitive modeling—building an understanding of what thinking is like into the machine learning algorithm. Yann LeCun recently left Meta to start his own firm precisely because he thinks hyperscaling is a waste of time. This brings us back to what philosophers and linguists like Gary Marcus have been saying.

The real advances will come when we can integrate this into business strategically and learn to govern and regulate it properly to protect privacy and keep humans in the loop. In medicine, they are calling this “augmented intelligence” rather than “artificial intelligence”. You need to be able to compare different regulatory frameworks, which is what scholars like Kaylyn and Daniel Schiff do in political science. The advancement of AI is not just about making a better widget; it’s about figuring out how it fits into social, political, and economic life. That’s a problem for management professors, history professors, and political theorists, not just computer scientists.

Jay Akridge: Appreciate that perspective on the humanities’ engagement with technology like AI. One critique we hear is that much of humanities research concerns subject matter that hasn’t changed. Shakespeare finished writing 400 years ago, yet scholars continue to publish hundreds of articles. There were 50,000 books on the Civil War in 2001, and that number doubled by 2012. Don’t you run into diminishing returns at some point? Is there still value to society in such research?

Chris Yeomans: I work on Immanuel Kant, and it’s often said there were already 2,000 books on his philosophy at the time of his death. We’re still writing and finding things. I’m going to throw my STEM colleagues under the bus again—they have it even worse because the laws of nature presumably haven’t changed since the Big Bang. Yet physicists, biologists, and chemists still have stuff to do.

I think we’re actually better off because human life is constantly changing. We do a lot of modern history, like Kathryn Brownell’s book on how cable news and the 24/7 news cycle changed politics. Our fields change more than people realize. Sometimes the topics haven’t changed, but they are just incredibly complex.

Regarding the Civil War, we tore this country apart and then stitched it back together. It’s an extraordinary episode, and I’d be surprised if we ever ran out of new things to say about it. Just as we’ll never get to the end of physics, I don’t think we’ll reach the end of Civil War scholarship.

Often, the things we study haven’t changed, but we have. We have different perspectives, so different facets of an event become apparent. My basic view is that human beings are slow learners. That’s why I started studying Hegel; he thinks it takes many generations to figure out really basic things. Each generation builds on the last.

Think about the Civil War through films like Glory (1989) about African American soldiers. Once you’ve assimilated that story—that they were fighting for their own freedom—you’re ready for more complex work like Jonathan Lande’s research on the actual experiences of those soldiers and the difficulty of moving from slavery into army discipline. You need that first level of complexity before you can tackle the next. It’s like any discipline; you take step one, then you add another variable or realize the first step was only an approximation.

I don’t think we get diminishing returns, but we do get increasing specialization. This happens in STEM, too. My math professor friends tell me there are papers they write that only a half-dozen people in the world can review. You get there by adding dimensions of complexity. This leads back to the humanities’ “PR disaster”—it’s not the content, it’s the form. We need to find the people who can explain that next level of complexity to a broader audience without them needing a PhD.

David Hummels: I want to bring the conversation to this political moment where there is a lot of questioning about the independence of universities and academic freedom. Scholarship that questions how society operates is always going to be more controversial. What role do you see humanities research playing in challenging the way we live and govern, and how do you manage that when governments don’t like to be questioned?

Chris Yeomans: It is the topic of the day. One important thing to realize is that the challenge we are involved in at universities is continuous with the everyday challenge that goes on in families, workplaces, and the military. Everywhere there are human beings responsive to rules and norms, there are disagreements about what those rules mean.

I think we can get a false binary where there’s “ordinary life” where everyone agrees, and then “weird academics” who challenge everything. I grew up in a Marine Corps town; Marines were very happy to criticize the Corps, their officers, and the President. Even in a military command structure, there was plenty of dissent. I think of the humanities as just a more self-reflective and articulate version of this constant renegotiation of norms that is the fabric of human life.

We need to maintain that continuity. In our introductory classes, we should take students where they are and use their issues as an entry point into academic discussions. We can say, “This is just what good citizenship is like”. We offer the tools, and they make up their own minds.

Another false picture of contemporary life is the strict binary between left and right. The reality is much more complex. What one person means by “conservative” can be quite different from another. In a political theory class, you can show students that this is an n-dimensional space. Take the French Revolution: they cared about freedom, equality, and solidarity. Much of history since then is a “pick two” scenario. You might find a view on the right and a view on the left that both prize solidarity, but one prizes freedom more and the other prizes equality. You might have more in common with your political opposite than you think.

This doesn’t necessarily help with governments that don’t want to be challenged, but it helps show that universities aren’t outliers. In “Cornerstone for Business” courses, I love showing students that authors who are very pro-capitalist have views they might not accept. Adam Smith thought the joint stock corporation was a huge mistake and should be limited. Joseph Schumpeter thought modern corporations were a kind of socialism, not capitalism. Showing students this complexity helps break down the all-or-nothing thinking.

Jay Akridge: Let’s drill down on that. Conservative critics focus on what they view as left-leaning programs—gender studies, critical race theory, social justice—and some state governments have begun to ban discussions on these issues. How do you characterize that criticism? Is it deserved or overblown?

Chris Yeomans: There is a kernel of truth there regarding the demographic imbalance of political perspectives. That is well-documented and can be an issue in some fields. Higher ed can do a better job of keeping track of that in hiring and promotion.

On the other hand, many people who call themselves liberals or leftists disagree on a wide range of issues. And really, there is nobody more conservative in the world than faculty members. They are against any change at all. If anyone has imbibed Edmund Burke’s motto that “if it’s not necessary to change, it’s necessary not to change,” it’s academic faculty.

Most characterizations of these fields are caricatures. You can certainly find people with flimsy views, but for every one of those, I can show you a dozen papers by people in their own field criticizing them. Take Critical Race Theory; it’s often characterized as the claim that race explains everything in American history. But if you look at the philosophy of race, views are all over the place. My colleague Leonard Harris has an “actuarial theory of race,” where racial descriptions are just characterizations of variations in health outcomes—they are what get explained, they don’t do the explaining. That’s hard to square with the caricature.

Furthermore, faculty—certainly at Purdue, but even at elite universities—are generally not radicalizers of their students. At elite universities, faculty are often being pulled in a radical direction by their students who come in radicalized from their backgrounds. At a place like Purdue, there’s a disconnect between the idea that we are indoctrinating students and our actual experience of pleading with students just to read the syllabus or ask a single question. After 25 years of teaching, I am convinced we do not have the power to brainwash anyone.

David Hummels: I second that. I can’t get anybody to read a syllabus. What is your vision or strategic plan to help the broader public understand the value of humanities research?

Chris Yeomans: As I said, the problem is form, not content. We need more public engagement: thousand-word op-eds, YouTube videos, Substacks, and podcasts. We need research dissemination that doesn’t require reading a 25-page paper.

I’m also interested in multimodal approaches. In the College of Liberal Arts, we have humanities, social sciences, design, art, and performance. We can engage people aesthetically—put on a play, a dance concert, or create visual art about a topic. These are languages that speak to people without requiring specialized vocabularies or statistical competencies.

We also need to speak to the issues of the day that people are already interested in. When I say this, people worry about staying out of politics. Individual faculty don’t have to stay out of politics in their private speech, but many issues of common concern are not fundamentally political.

Take the damage technology has done to our ability to focus and form in-person relationships. I remember when classrooms were so noisy I had to yell to get people to shut up; now, they are often quiet because everyone is on their phone. Jonathan Haidt’s The Anxious Generation was a bestseller because people are concerned about this. It’s an issue of common concern.

We’re starting a learning community for first-year students called “The Art of Attention”. We’ll combine cornerstone classes with theater and art appreciation. We’ll tell them to “put your phone down and stare at a painting for 20 minutes” or “get on stage and deliver these words in character”. We’re also giving them “bricks”—tabs you tap your phone on to kill social media notifications—and asking them to figure out how to use them best to form better relationships. We’ll have theater performances and scholars in cognitive science talking about immersion. We want to hit it from all angles in a public forum.

Finally, we must maintain a culture of vigorous disagreement. The best thing ever said about economists is that if you get ten of them in a room, you have eleven opinions. I hope the same is true for the humanities. When people see us disagreeing publicly, they realize the caricature of the “indoctrinating academy” is inaccurate.

Jay Akridge: Chris, I really appreciate that focus on public engagement. As the new Dean, leave us with one reason why we should be excited about the future of humanities research.

Chris Yeomans: This will sound paradoxical, but Immanuel Kant had a great line: “Out of the crooked timber of humanity, no straight thing was ever made”. That is our hope. Human life is not going to get any less complex. Human beings are not going to get any less funny, tragic, foolish, or inspiring. Both the follies and the greatness will continue, giving us new perspectives and new things to study. We’re only scratching the surface.

Jay Akridge: That’s a great reason to end on. Thanks very much for joining us, Chris, and we wish you all the success in your new role.

Chris Yeomans: Thank you, I need it! And thanks for doing the Substack and the podcast; it’s a vital part of this public engagement.

Jay Akridge: That’s all for this Finding Equilibrium podcast. Thanks for joining us today.

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Finding Equilibrium” is coauthored by Jay Akridge, Professor of Agricultural Economics, Trustee Chair in Teaching and Learning Excellence, and Provost Emeritus at Purdue University and David Hummels, Distinguished Professor of Economics and Dean Emeritus at the Daniels School of Business at Purdue.

While these direct links between university science and commercial value do occur, far more often university science indirectly generates value. University research filters out into an improved understanding of the physical and human world and slowly, over time, that understanding is identified as useful for some specific “demand pull” innovation.

Because knowledge diffuses broadly and unpredictably it can be challenging to generate a proper counterfactual where you could say: without university research, what innovations would not have happened? But there are interesting thought experiments that drive at precisely this idea.

In this post we discuss evidence on how these indirect benefits contribute to economic growth, and to social value more broadly defined. We’ll also make an argument for how engaging in research raises the value of the university itself, even when that research has no obvious use case.

Research and the Value of Human Health

It is sometimes possible to point to specific innovations that generated huge market value even if the inventors themselves did not share in that value. The large language models (LLMs)at the core of generative AI are driving $450 billion dollars of investment in new data centers in 2025 alone. The Black-Scholes options pricing formula in finance led to the creation of derivatives contracts that are immensely valuable to financial markets – the current value of outstanding derivative contracts has something like $20 trillion dollars in market value.

Probably the best examples come in medical innovation where we can connect research directly to improvements in, say, cancer survival and assess the value of that survival. This is relatively straightforward because we can point to a specific technology and its specific effect: a molecule that when ingested reduces a tumor, for example. And we can also trace the chain of scientific influence from patents to scientific publications and then back to the funding of those publications.

A great example is a very recent paper published in Nature by Azoulay et al. that highlights the importance of NIH funding of university science. NIH proposals are scored and ranked, with funding flowing first to the highest scoring publications. That means one could examine the impact had by proposals that were funded, but wouldn’t have been funded had the NIH budget been, say, 40% smaller. (Not coincidentally, the size of the proposed cuts to NIH under the President’s skinny budget.)

Azoulay et al. show that 59.4% of the new drugs approved by the FDA between 2000 and 2023 were linked via patent-to-paper citations to academic studies that NIH funded between 1980 and 2007. And over 51.4% of these drugs were citation-linked to studies that wouldn’t have been funded under a smaller NIH. Whoa.

But these instances where we can make direct attributions between commercial technologies and university science are much less common than you might think. Rather, most innovations that improve our lives combine understanding drawn from wide-ranging scientific progress. That is true of innovations like your smart phone, which embodies thousands of individual technologies drawn from a dozen scientific fields. It is also true of your health, which has been impacted by a gradual accumulation of understanding – of hygiene, nutrition, exercise, preventative medicine, and so on – that cumulatively improves your well-being.

William Nordhaus estimates that over the course of the 20^th century, the value of health gains in the form of increased longevity are comparable to the value of income gains. Or to put it another way, per capita income in the US rose about 10-fold in the 20^th century. If we combine this with the improvements in health noted by Nordhaus, people in 2000 were about TWENTY TIMES richer than people in 1900.

This calculation is based on a somewhat grim concept called the “Value of a Statistical Life” (VSL). Imagine you are offered two jobs, one of which is perfectly safe, whereas the other has a 0.1% chance of killing you. If you would take that risky job for an extra $11,000 a year, that translates to valuing your life at $11 million. (Which is exactly the number the US Department of Health and Human Services calculated for VSL in the US using precisely these risk-reward tradeoffs in employment data.)

A similar calculation provides a value for enjoying an additional year of life, and in the 20^th century medical improvements caused US life expectancy to rise from 50 to 80 years. Nordhaus combines these to conclude that health gains were the equal of our prodigious income gains. More recent work in Nature Aging by Scott et al. uses a related calculation to conclude that, in 2017, increasing US life expectancy by a single year would be valued by the population at $37.6 trillion. That’s trillion with a “T”, equal to almost twice the entire value of national GDP that year.

This suggests that research that extends life expectancy (through treating disease, or improving health in other ways) is an incredibly powerful driver of human well-being, with an extraordinarily high rate of return. It is also perhaps the reason that the National Institutes of Health are (or at least were) the single largest investment the federal government makes in research.

Research and Economic Growth

Jones and Summers offer a provocative thought experiment linking research to economic growth more broadly. Economists who study the drivers of growth attribute something like 2/3 of the variation in economic growth across countries to improvements in productivity, as opposed to accumulating more capital or education or a larger labor force.

If that’s right, suppose we were to simply stop innovation and stop economic growth for just one year, what does that mean in terms of lost GDP? In a typical year, US GDP per person grows about 1.8%. So if we lose 2/3 of that because we shut down innovation, the US economy will be about $350 billion smaller than it otherwise would have been next year ($29 trillion * 0.012 = $350 billion).

Ah, but economic growth in the economy compounds in the same way interest compounds in a savings account. So, if we subtract that innovation-driven growth for one year, we are poorer in every subsequent year. Even if we restart innovation, we are restarting growth from a smaller base the following year - and every year after. Adding that up amounts to a really big number!

We can then compare that to what we actually spent on research of all kinds to get the ROI from that research. Assuming 2/3 of economic growth comes from innovation, the Jones and Summers method tells us that every dollar of research generates almost ten dollars in economic value. You can fancy that up with varying assumptions on how long it takes research to generate market value, or the investments other than R&D that are needed to create that market value. But any way you slice it, you get a number that says research generates many multiples of what we spend on it.

Note that if we take the 10:1 ratio and apply it to $108 billion dollars spent on university research, you get something like a trillion dollars of benefit to the economy. And that’s not counting the health benefits we just discussed. That sum is vastly greater than what universities directly capture from startups or licensing royalties. The key thing about this method is that it doesn’t only account for the market value that is directly associated with specific research, but instead all the spillover value research creates economy wide.

Do these numbers seem crazy? Let’s look at a specific industry. Food is a basic human necessity, and so the returns to public agricultural research have been carefully and repeatedly studied. Alston, Pardey, and Rao look at more than 400 studies that estimate the returns to public investments in agricultural research (encompassing 722 return estimates) and also find a 10:1 benefit:cost ratio.

These numbers may seem surprisingly high if you think only about immediate returns to research. But they are perhaps less so when you realize that investments in agricultural research generate knowledge that can be used and reused many times and by many people over decades.

This gets at the heart of a fundamental paradox for valuing university research. The more enduring is the impact of a particular piece of university research, the longer are the lags between when that research is conducted and when the returns are fully realized. More impactful research can actually be *harder* to properly assess than work that offers meager, but immediate, gratification.

Social Value, Not Market Value

There is a third reason that university research can be enormously valuable and yet not captured in specific measures like royalties or business spinoffs. Much of what we study, particularly when we step outside of physical science or engineering, is aimed at helping individuals and societies make better choices.

For example, use-inspired research is aimed at addressing a specific societal problem: food insecurity, climate change, water stewardship, and so on. These issues are sometimes labeled ‘wicked problems’ – societal problems so complex it takes multiple disciplines, working together in ways they perhaps never have, to make progress. Universities, given the breadth of disciplines represented on a campus, are especially well-positioned to tackle such wicked problems.

How do we value research aimed at addressing a societal issue? Sometimes the results of use-inspired research show up as economic value. Sometimes this work “only” results in people leading better lives.

Let’s think about a few examples. Going back two centuries to David Ricardo, economists have studied why countries trade, how they benefit from that trade, and how countries are made poorer by imposing barriers to trade. Until very recently, this academic work was extremely influential in shaping government policies that promoted open markets.

For a country like the US, free trade might increase overall GDP by something like 5% each year (about $1.5 trillion). For countries like China, trade is arguably responsible for lifting literally billions of people out of dire poverty. Neither Ricardo, nor the legions of economists who have worked on international trade research in the centuries since, have meaningfully shared in these gains.

Another example: prior to our understanding of the germ theory of disease, and its implications for simple policies like providing a clean water supply and sterile medical facilities, many men and women died too young, and vast numbers of children died before reaching the age of 5. How vast? Two-centuries ago, in even the richest countries, 3 children in 10 died before the age of 5. In the poorest countries it was 5 in 10. Child mortality today is extremely rare, around 5 children out of 1000. How do we value that? Who got paid for alleviating all that suffering?

Nobel Peace Prize Laureate Norman Bourlaug’s work on high-yielding, disease-resistant and climate adaptable wheat is credited with saving the lives of literally a billion people. Closer to home for us, Purdue’s Gebisa Ejeta, (both a recipient of the National Medal of Science and a World Food Prize Laureate) developed sorghum varieties resistant to a devasting parasitic weed, striga, enabling African farmers to expand yields of this important food crop with the same effect – millions were spared from starvation, stunting, and/or other consequences of inadequate nutrition. Bourlaug and Ejeta are appropriately well-honored, but they sure weren’t compensated in proportion to the lives they affected.

Or here is a contemporary and unresolved research question. What are smart phones doing to our brains, especially for adolescents in a critical development phase? Carefully done research on this important question probably doesn’t generate a lot of market value, and if it leads to parents keeping smart phones out of their kids hands it probably *destroys* market value. But it’s a question that parents are wrestling with right now, and they need the help of careful and unbiased research to decide.

Does all Research Generate Value?

For all these reasons we think university research taken as a whole generates enormous economic and social value. But we can be honest. Not all research does.

Some research ideas are not very good. Like a lot of innovative efforts, some research that seemed like a good idea just fails. Some research output is too esoteric, or too concerned with minor controversies internal to specific academic fields. The continual process of challenging assumptions and data means that some scientific conclusions are subsequently overturned.

So, let’s ask a different and harder question. Is there still a case for faculty engaging in research even if we knew in advance that the specific piece of research they produced would end up generating little or no social or economic value?

Building Research Capacity for Industry and Academia

University research develops a set of measurable outputs – journal articles, books, patents, etc. – but it also develops inputs into the research process. Perhaps the most notable of these are students who participate in research.

Research is not something one can read about in a textbook and then go and do on your own. It is a practice, learned slowly and painstakingly through a mentoring process with faculty engaged in their own research. Without faculty research funding, there is no money to hire student research assistants, and no research practice through which they might train.

In 2022, US industry employed 1.44 million researchers, 10% of whom had PhDs. The industries that hire the most researchers – the information technology and pharmaceutical sectors – generate an outsized share of US productivity growth and stock market returns.

In 2023, the Engineering and Physical Sciences disciplines sent 80% of their PhD graduates to industry, Computer Science 70%, Math/Stats 63%, and Biological and Biomedical Sciences 62%. These graduates earn an average premium of 67% relative to what they would earn in academia, typically 2-3 times what a student without a graduate degree in these fields would earn. Why would industry absorb all this high-priced, research-experienced, talent unless that experience was extremely valuable to them?

We are not just talking about graduate students here - undergraduate research is high impact experiential learning. Conducting independent research under the guidance of a faculty member may well be the best career preparation an undergraduate student can have at a university, helping develop many of the skills and abilities the work world is looking for: critical thinking, problem-solving, communications, independence and perseverance, among others. Our university has made undergraduate research a priority and last year more than 5800 undergraduates engaged in research were mentored by more than 1500 faculty/staff members. That is real value from the university research enterprise!

In addition to the students, the ability of faculty themselves grows through research practice. Early career work may carry all the pejoratives we mentioned: the problem too narrow, the ideas too esoteric or subject to failure, the output itself not impactful. But it gets better with experience! And as it gets better, it is more likely to contribute to larger scientific questions, and to be useful to external stakeholders willing to directly pay for that research, and to students who learn as apprentices in the research ecosystem.

Teaching and the Value of Faculty Research Expertise

It should not be controversial to say that we want faculty teaching coursework in areas where they have significant expertise. Without that expertise, faculty become highly reliant on textbooks. They will struggle to answer student questions on related material outside the textbook, to bring to the classroom an evolving understanding of the topic, or an analysis of current events relevant to the class. Without faculty expertise, we might as well simply assign students a pile of reading and not teach at all.

But how do faculty develop that expertise? Some of it comes from reading and thinking about the material. Some of it may come from their professional experiences in industry or government. Far more comes from actually producing research in related areas.

It can be difficult to explain this process to someone who has not engaged in serious research and then taught material related to that research. Trying to move the frontier of science forward, in whatever field, forces you to engage deeply in questions like: What do we actually know? How do we know it? Do we fully trust that evidence or might there be a better way to evaluate some claim? What are the things that are relevant to this question that we don’t know and should?

Now obviously you can ask these questions without formally producing research, but there is an urgency to these questions if you are trying to produce research. Trying to capture in writing what (you think) we know and how you have advanced that state of knowledge is tough. Having that effort assessed by seminar audiences and peer review (yes, even #%@!! Reviewer No. 2!) is a crucible.

Simply reading and thinking about a subject pales by comparison because research constitutes expertise developed through practice. Most of what we really learn comes through practice. Practice involves developing an awareness of what is important, grappling with problems, identifying and applying solutions. And then iterating.

Recent evidence for this link between research and frontier teaching comes from a fascinating paper by Biasi and Ma, “The Education Innovation Gap” who use natural language processing techniques to examine 1.7 million course syllabi and their relationship to 20 million academic articles. The goal is to discern how far course syllabi are from the frontier of knowledge in a field, based on whether the syllabus content is based on “new” relative to “old” material.

They found that courses differ substantially in how far the course content is from the knowledge frontier (the titular “gap”). Research active instructors teach more frontier knowledge, with an especially large effect if the course content is in their area of research expertise. Overall, more selective and more research-intensive institutions teach more frontier knowledge. These findings are reflected in student outcomes: students from institutions with smaller gaps between the course content and the frontier earn more and are more likely to become innovators (patent holders, earn doctorates,..) themselves.

That’s not a criticism of faculty whose official duties include only teaching and no research. We keep them so busy there is little time to do anything but teach. But it does say that the research enterprise fundamentally changes what can happen in a classroom.

So Where Do We Go From Here?

One reason the public doesn’t understand the value of university research is that it is not easy to explain that value. The direct commercial value, while important, is relatively modest. The spillover value in support of innovation is huge, but hidden. Research addressing societal issues, so called grand challenges, generates returns for the broader public but only over decades. Stakeholder research generates benefits for very specific groups… So, the value story is a complex one and not easy to tell.

That said, another reason the public doesn’t understand university research is that universities don’t tell the story well, or enough, or to the right people in the right way. This is a topic for another post, but revisiting basic communication questions about who should know, what do they care about, what is the best way to reach them, and what difference did this research make for them can go a long way in sharpening up the public’s understanding of and appreciation for university research.

Bottom-line: the value of university research is a great story to tell, and we need to get better at telling it. (You might start by sharing this article!)

Next Week

We are starting to see state legislatures mandate teaching loads - basically, telling universities how many courses their faculty must teach during an academic year. In the next couple of posts we will take a careful look at this issue and university teaching more broadly. Should faculty teach more and who should make that decision? How much time does it really take to teach a course? What are the consequences of increasing faculty teaching responsibilities? Join us as we dig into these questions (and more) about university teaching and teaching mandates in our next two posts.

We thank Karen Plaut for her insightful comments on an earlier version of this post. Karen, a long-time academic research leader, recently retired from Purdue. Her contributions to this post are her own and may not represent the views of the University.

“Finding Equilibrium” is coauthored by Jay Akridge, Professor of Agricultural Economics, Trustee Chair in Teaching and Learning Excellence, and Provost Emeritus at Purdue University and David Hummels, Distinguished Professor of Economics and Dean Emeritus at the Daniels School of Business at Purdue.

How do universities justify that investment? To be clear, we (David and Jay) love research! We think it is extremely valuable to society and a core mission of higher education. Many of our readers probably feel the same way. But OF COURSE we think that. We are socialized in our profession to think that.

Faculty in tenured or tenure-track positions are part of this big tournament where research both decides who wins and is itself the prize. Better research leads to promotion, but also reputation, invitations to travel and speak, funding and awards, better grad students and post docs, and more time devoted to doing the research we love and believe is important. So, of course we think it’s valuable!

The question is…how do we convince the public that university research is valuable? Especially when they are increasingly distrustful of what we research, or the rigor and integrity of that research, or when the fruits of that research have been painted (unfairly in most cases) as politicized.

Direct Tangible Evidence: Business and Philanthropy

It is common for universities to point to record-breaking research funding numbers as a stand-in for the success of their research enterprise. And given the intense competition for grant funds, impressive research funding certainly indicates that faculty and their work are held in esteem by peer reviewers. But funding is an input, not an output, and it is zero sum – if government agencies allocate $60 billion in research funding, someone is going to get it.

What evidence shows that our research output has tangible *external* value?

The most obvious case can be made for the 14.7% of university research funding that comes from business ($6.2 billion in 2023) and philanthropic sources ($9.8 billion in 2023). Business can invest anywhere it wants, including internal R&D or R&D conducted by partnering firms. To invest $6.2 billion in university research, it must be that business values the university research it commissions by *at least* that amount.

Modern philanthropies care about societal problems rather than profits. But they are shrewd judges of investment choices and the competition for their resources is tough. They invest in university research because they believe it has the best chance of solving problems of interest.

What about Government- and Internally-funded Research?

Universities increasingly point to patents, license revenues, and start-ups spun out of faculty research as tangible evidence that university science is “real”. But if you look hard at the numbers, these just aren’t big enough to justify the research enterprise on their own terms.

University research spending comprises about 12% of overall R&D spending in the US, but associated commercial activity is a much lower percentage of overall US activity. Universities generated only about 2 percent of the total patents granted nationwide in 2024, and a similar or lower number in previous years. Universities generated 19,000 startup businesses between 1996 and 2020, or about 760 each year. That is in contrast to the 200,000 to 250,000 businesses started nationwide each year in that period.

The licensing fees that universities generate from these patents and spin-offs are small relative to the amount invested in the research enterprise. This is true even in powerhouse STEM universities like Johns Hopkins or Stanford or Purdue.

Of course, if commercialization dollars are the preferred metric, it only takes one success to make the whole thing worthwhile. Famously, the University of Wisconsin’s research foundation WARF grew rich because university researchers were able to identify an anticoagulant factor from spoiled clover that killed a cow. That initially became a hugely successful rat poison, then found human application as the widely-prescribed drug Warfarin, which is used to treat vascular and heart disease and prevent stroke.

Still, that is literally a one-in-a thousand shot. The vast majority of research output in universities never leads directly to a successful rat poison, let alone something that benefits millions of patients around the world with heart disease or strokes.

That’s not unique to university science – it is the way science works. As we’ve detailed before, corporate efforts at innovation are often failures. And even wildly successful innovations typically involve repeated failures before finding something that works – think of Edison testing 1500 different materials for the filament in his incandescent light bulbs before finding one that worked.

There are really interesting reasons that university science rarely translates directly to commercial successes like Warfarin but offers great value to society nonetheless. We’ll talk about three. One, what happens in the innovation pipeline between basic science and commercial applications. Two, idea spillovers. Three, research that generates social and economic value that cannot be commercialized.

Supply Push and Demand Pull in The Innovation Pipeline

There is a fascinating emerging literature on technological innovation and its drivers. If you have some time, we recommend Brian Arthur’s book, The Nature of Technology.

When we unpack drivers of innovation, we can think about two critical forces: “science push” versus “demand pull”. “Science push” means that some innovations arise from a deeper fundamental understanding of the physical or human world. Centuries ago, that meant grappling with basic principles of chemistry, physics, biology, mathematics, economics and so on. Today it means ever more sophisticated understanding of these principles, as well as new areas such as gene editing, quantum science, or neural networks.

When we understand new fundamental properties we sometimes (sometimes!) see a path to building those properties into specific products or services that people will value. In earlier times, fundamental properties became electric power (and all its applications), or improved plants and animals, or synthetic rubber, or mechanical and then electrical computers. Today it is things like generative AI, or quantum computers, MRNA vaccines, or GLP-1 drugs.

But for the most part, what happens in universities is science for its own sake. Deepening our understanding of the physical and human worlds is the end goal, and worthy, regardless of whether some specific understanding makes its way into some particular consumable outcome. That means that a lot of what we produce as researchers will never directly make it into commercial use because the science is driven primarily by the individual curiosity and insights of the researcher. Of course, perspectives on what is important and worthwhile are also shaped by gatekeepers in the field: funders, editors, and %&*$!! “referee number two”.

The other major force is “demand pull”. There is a potentially valuable product or service we know we want to create, but we just don’t know how to make it. Or we have some significant societal problem like climate change or food insecurity we want to solve. And so the incipient demand for that product or service or solution pulls the necessary science toward a specific goal. In some sense, it goes searching for a basic principle or understanding that will make a specific problem solvable.

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Improving the Mismatch Between Scientific Supply and Demand

Getting these two forces to match up is hard. After all, what are the chances that some specific slice of biochemistry or material science that happens to inflame the intellectual passion of a dedicated researcher will also correspond to the very specific slice of biochemistry or material science that is needed to solve a firm’s specific innovation problem?

Mismatched scientific supply and demand is worsened by three key factors.

One, very few products or services are the result of a specific and individual piece of science. Almost all technologies are complex combinations of other technologies, rooted in different pieces of underlying science. Think about your smart phone: how many discrete parts and distinct technologies does it embed, and what physical properties of the universe or human properties of cognition and attention were needed in combination to design and produce it. Hundreds? Thousands? More? (In 2024 alone, Samsung filed 9304 patents, more than all US universities combined…)

Many products seem less complex than a smart phone because they are not composed of thousands of discrete parts and technologies, and yet they still embody layers of evolving scientific understanding. The unbelievably rapid deployment of the COVID vaccine was possible because of a century of accumulated research. The vaccine incorporated many basic discoveries about viruses in general and coronaviruses in particular, tools like electron microscopes that were necessary to actually see and study viruses, gene editing tools, the function of mRNA, the ability to encapsulate mRNA in lipid nanoparticles, and of course, all the management techniques needed to integrate a complex supply chain of nearly 100 specialized production facilities worldwide that worked to produce the vaccine and its components.

Two, and as illustrated by the COVID vaccine, there are long lags between when science is originally produced and when it has commercial effect, around 20 years on average. Forget commercialization, even recognition that a particular piece of science is good and important can take a long time. In the early 20^th century, Nobel prizes were awarded for research that was 10-15 years old. In the early 21^st century, Nobel prizes are awarded for research that is 20-25 years old.

Three, universities are ill-suited to handle the regulatory burden that comes with efforts to commercialize innovation, particularly in the life sciences. New medical devices take 3-7 years to secure approval, new drugs 12 years, with some estimates of the associated costs of drug approval running into the billions of dollars.

Despite these challenges, there are concerted efforts to connect “science push” and “demand pull” and improve the commercial potential of university science. Here are a few.

• Federal funding agencies identify priority areas for research through conversation with key scientists and other stakeholders (at least they have in the past, sigh). Their requests for proposals can shape the research agenda in important ways, moving science in the direction of specific problems needing solutions.

• University commercialization offices move science out of universities by helping researchers to think like business people and identify a specific commercial use case for their inventions.

• Federal funding or programs like the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (SBTT) are remarkably successful at moving science into commercial innovation.

• Corporate funders invest in university science (currently about $6.2 billion, or 5.7% of university expenditures on research) in order to pull science toward a specific problem these companies are trying to solve.

But these connections are thinner than you might imagine. So if we define the aggregate return on university research only in terms of the licensing revenue and startup business valuation it directly generates, it is much smaller than we might hope. Even if it occasionally turns into a successful rat poison. This suggests to us that universities need to make a bigger and broader case for the value of science. The good news is that there is a case to be made.

University Science and Idea Spillovers

Here’s the thing to keep in mind. The commercial return on university science, appropriated by the university in terms of royalties or startup revenues, was never *designed* to be big. Rather, university science was designed to generate a free flow of information that anyone could use, doing precursor science that is many steps away from commercial value. It was intended to create “spillovers”, knowledge that escapes from one use to another and that far exceeds any value that the original creator can ever capture.

Think about calculus for a moment. It underpins a vast body of subsequent understanding in engineering, physical and social science. It therefore underpins the application of these sciences to untold innovations that led to enormous improvements in human wealth and quality of life across uncountably many domains. And yet none of us pays Newton (or Leibniz, or the companies they founded, or their heirs) a dime.

Imagine instead that there was some powerful “intellectual rights protection” office that forced each of us to pay for every use of calculus, even before we knew whether the use was going to be profitable. We wouldn’t teach it in schools. We couldn’t afford to! Researchers couldn’t use it to advance science across all those disparate realms unless they were sure they had identified some immediate commercial use that would generate the license fees paid to Newton and Leibniz or their heirs.

Now, apply that same principle to our basic understanding of chemistry, biology, physics, economics and so on, and you can see that scientific and technological advancement would grind to a halt. Probably fixing us sometime in the late 19^th century.

It might be the case that the directly measurable ROI from university research in terms of royalties and startups that universities create is quite small. But, a great deal of university research does wind up in somebody else’s highly profitable commercial patents.

Following the Path from University to Application

Innovation scholars track these linkages through citations, either a patent application’s citation of an academic paper, or another patent held by a university. By linking together chains of citations we can see at least part of the intellectual heritage of patented innovations. (For background, we recommend “New Things Under the Sun”, the fantastic and highly accessible innovation science blog and website written by Matt Clancy. Below we cite evidence from his pieces “More Science Leads to More Innovation”, “Ripples in the River of Knowledge”, and “Science is Good at Making Useful Knowledge” and Knowledge Spillovers are a Big Deal”.) From that work we learn several things.

• Starting around 1980 the number of patent citations to academic journal articles began to rise sharply – that’s about the same period of time during which companies stepped back from doing basic research in corporate labs and became increasingly reliant on science generated in universities.

• Some patents are more valuable than others, as measured by the change in a company’s stock price after it files a patent. A patent that directly cites academic research is more valuable (on the order of $3 million) than a patent that doesn’t, and the “closer” are a patent’s links to the underlying science, the more valuable is the patent.

• Patents are more valuable when they cite academic research that is itself highly cited by other scientists.

• Unanticipated shocks to the supply of academic research in a particular field leads to significant increases in number of publications and patenting in industries that use that science. Sometimes these shocks are caused by forced emigration of scientists (from Nazi Germany or Soviet Russia), sometimes by abrupt changes in federal funding of particular kinds of research (from physics to health sciences after the Cold War).

• We can also use citations to track spillovers across fields, and these spillovers can be wide-ranging. In areas ranging from agriculture, to health, to energy, the knowledge used within a sector of the economy primarily comes from research originating outside that sector of the economy.

To be clear, it is not only university research that generates idea spillovers in the economy. Corporate R&D can have similar effects.

A series of interesting papers have shown that R&D conducted by one firm leads to increased patenting and economic value for that firm, but even larger effects for firms operating in closely related fields of technology! Economists call this second effect the “social return” on investment, as distinct from the “private return” on investment enjoyed by the firm engaging in the research. The social return, the spillover from research, is about four times larger than the private return.

Summing Up

So there is clear evidence of a strong link between specific pieces of university scientific research and the value they generate to the commercial world. Even when the university itself does not capture the value associated with that research through its own startups or licensing royalties.

In our next post we will describe how scholars of innovation have worked to assess the value of research spillovers, and the connection between research and economic growth. We will also make the case for valuing research that generates no directly measurable market returns. Thanks for reading Finding Equilibrium!

We thank Karen Plaut for her insightful comments on an earlier version of this post. Karen, a long-time academic research leader, recently retired from Purdue. Her contributions to this post are her own and may not represent the views of the University.

“Finding Equilibrium” is coauthored by Jay Akridge, Professor of Agricultural Economics, Trustee Chair in Teaching and Learning Excellence, and Provost Emeritus at Purdue University and David Hummels, Distinguished Professor of Economics and Dean Emeritus at the Daniels School of Business at Purdue.

After more than a decade of declining public trust in higher education, some recent data suggests a bit of an uptick in what the public thinks about higher ed. This summer Gallup reported that for the first time in a decade, public confidence (great deal/quite a lot) in higher education ticked up, increasing from 36% to 42%. More recently, the Vanderbilt Project on Unity and American Democracy Unity Poll reported a similar increase in public confidence, with their ‘net positive rating’ (% confident minus % not confident) at +33, up 13 percentage points since 2023.

Source: Gallup.

Hey, even a slight improvement in public trust is welcome! Building on that uptick is a must for higher education and to that end, we (Jay, Trey, and John) thought it appropriate to share some key points offered up in a journal article we published last year “Strategies for Land-Grant Universities to Foster Public Trust” in the Journal of Agriculture and Applied Economics.

While the focus of this review paper is land-grant universities, we believe the key recommendations apply more broadly. We will briefly overview land-grant universities and some of the ‘crisis factors’ they face in this post but will focus primarily on the recommendations from the paper. We refer you to the full paper if you want to better understand land-grant universities, their origins, some of their current challenges, and why their three-part mission of learning, discovery, and engagement provides a strong foundation for re-building public trust in higher education.

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A Brief Overview of Land-Grant Universities

We won’t go into the full history of land-grant universities here, but the general philosophy that underlies the 112 current land-grant universities is based on the ideas of access to education and relevance to society.

The original Morrill Act, passed in 1862 in the middle of the US Civil War, was focused on providing access to higher education ‘for the sons and daughters of the working class’. Previously post-secondary education was primarily limited to the coasts and to families of wealth. The Second Morrill Act of 1890 extended land-grant status to a number of historically Black universities in segregated states, expanding access to higher education for students of color. The Equity in Education Land-Grant Status Act of 1994 did the same for a group of tribal colleges and universities serving Native American students.

Relevance became a fundamental mandate for land-grants with the passage of the Hatch Act of 1887. This legislation provided funding for and charged land-grants with conducting research (through State Agricultural Experiment Stations) on issues of importance to agriculture and rural communities – at a time when quack science was rampant and farmers and rural residents needed science-based answers to their questions.

The circle was closed in 1914 when the Smith-Lever Act was passed, the Cooperative Extension Service was created, and land-grant universities were charged with taking the university to the people. It was not enough to do relevant research; research results needed to find their way into the hands of farmers, rural residents, businesses, and communities to help them improve their lives and livelihoods.

‘Extension’ has now evolved into a broader concept of ‘engagement’ at most land-grants and many public universities. The focus is no longer simply farmers and rural communities: university engagement initiatives now embrace small businesses/entrepreneurs, K-12 education, not-for profit organizations, state and local governments, and non-traditional college students, as well as providing technical assistance/continuing education to firms of all sizes. We also include university intellectual property and commercialization activities in our definition of engagement.

Engagement is a land-grant’s secret sauce: the idea of connecting university teaching and research with the many publics they serve through engagement/extension is a powerful one. Research and teaching programs informed by stakeholder engagement are more likely to be viewed as relevant by stakeholders. Engagement and extension relationships help ensure research findings and educational programs are available to those who can benefit from them. Such relationships are self-reinforcing and trust-building as value is created for stakeholders and society more broadly. (We are going to dig much deeper into this idea of engagement in a future post.)

Working as intended, this value creation leads to political goodwill and thereby resources to reinvest in teaching, research, and engagement activities. This cycle and some of the current crisis factors – and opportunities - facing land-grants are captured in the figure below.

Crisis Factors

Land-grant universities, like all colleges and universities, are dealing with a set of ‘crisis factors’ that undermine trust in higher education. Some of these include:

• Relevance of and trust in research: Are universities working on the right problems? How can universities ensure their research agenda is relevant? Recent scandals in the replication of research results, research misconduct, and general questions of relevance have undermined public confidence in university science.

• Incentive misalignment: Are faculty incentives aligned with research, teaching, and engagement work that is relevant to society? Is research that supports/is integrated with the teaching and engagement missions valued? Or, do promotion and tenure standards lead faculty down the path of much more narrowly defined disciplinary work, that while publishable, may have little impact – short- or long-term?

• Information ‘pollution’, acceleration of misinformation, and growing partisanship: How does a university establish credibility at a time when misinformation flows (much through social media channels) at an ever-faster rate? Anti-science mindsets are fed by non-expert social media influencers who create powerful narratives and beliefs that, while misguided, are very, very difficult to push back on. The current partisan political environment means any finding not aligned with the beliefs of one party or another may well be dismissed as politically motivated. ‘Relevant work’ in such an environment may lead to praise from one party and a doxing campaign from the other…

• Distrust in educational outcomes and cost of education: These issues have been addressed in earlier Finding Equilibrium posts. When the public questions whether or not a university education is preparing students for the work world/a successful career and they also question the cost of that education, the fundamental value proposition of higher ed is at risk of being destroyed.

Six Ideas to Help Re-Build Trust

These crisis factors undermine the value proposition of land-grant universities (and frankly all of higher education). The proliferation of information/mis-information in society and the means to disseminate it at very low cost has drastically increased the value of a reliable separation of signal from noise. Questions of workforce readiness have elevated the importance of relevance in degree/educational programs. Land-grant universities have an opportunity to reassert their traditional role as objective, unbiased arbiters of reliable information and to provide national leadership in graduating career-ready students/supporting workforce development more broadly.

This can only be accomplished if stakeholders consider university research objective and unbiased, and if academic programs and educational experiences are aligned with an evolving work world. Both require deep, consistent engagement with a diverse set of stakeholders and a demonstrated commitment to the highest standards of scholarship. To make such engagement and the resulting benefits a reality, we outline six strategies to expand and enhance the role of land-grant universities in the face of the crisis factors described above.

1. Expand Integrated Communication Strategies: In the wake of misinformation and reduced public trust, land-grant universities should expand stakeholder-centric communication strategies that meet stakeholders where they are, with messages that are meaningful to them, through channels that they utilize. This means leveraging both traditional outreach methods (in-person, print, …) and modern digital platforms (social media, podcasts, video, …). Both message and access matter here – what do stakeholders want to know and how do they want to receive it? Such integrated strategies must facilitate two-way communications with audiences, ensuring the voice of the audience is heard (and acted on) if they are to support the kind of stakeholder engagement needed to rebuild trust.

2. Engage in Policy Advocacy: Engagement programs should engage in policy advocacy, not in the sense of picking sides in political fights but in routinely providing evidence-based research and data to inform policy decisions. This role involves working closely with policymakers, understanding their information needs, and supplying timely and relevant research findings. Such work can draw on the well-established ‘alternatives and consequences’ model of policy research and education: providing research-based information to stakeholders on the policy options available and the consequences of each, so decision-makers can make informed choices.

3. Strengthen Community Partnerships: Here ‘community’ is broadly defined to include the list of stakeholders described above. But engagement with a narrower definition of ‘community’ including local economic development officials, K-12 schools, local governments, non-profits, and small businesses is especially important. The needs of these groups, their resource limitations, and the potential to build grassroots support for the university through them all make these groups a priority. Addressing their specific needs builds trust and establishes the university as a key player in community development.

4. Expand Stakeholder Education Programs: University engagement initiatives should expand their educational programs to cover more areas of public interest, such as media literacy and critical thinking, to empower stakeholders in differentiating between credible and non-credible information sources and to become more discerning information consumers.

5. Encourage Collaborative Research Initiatives: Land-grant universities should encourage collaborative research initiatives that involve stakeholders in the research process. Sometimes known as ‘engaged scholarship’, involving stakeholders in creating – and disseminating - knowledge, land-grant engagement programs can help ensure that the research is relevant, the research process transparent, and the findings available, which can help rebuild public trust in scientific research.

6. Expand Innovative Teaching and Learning Approaches: Much has been done in this area post-COVID, but a deeper look at which audiences are still underserved and how they can best be reached is needed. Innovations here can also mean combining work and school for traditional residential students in new ways, helping students gain much needed work/professional experience in the process. By leveraging digital tools and flexible delivery methods, universities can provide high-quality education that is more adaptable to the evolving demands of students and the workforce. This innovation in teaching can also foster a stronger connection between (more) students and the land-grant mission, reinforcing the relevance and impact of these institutions in today’s society.

What’s Next?

We take a close look at the value of university research to society. Commercialization metrics such as patents, licenses, start-ups, etc., are often promoted as evidence that university science is relevant and impactful. But university science delivers benefits to society far beyond what is captured by narrow measures of commercialization. We’ll explore this issue over the next couple of weeks in Finding Equilibrium.

“Finding Equilibrium” is coauthored by Jay Akridge, Professor of Agricultural Economics, Trustee Chair in Teaching and Learning Excellence, and Provost Emeritus at Purdue University and David Hummels, Distinguished Professor of Economics and Dean Emeritus at the Daniels School of Business at Purdue.

Some of the mechanisms for enforcing viewpoint diversity include surveys of students and employees, establishing processes by which students and employees can submit complaints when viewpoint diversity is not respected, and, in Harvard’s case, dissolving departments that can’t prove they are viewpoint diverse.

Last week we wrote about why institutional autonomy is valuable to society. In this post we discuss where this push for viewpoint diversity came from, whether the underlying concerns have merit, how it may impact university autonomy, and what to do about it.

What Does Viewpoint Diversity Mean?

We think of viewpoint diversity in this way. The university brings together a set of people who collectively ask a wide variety of questions, and approach similar questions from different angles or with different methodological tools. These people listen to new perspectives on problems without imposing ideological constraints, and they are open to answers that differ from their prior beliefs when another scholar has brought new and credible evidence to the table. In the classroom, students are exposed to credible alternative theories and competing evidence on controversial issues.

Phrased in this way, viewpoint diversity is not just a good thing for the university, it’s a fundamental value we should hold.

It would be great if that was also what politicians have in mind when they seek to mandate viewpoint diversity. But, given recent actions, that is much less clear to us. They may instead have in mind a rebalancing of the professoriate along political lines. Or to ensure the ascendance of conservative viewpoints in left-leaning research and classrooms, while perhaps not exercising the same vigor in ensuring the reverse. And in some cases, to ensure that certain topics are excluded entirely from the curricula.

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Where Did This Come From?

Pundits and politicians have long decried what they perceive as the left-leaning political orientation of the university. Universities were hotbeds of protests over the Vietnam War. Some professors’ scholarship took a negative view of US history, for example, focusing on slavery and race relations, the impact of US military intervention abroad, or the consequences of market-based capitalism for inequality.

More recently, some campuses were caught up in disruptive protests. Some university DEI efforts excluded more than they included. Right-leaning speakers were shouted down by students and/or outside protestors. Some job candidates felt excluded by required diversity statements in faculty hiring.

But it is critical to note that these well-known examples of left-leaning scholarship, programs, and behaviors represent a small fraction of the overall activity on a campus. Scholarship at a large university is much broader than a few professors producing left-oriented critiques of US culture and history. Ethnic and Gender Studies programs come in for a lot of criticism, but students in these programs represent 0.3% of undergraduate majors nationwide.

Disruptive protests generally involve a tiny fraction of the campus population, and a small number of campuses. In May 2024 news organizations tallied Gaza protests on 140 campuses and 3100 arrests of faculty, staff, and students…out of roughly 4000 higher education institutions and campus populations totaling 23.5 million. And DEI initiatives are broader and more positive than the excesses of cancel culture and some mandated training would indicate. Many of the DEI policies pursued are (or at least were) a commonplace of not just universities but also major for-profit corporations.

Still, these examples of left-leaning activity have become fixtures in the news even if they are not at all representative of the vast majority of actual activity on a campus. Sometimes your reputation is based on the loudest and most public 1% of people and activity, not on the quiet 99%. (Which raises a question we tackle next week -- why don’t the 99% choose to be more vocal and visible?)

Using the Logic of Racial and Gender Diversity to Advance Political Viewpoint Diversity

Advocates for mandated viewpoint diversity in hiring and curriculum base their argument in the logic of DEI programs, a logic that universities themselves have fully embraced.

At the core of this approach is the quintessentially American ideal that there is strength in bringing together people from different backgrounds. That we learn more when we are around people who have different perspectives and life histories than if we surround ourselves with the like-minded. It is why universities support cross-disciplinary research. It is why universities, and corporations, seek diversity (broadly defined) in leadership.

Including a greater diversity of scholars in the university can change the things we research and teach because our research and teaching can be influenced by our experiences. Breakthroughs in science come not just from brilliance, or a supreme mastery of the methodological tools of one’s discipline. They come through looking at old problems in new ways, or from seeing different problems entirely. Having a wider range of perspectives on how to attack problem, or what problems to attack, is a highly effective way to advance science.

And now, let’s spring the trap. Surely, if that logic for including racial and gender diversity in higher education has merit, then it must also apply to people who have diverse viewpoints for other reasons. Why not select on viewpoint diversity directly? And maybe, while we’re at it, institute political orientation as a new protected class and source of that diversity.

Hence, you get the spectacle of the “Dear Harvard” letter that simultaneously demands an end to DEI policies (historically focused on race and gender) while insisting on admission and hiring quotas based on viewpoint diversity.

It’s a logical pickle for higher ed. But, let’s take a bite.

Are Professors A Bunch of Raging Liberals?

It is not hard to find articles that report biased political orientation among faculty -- far more liberals than conservatives, far more Democrats than Republicans. For someone disinclined to trust universities, it’s not hard to draw a straight line between the relatively small number of conservatives among faculty and the prevalence of left-leaning behaviors with which universities have become associated.

But when you dig into the details of the existing studies you learn this narrative is misleading in two ways. One, while the left-right mix (whether identified by party registration or self-reports of political orientation) often looks highly skewed, the headlines obscure a key fact. The plurality of faculty self-report as neither liberal or conservative but instead as moderates, and a majority of faculty don’t register as members of either political party. The dominant middle is ignored.

Two, many of these studies and the headlines they provoke focus on liberal arts colleges, and on departments in the humanities and social sciences. That is, they focus on places where faculty skew left while ignoring entirely those departments, colleges, and universities that skew right.

Let’s dig in on this last point, because we think this is critical. The UCLA-HERI studies represent the only long-term effort to gauge faculty political orientation (among questions surveying a long list of other faculty attitudes and behaviors). It appears to show that the number of liberals among university faculty is rising over time. That inference seems problematic to us because the institutional coverage of this survey has changed dramatically over the period studied.

Source: https://www.the-american-interest.com/2017/03/10/mind-the-professors/ based on data from UCLA-HERI.

Still, we think the change over time obscures the more interesting part of these data. While some departments like English self-report to be 60-80% liberal, others like Business self-report to be only 20-25% liberal. Many other campus units (health-related professions, engineering) also skew to the right.

Now compare this distribution to student enrollments by discipline. We noted above that Ethnic and Gender Studies graduate only 0.3% of students, down from 0.5% in 2000. While universities as a whole graduate 62% more students than they did in 2000, the number of English majors has dropped 40% and now represent only 1.6% of graduates.

What about the majors for faculty that skew right? Business majors, taught by the most conservative faculty on campuses, are the largest grouping at 19% of majors nationwide. Health related professions are 13% of majors and have increased 6 times faster than the overall student population. Engineers are 6% of majors, and have more than doubled since 2000. If we look within social sciences, the second-largest and the fastest growing major is Economics, where studies have shown faculty are evenly divided between Republican, Democratic, and Independent political registrations.

So, yes, judging from the UCLA-HERI data and more targeted studies, some units on campus are liberal. But some are decidedly not. And it is the more conservative parts of campus where all the enrollment growth is happening. Is that because the students are seeking out conservative faculty or are both students and conservative faculty more attracted to disciplines that have better job outcomes? We can’t say for sure, but our guess is the latter.

Looking at these data helped us to understand why our perspectives on these issues differ from some of our colleagues around the country. We sit on a STEM and Business oriented campus in the Midwest, a university that Time Magazine called “a hotbed of rest” during the 1960s. Our experience of the relatively mild influence and impact of left-leaning faculty is markedly different from what colleagues on other campuses report.

Does University Research Suffer from a Lack of Viewpoint Diversity?

We think political orientation is less determinative of research and teaching than critics believe.

While the evidence is clear that some faculty disciplines have more liberals than moderates and conservatives (and vice versa), the evidence that this affects research output or student attitudes and beliefs is too understudied to reach conclusions about the effect. So, let’s take a step back and think conceptually about what viewpoint diversity might mean in different contexts, and whether this could be affected by political affiliation.

Most research areas at the university do not have an obvious political connotation. Civil engineering techniques for building a bridge are not partisan. Mathematics is not partisan. Most of the research and teaching that occurs in STEM disciplines has no connection at all to political fights.

Here viewpoint diversity is largely about the choice of problems and that could be affected by a long list of personal interests and life experiences. A drug researcher who lost their mother to cancer might choose to study cures for that disease.

Doing Science When its Implications are Political

Of course, some science and engineering research takes on a political connotation because of its implications for policy. Research on vaccines is one example. Climate science is another.

There may be legitimate intra-field disagreements about the best ways to measure temperatures or atmospheric gas, and probably larger disagreements when one looks to the geological record. There are still larger disagreements about the best predictive models to map these measurements into long run climate forecasts. And, ultimately, disagreements about the extent to which climate change is anthropogenic.

Viewpoint diversity in this context could mean exploring disagreements on the fine points of these methodologies. It doesn’t mean that we continue holding views that are inconsistent with evidence and pretending that they are equally valid. Or that we look for answers to validate preconceived ideas.

That’s all par for the course with science, and nobody outside the specific field would much care -- except for the fact that the implications of climate research are profoundly political. Should we tax carbon or subsidize ‘green’ energy sources? Should we discourage building in low-lying coastal areas? Should our military prepare for the national security implications of a thawing arctic and climate refugees from swamped or desiccated regions?

Not liking the political implications of science causes politicians to want a say in how the science is done. To hire more scientists who might point to flaws in climate studies, or to teach students that the science is unsettled. If this is about ensuring methodologies are rigorous, and that conclusions do not outpace what the research can confidently demonstrate, then fine. That is what science should always do.

The problem comes when viewpoint diversity starts to look like selecting on someone who provides the “right” answers rather than selecting on who asks different questions or employs better methodologies. If viewpoint diversity, or balancing partisan numbers in a field, means finding someone who will reliably provide politically aligned answers to scientific questions, that is a certain path to corrupt research.

Even Policy Oriented Fields Are Not Obviously Red/Blue Partisan

Of course, some fields are inherently bound up with politics. Our field of economics is deeply tied to questions about the effect certain policies have on the economy, and what policies should be pursued.

Some of these – e.g. policies related to income taxation, setting minimum wages, acceptable levels of environmental regulation -- align clearly with partisan politics. Other critical policies – e.g. how long should a firm enjoy intellectual property protection, should we break up monopolies held by giant technology companies -- have no obvious partisan alignment.

Other policy areas have seen a complete inversion of partisan alignment. For decades market-oriented Republicans strongly supported free trade policies. Democrats, concerned about the effect on blue collar workers, resisted. Then Presidents Clinton and Obama came into the free trade camp, leading the Democratic party in this direction, and later President Trump led the Republican party in the opposite direction.

What then does party affiliation in the faculty tell us about whether an Economics department has a diverse viewpoint when it comes to international trade policy?

Where Should we Look for Balance?

Should a university as a whole represent viewpoint diversity, or should it be present within each department?

Diversifying departments, in the manner the “Dear Harvard” letter would require, seems sensible on its face. Say, for every climate scientist who measures ice cores this way, we balance them with a climate scientist who measures ice cores a different way. Or we find an economist whose research points to problems with free trade to balance the economist whose research points to the virtue of free trade.

That runs into two problems. First, very few departments are big enough to afford multiple experts in every research area who balance each other out. Second, some fields are inherently imbalanced in their approach to problems.

We noted above that business school faculty skew more conservative than liberal. And, you’ll find that most business school faculty are broadly supportive of the notion that market capitalism is an effective way to organize the economy. Their teaching and research is largely focused on how to operate within the system of market capitalism. You could try to balance that, but good luck finding radical Marxists with a PhD in Accounting.

Instead, we can look across campus and find examples of disciplines (maybe history, or sociology) where faculty do not presume market capitalism is the only or the best way to run an economy. They are interested in a critique of the system itself, as opposed to refining ways to operate within the system.

As long as there are critics of market capitalism somewhere on campus, does a business school have to hire some in order to ensure that students can find, and the research of the university taken as a whole offers, that viewpoint diversity?

Of course, we’re being cute by picking this example. We do not think the “Dear Harvard” letter means that the Trump administration wants more radical leftists at Harvard Business School. It almost certainly means changing left-leaning departments with an affirmative action program for conservatives.

In any case, balancing across departments to ensure the university as a whole represents diverse viewpoints is not only feasible, it’s what university leaders already do when they support a History Department and an Economics Department, and faculty in Humanities and in Health Sciences. And its what students do when they pick majors. They are picking not only a field of inquiry and perhaps a career trajectory, they are picking a world view. Increasingly, they are picking majors whose research and teaching has no political connotation, or aligns with a conservative worldview.

Viewpoint Diversity in the Classroom

Representing diverse viewpoints in the classroom runs into some of the same problems we just described for research. But it is both feasible and indeed essential to make students aware that other scholars have reached different conclusions and why.

The real challenge lies in political solutions that try to enforce viewpoint diversity. EVERY class with controversial material represents a selective editing of viewpoints, even for the most even-handed instructor. We don’t begin every economics course with an extended digression on Marxist critiques of markets and private ownership of capital. There isn’t time.

For someone outside the classroom it’s simply not possible to systematically evaluate whether a broad selection of university content is teaching all sides; you need expertise in a field to even know the sides.

One thing is clear: students don’t know the sides. They don’t hear and understand everything that is said. They are prone to selective understanding/reporting, which makes them unreliable as monitors, and a system that relies on that reporting is highly problematic.

So, what are faculty to do?

The worst solution is for faculty to pull back from controversial topics to avoid being called out by a disgruntled student. We understand the motivation – even a successful defense is time consuming. But this defeats the point of the university and the point of the classroom. Unfortunately, as we reported last week, some pullback in this area is already happening.

Instead, we think there is a reasonable three-part approach that is consistent with the aims of the university, ethically and legally defensible, and will ultimately save faculty a lot of time and grief.

1. Don’t shy away from controversial topics, but instead signal clearly – in the syllabus, and in class – that this is a controversial topic. And as the best instructors do, teach the controversy. This doesn’t mean rehashing every absurd YouTuber’s take, but doing one’s best to represent legitimate arguments and counter-arguments.

2. Tell students explicitly when you are “teaching the controversy”. Students do respond to and remember cues to pay attention. We think it is entirely legitimate to cue your students with phrases like, “Now we are going to wrestle with the other side of the argument.” Or, “Let’s think about other views.”

3. If your institution provides the opportunity to video record lectures, use it. On more than one occasion we dealt with angry student complaints directly related to viewpoint diversity. When we had recordings to look at, we found that what was actually said was miles away from the student claim. Maybe the students were deliberately misstating the facts or, much more likely, their own biases led them to selectively hear one side.

(On this last point, faculty who are uncertain how to navigate specific laws or university policies regarding recording, student privacy, and consent should first seek input from their relevant campus offices.)

Some Concluding Thoughts…

Taken at face value, viewpoint diversity is a value that every campus should hold dear. The challenge is keeping the focus on encouraging and valuing diverse ideas and not using viewpoint diversity as a means to a political agenda.

Perhaps the folks who both oppose DEI and propose strengthening a political version of viewpoint diversity might keep this in mind. Much of what they hate about DEI began as a sincere effort to include more people in the conversation and respect viewpoints and experiences that arise from racial and gender differences. Are you so sure that political viewpoint diversity will land in a healthier place?

In any event, the current moment is a call to arms. Coming to terms with what viewpoint diversity means on campus and how the campus will promote and protect that core value is a good place to start.

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Next Week

Much of the current challenge to higher education is driven by a call for ‘accountability’. Next week we will talk about where accountability fits with institutional autonomy and how both can be improved.

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Research assistance provided by Marley Heritier. We are grateful to Trent Klingerman and Peter Hollenbeck for their excellent suggestions on this post.

“Finding Equilibrium” is coauthored by Jay Akridge, Professor of Agricultural Economics, Trustee Chair in Teaching and Learning Excellence, and Provost Emeritus at Purdue University and David Hummels, Distinguished Professor of Economics and Dean Emeritus at the Daniels School of Business at Purdue.

• “No government—regardless of which party is in power—should dictate what private universities can teach, whom they can admit and hire, and which areas of study and inquiry they can pursue.”

The federal government doubles down, threatening to take away Harvard’s tax-exempt status and cancel all international student visas. But wait, anonymous White House sources claim the initial letter to Harvard was a ‘mistake’ and there is back and forth as to whether the letter was intended to be the starting point of a private negotiation.

Harvard goes to the bond market and to donors to bolster its finances for the fight. President Trump threatens to withhold another billion in federal grants from Harvard. Harvard sues. What a week indeed…

Pressure on Institutional Autonomy and Self-Governance

While Harvard dominated the headlines, we are reminded of the African proverb: when the elephants fight, it is the grass that suffers. There has been plenty going on in the ‘grass’ this week with Texas (among others) considering new restrictions on institutional autonomy and self-governance. And, for public universities, states can make such changes stick.

In our last post, we shared thoughts on how higher education ended up in this mess. This week, we explore the case for institutional autonomy and self-governance. We like Menand’s definition of autonomy, that institutions don’t have to “answer to some standard of political correctness, economic utility, or religious orthodoxy” and are allowed to “decide among themselves the work it is important for them to undertake” (page 8).

Taxpayers foot the bill for much of the research and teaching at universities, whether they are public or private. The argument for why society benefits from institutional autonomy has two key parts: universities are valuable, and autonomously run universities are more valuable than ones constrained by overt political intrusion.

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How Does the Public Benefit from Great Universities?

This is a topic for a much deeper look in future posts, but the case comes down to four main points:

1. Universities graduate students (by the millions) with the skills and capabilities needed in today’s economy. That value is demonstrated by the fact that graduates earn dramatically more than those who don’t go to college, among other personal and societal benefits from a well-educated citizenry. We wrote extensively on this topic in the fall – including how universities can get better at preparing students for successful careers.

2. Universities play a fundamental role in the US innovation ecosystem. Innovation requires a combination of basic science that helps us deepen our understanding of the world and commercialization processes that turn that understanding into valuable technologies. A deeper understanding of basic plant biology precedes more resilient crops, crops with improved yield, crops that can be used for industrial purposes such as biofuels,…

Historically, for-profit companies engaged in both basic science and commercialization, but companies have retreated from basic science. Two big reasons are the growing lead times between invention and commercialization, and the likelihood that breakthroughs spillover to rivals, making harder to appropriate returns to basic research.

Virtually gone are the days of the Bell, DuPont, Xerox and other corporate labs where armies of researchers pursued basic science. (Bell Labs at its peak had 15,000 employees, 1200 with Ph.D.s, 14 Nobel Laureates, 5 Turing Awards,…).

Universities have filled the void – fueled by dramatic increases in federal funding and the transfer of patent rights on federally funded research from the government to the university. And, the costs of losing the front end of the innovation pipeline currently filled by universities are immense but won’t be fully realized for years.

3. Universities are an economic engine in their local/regional/state economies and are increasingly important in a world where science and innovation matter. Higher education employs more than 4 million in the US directly – and so many of these jobs are not in coastal cities, but in the industrial heartland and rural areas. They are also one of the largest export earners in the economy – universities generated $50 billion dollars of value to the US economy from foreign student enrollments in 2023.

Source: College Towns

Beyond direct employment, universities spur economic development as firms and medical centers co-locate to take advantage of university talent and research. Some of these are high-tech: defense, aerospace, and semi-conductor manufacturing and our own university provide a good example.

Others are less splashy but vital, and arise from the engagement mission of land-grant universities and increasingly universities more broadly. Technical expertise, workforce development, public health education, PK-12 partnerships – and so many others – create value for business, community, and individual stakeholders.

4. Universities are one of the few places that can challenge the way society runs because doing so is not commercially viable and is politically risky. The private sector gets hammered when they take positions that aren’t politically popular. Politicians with contrarian ideas may not survive elections and/or have any real voice in decisions. We will dig much deeper into this point below.

How Does the Public Benefit from Institutional Autonomy?

The fact that universities generate a lot of value for society does not immediately imply that autonomous universities generate more value. How do we make the case?

For starters, Stein asks a good question: “Do we really want new research and new knowledge to come exclusively from private businesses?” To which we would add, “Do we really want what is researched and taught to be defined by partisan politics?”

More concretely, let’s identify some specific benefits that accrue from an autonomous university system – one that develops and disseminates new knowledge and operates without the short-term pressure of profitability or the constraints of a political party’s values and beliefs.

Thinking About a Better World

Ideas that challenge society are necessary for society to progress. But ideas that challenge society are the least likely to be funded and supported in a captured university.

The case for university research is relatively easy to make for engineering, science, medicine, agriculture – the traditional STEM disciplines – where discoveries can provide a platform for more applied research that can be commercialized. That said, even in these fields, work in areas such as climate science, environmental issues, and health disparities can draw criticism from politicians and the private sector.

The harder case is humanities and social sciences research, and yet that research is probably MOST valuable when it questions how we work as a society. Creative work in these areas may never lead to anything that can be commercialized but may help us better understand the human condition. Questions of how prior/other societies made the choices they did – and the consequences of those choices – can help inform decisions today.

Here is an example: nobody can commercialize the idea that free trade leads to gains to society and that putting up tariff walls will immiserate us. Ignoring the careful research of international trade economists led to “Liberation Day” tariffs last month that wiped out 2 trillion dollars of market value in US public equity markets (and more than that if you add effects around the world and in private equity markets). What was the last commercial innovation coming out of university labs that generated 2 trillion in value? Not that we are grumpy about this or anything…

Research that simply affirms that everything is great doesn’t lead to progress. There is irony here: research that challenges policy, social organization, current industry practices, etc. may well be the most valuable, yet at the same time, such research is the MOST vulnerable to funding whims and in need of freedom to operate.

Note we are not saying that all university research is ‘useful’ (in the broadest sense of the term). And, hard decisions about the need to continue research in some areas have to be made given resource constraints. The issue is who makes the decision and why it is made.

Freedom Attracts Talent

When it comes to creativity, there is value in the freedom to approach a problem without constraints (economic, political, or otherwise). Seeking answers to “why” without worrying about whether or not the answer can be monetized in the short-term. Looking to push the boundaries of what we know and understand to be true without political interference.

The freedom to pursue research for research’s sake drives so many faculty we know – it is their personal passion and the fundamental reason they chose an academic career over a career in the private sector/government. Faculty focus on a question they find important and are excited about, and if they can find the funding/resources needed to explore the question, they currently have the freedom to do so.

It is very difficult to adequately capture the focus, intensity, and drive a passionate scholar brings to their research. While some critics poke at the idea of faculty work ethic, we have seen over and over precisely the opposite: faculty who work ridiculous hours to meet a grant deadline, complete a series of experiments, get another paper in review, help a graduate student across the finish line…all in the name of bringing new knowledge to the world. Such intrinsic motivation is about so much more than compensation.

Contrast this with much private sector research where the focus is constrained by the need for a commercial outcome. Reduce that freedom to explore, and the job security of tenure, and see how many bright, creative people are attracted to higher education? There is already evidence the current battle over autonomy and commensurate research funding cuts is leading some US scientists to look at positions abroad.

Importance of Stability

Meaningful research programs can take decades of incremental work. Being insulated from the whims of politicians and the pressures of quarterly earnings reports allows a university researcher to spend a career on a narrow area of science (if they can find the funding).

Stability allows curricula to evolve over time and not chase every fad/hot career field running around, with all the downsides fad-chasing brings. As we have written before, the privilege of stability also means higher education has a responsibility to ensure curricula are contemporary and students are well-prepared – and we have work to do here.

Perhaps the most concerning element of the proposed interventions is the whipsaw effect seen when one political party (along with their interventions) is voted out and the new party replaces these with interventions of their own. We are already seeing this: Biden administration DEI requirements on grant funds are leading to cancellation of those same grants because of the DEI requirements – flushing all the work/investment in the process. This kind of back and forth is in no way supportive of an environment that fosters scholarly creativity and productivity.

Cost of Intervention

We have written before about the regulatory burden higher education currently deals with. But, read that list of Harvard provisions again. You think operating costs won’t increase and the effectiveness of institutions be diminished as administrators and faculty take on even more compliance and reporting burdens? Every hour a faculty member spends on some reporting requirement/training is an hour they are not devoting to research, teaching or engagement.

Experts Know Things

Autonomy means that faculty decide what is taught and how to teach it. The argument of course is that expertise matters: an economist is in the best position to determine what goes into a course on international trade; an engineer is in the best position to determine how a class in aeronautics is taught; a humanities faculty member should decide what books are part of a course in medieval literature,…

There is an element of arrogance here that has certainly rubbed some the wrong way. And, there is growing resistance to the idea of deferring to experts. This has led to plenty of arguments over faculty control of the curricula with governments intervening on the university core, what is taught in those courses, what books are in the library,…

The challenge is once a government intervenes/dictates some aspect of curricula, where does it stop? Are government bureaucrats really better positioned to decide what a college student studies than are faculty experts? We think the answer is no. (We’ll get into the responsibility this position brings in our post on autonomy.)

The Chilling Effect of Intrusion

There is no room for ‘the chilling effect’ in higher education – be it chilling liberal or conservative voices, be the chilling from within the academy or from outside (and yes, some chilling comes from within the academy). If we are going to ‘search for truth’, faculty and students need freedom (and support) to explore hard questions – from multiple perspectives.

There is already evidence that faculty are pulling back on controversial topics in our current environment. A recent AAC&U/AAUP study found that 35% of faculty believe that relative to six or seven years ago, there is less academic freedom with respect to teaching without any interference and 19% believed there is less academic freedom with respect to investigating and publishing research findings without any interference.

Some 51% of the faculty in the survey believed their colleagues are more careful to avoid controversial topics when revising curricula and 40% believe their faculty colleagues have become less willing to express controversial views in their courses.

Wait until the federal government can merge your unit with another (see the Harvard letter) if you can’t demonstrate ‘viewpoint diversity’ and see what happens…

Source: AAC&U/AAUP

What’s Next?

“Viewpoint diversity” has become an important goal of much the recent government intervention into higher education. A look into why viewpoint diversity has become a point of concern, whether that concern has merit, and how remedies may impact institutional autonomy is coming soon.

We are well aware institutional autonomy and self-governance is a privilege society has afforded universities. And, with that privilege comes a set of responsibilities. To better understand those responsibilities and what is needed to retain the privilege of self-governance, we will take a look at the issue of accountability in a future post.

As always, thanks for reading Finding Equilibrium!

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Research assistance provided by Marley Heritier.

“Finding Equilibrium” is coauthored by Jay Akridge, Professor of Agricultural Economics, Trustee Chair in Teaching and Learning Excellence, and Provost Emeritus at Purdue University and David Hummels, Distinguished Professor of Economics and Dean Emeritus at the Daniels School of Business at Purdue

Taken together, these demands would effectively end the autonomous operation of a private university.

The provisions included specific actions to be taken in light of the anti-Semitic protests/activities on campus – and anti-Semitism, or any other form of discrimination, has absolutely no place on a college campus.

But going far beyond this specific issue, the provisions include major changes to Harvard’s governance, departmental structure, faculty hiring, student admissions, and student conduct policies. In addition, the demands require extensive and intrusive new reporting and audit requirements on all the above, along with punitive actions taken against particular departments based on the content of their scholarship.

A recurring theme is the end of diversity, equity, and inclusion efforts, in admission, hiring, and programming, while simultaneously requiring quotas in faculty hiring and student admissions based on a federally mandated conception of “viewpoint diversity”.

When Harvard informed the federal government they would not accept the proposed agreement, the Trump administration announced they would freeze $2.2 billion in multiyear grants along with a $60 million contract.

But it didn’t stop there. President Trump took to social media to propose eliminating Harvard’s tax exemption as a non-profit entity, in line with earlier efforts to tax away Harvard’s prodigious endowment. A day later this escalated to a Presidential demand, in violation of norms and laws meant to insulate tax treatment of individual persons and institutions from political retribution, a demand the IRS was considering as of this writing.

In addition, the Department of Homeland Security threatened to revoke Harvard’s ability to host student visas, an action that would affect 6793 international students, 27% of Harvard’s enrollment, and likely eviscerate graduate programs on the campus.

Why Does this Matter?

It’s old, rich, elite Harvard. The vast majority of higher education institutions look nothing like Harvard with respect to financial resources, selectivity, student profile, research reputation, alumni achievements,…so?

Let’s be clear. This represents perhaps the most dangerous moment in the history of the modern university. The Trump administration is threatening nothing less than the financial destruction of the world’s leading university. That is, unless Harvard complies with what they (Harvard) regard as a series of clearly illegal and unconstitutional demands, and put every aspect of their operation under the systematic control of the federal government.

Again, you might think this is an Ivy League problem and not relevant to the rest of higher education, but that would be wrong. It is no accident that first Columbia and now Harvard have been targeted, with Penn, Princeton, Cornell, Northwestern, and Brown next in line, and the list of “concerning” universities growing by the day. If the strongest and best-resourced universities are brought to heel, the rest will follow. And as should be clear from Columbia’s capitulation, agreeing to the administration’s initial demands does not resolve matters. It invites additional penalties and more aggressive intervention.

You might also think that it’s possible for other universities to duck and cover, and just wait this out. After all, does a Department of Education that has laid off most of its workforce really have the manpower to micromanage thousands of institutions of higher education?

And it seems entirely possible that courts will intervene on Harvard’s behalf because the administration’s demands are so over-the-top and in contravention of clear statutory language preventing such interference. Civil rights law does allow penalties for universities that violate civil rights. But the legally required findings of fact, opportunity for response and redress, and permissible scope for punitive action have been thrown out the window. The “Dear Harvard” letter uses the veneer of the law to flagrantly break the law.

But while the Trump administration’s recent actions are extraordinary in their scope and severity and flouting of legal boundaries, they are best understood as a continuation of a whole host of government actions impinging on university autonomy. Higher education as we know it has been under increasing pressure the past decade with state governments taking on faculty tenure, DEI, curricular issues, and admissions practices.

Unlike the administration’s “Dear Harvard” letter, these state-level interventions are death of the university’s autonomy and self-governance by a thousand small cuts, and yet probably well within these governments’ legal authority.

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Where We are Going in Finding Equilibrium

We will explore institutional autonomy and self-governance over the coming weeks. In this series of posts, we want to sort through the daily barrage of charges, changes, proclamations, accusations, threats and actual cuts to get to the heart of some issues that really matter to the autonomy of universities. We start with some history on the evolution of government-university relations and why fraying trust in higher education has opened the door to intrusions on autonomy.

Then in subsequent posts we will address a series of related specific issues: the value of autonomy and academic freedom, not just to universities but to society at large; university accountability; viewpoint diversity; and the link between funding and autonomy – and how universities might respond to the challenges presented in the current environment.

This week these issues are front and center for Harvard. In the months and years to come, they will be front and center for all of us.

Some History on US Universities and Government

Education is important to society and fundamental to a country’s economic development. Universities are expensive to establish and run. For these reasons, there has always been a close connection between government action and university function. We learned a lot about this history from this short piece highlighting the historical connections and tensions between higher education and government when it comes to who calls the shots.

While Harvard is widely considered to be the first private university in the US, it was initially established with an investment of 400 pounds from the General Assembly and Court of Massachusetts Bay to ‘serve the newly established colony’. Yes, Harvard was essentially founded as public institution, and notice that word “serve”.

In the nearly four centuries since that investment, many important pieces of legislation and many, many court cases have impacted the relationship between higher education and federal and state governments.

The Morill Act Land Grant Act of 1862 not only involved a major federal financial commitment (in the form of grants of federal lands) to create universities nationwide, it specified both curriculum and admissions criteria. Support was given only for colleges teaching “agriculture and the mechanic arts”, training in military tactics was a required part of the curriculum, the admission target focused on students from the farming and industrial classes.

The Second Land Grant Act of 1890 tied federal funding for a state’s higher education institutions to non-discrimination in admissions on the basis of race, while also establishing separate but similar ‘land-grant’ colleges to serve African American students – what we now know as the HBCUs (Historically Black Colleges and Universities). Which is to say, the first widespread DEI policies in higher education were federal mandates leveraged by the threat of lost funding.

The National Defense Act of 1916 established Reserve Officer Training Corps programs (federal funding to create departments and direct curriculum) and the GI Bill of 1944 created a massive infusion of federal financial aid targeted at a specific student population (returning veterans of the war). University research played a key role in weapons innovation during World War II, and that, plus the shock of the Soviet Sputnik launch, led to large and escalating federal investments in science and engineering research.

Finally, a wave of civil rights laws enacted over the last six decades have regulated conduct within the university, including race (Title VI), sex (Title IX) and disability (ADA). In each case, federal funding is used as leverage to discipline behavior within the university.

The Way it Was

This history makes clear that government has always been involved in the affairs of US universities. Not just founding and funding them, but broadly influencing what is taught, who is taught, and what is researched, as well as what conduct is prohibited.

Yet even given these various laws and policies that constrain behavior, US higher education has enjoyed relatively broad freedom to compete, operate, and self-govern. This autonomy rests on two critical pillars: expertise and intellectual freedom. Faculty experts are in the best position to make decisions about curricula and hiring, and the best scholarship is unconstrained by political, economic, or social agendas.

More than 30 years ago, Menand (page 8) described higher education’s ‘compact’ with society this way:

• Universities have, essentially, a compact with the rest of society on this matter: society agrees that research which doesn’t have to answer to some standard of political correctness, economic utility, or religious orthodoxy is a desirable good and agrees to allow professors to decide among themselves the work it is important for them to undertake.

Or to state the converse, research (and presumably teaching) that *does* have to answer to some standard of political correctness, economic utility, or religious orthodoxy will ultimately be less desirable to society.

What Happened?

One way to view the current change is that people, and the politicians they elect, stopped believing in the social compact Menand wrote about. Which is to say, the public stopped believing that the research and teaching of the university was generating goods of value to society.

We can see this in a wide variety of concerns. On the student end critics point to spiraling tuition prices, rising student debt, low completion rates, worries that graduates are ready for work, whether we guard against discriminatory behavior and ensure the safety of all students. On the faculty end of things, critics question the reliability of our research, whether we exclude certain viewpoints, and ‘indoctrinate’ students into certain perspectives.

We’ve written about many of these issues extensively and believe the evidence shows that a lot of the concerns are overblown. Still, some are real and haven’t been taken seriously by higher education. Others are rooted in seeds of truth, and the real issues combined with those seeds have grown into increasing public distrust of higher education.

Higher education has gotten caught up in the culture wars, cancelling speakers, dealing (or not) with protests on campus, going further with DEI efforts than some are comfortable with. Of course, many stakeholders applauded these efforts, but culture “war” means these efforts infuriated others. And it doesn’t help that the political sphere has become increasingly polarized around education, with a growing share of the population without college degrees voting for one party.

Ultimately, all this would only be grist for opinion columns and animated dinner conversations, except for funding. It was inevitable that someone in the political sphere would recognize that universities overwhelming dependence on public funds would create leverage. And, as we note above, the expansion of civil rights laws into a university context used precisely those funds as leverage.

What is different today is that leverage is not being used to address some serious, indeed dangerous, discriminatory behaviors at the margin. Rather, the American people elected an administration that saw the massive federal investments as a hammer to restructure the US higher education model in a way aligned with the administration’s vision. The “Dear Harvard” letter speaks to the scope of that vision – nothing less than remaking the university in its entirety.

Reducing F&A, shrinking research investments, withholding federal funds … these actions hit higher education where it truly hurts: their budgets. And, very, very few institutions have the financial resources to push back on these changes. As Menand put it…

• …academic freedom will be killed by the thing that, in America, kills most swiftly and surely, not bad ideas, but lack of money.

We (higher education) lost the trust of those who provide the funding. The values higher education holds dear are now at risk because they drifted from the values held by those in power. We think those in power are wrong about the value higher education provides to society, but they have the checkbook, and with it the ability to remake higher education.

So What Then Do We Do?

In our next four posts we take this on directly. We start with Menand’s compact and argue for the social value of a (relatively) autonomous university, along with evidence about how creeping intrusions are already undermining that value.

We then tackle accountability, what mechanisms society already has in place to ensure universities are adding value, and what we can do to increase and make visible that accountability. We will dig into the issue of viewpoint diversity, the composition of our faculty, what we teach, and how we hire. We close with the funding lever, and examine what strategies universities might use in light of it.

Despite its flaws, US higher education has long been regarded as the best system in the world. Whether or not we maintain that position will depend on how the current crisis plays out. Universities (and their stakeholders) can’t be spectators as it does – and the response will need to be more than complaints and pushback – relevant criticisms will need to be addressed and trust rebuilt.

Research assistance provided by Marley Heritier.

“Finding Equilibrium” is coauthored by Jay Akridge, Professor of Agricultural Economics, Trustee Chair in Teaching and Learning Excellence, and Provost Emeritus at Purdue University and David Hummels, Distinguished Professor of Economics and Dean Emeritus at the Daniels School of Business at Purdue.

Where does this leave us? Universities, and more especially faculty themselves, have to be more responsive to public critiques of tenure, while ensuring the necessary components of tenure remain and are strengthened. The reason is not only self-protection, but also because tenure and the protections it provides makes for better research, for better instruction for students, and for a better role for strong universities in shaping our society.

In this post we highlight a number of areas where a rethinking is necessary, along with our recommendations for strengthening and protecting the core benefits of tenure and thereby higher education as an institution.

Academic Freedom and Job Security for Who?

Faculty who actually enjoy the protections of tenure are rapidly shrinking as a share of the faculty workforce at most universities, and even faster as a share of overall undergraduate teaching. At many institutions, the lion’s share of credit hours outside of graduate programs are delivered by non-tenured faculty members.

An immediate implication is that, to the extent that tenure is *the* guarantor of academic freedom in the classroom, academic freedom is not guaranteed at all in the vast majority of classes taught to undergraduates. It is only what we might call regulatory forbearance that prevents the state, the university, or its agents (i.e., other faculty, staff, or administrators), from dictating classroom content. Regulatory forbearance means that a person or institution with the authority to intervene in courses or curricula simply chooses not to, but that hands-off choice depends on the faculty member in question remaining in their good graces.

That tenuous state is complicated by an important reality of faculty HR processes within universities. The hiring, evaluation, and promotion of tenured faculty are subject to a great deal of formal university process, along with a very significant investment of time by other faculty, staff and administrators. In contrast, HR decision making around non-tenured faculty is much more ad-hoc and subject to far less scrutiny.

Why? Non-tenure track positions are, alas, not enough of a priority at most research universities. Taking great care in selecting candidates takes time nobody has to invest. It is difficult to assess excellent teaching, and undergraduate teaching itself is perhaps not taken as seriously as it could be by many faculty. And really, what’s the harm? A mistaken lecturer hire can be corrected after a year or two; a mistaken tenure decision stays with you a long time.

A consequence is that we effectively delegate hiring, evaluation and contract renewal decisions for non-tenured faculty to a much smaller set of individuals with far less clear criteria for making these decisions. Suppose a department head simply does not like what or how a lecturer teaches -- what is to stop them from simply not renewing a contract?

How Can We Ensure Academic Freedom in the Classroom?

We think the growing importance of non-tenured faculty points at three key elements that are necessary to ensure academic freedom in the classroom.

1. States and universities should state explicitly that academic freedoms in the classroom are held by all instructors, regardless of tenure status.

2. HR decision-making around the hiring, development, evaluation, compensation, and promotion of non-tenure track faculty should be professionalized and treated with the same seriousness as related functions are for tenured faculty. An important element is getting much more serious about the evaluation of teaching.

3. Both of these suggestions will work more effectively if academic freedom and HR decision-making are paired with longer term contracts for non-tenure-track (NTT) faculty. Perhaps not indefinite, but long enough (a) that other faculty take related HR functions more seriously because the consequences of good/bad decisions stay with you and (b) to insure against situations in which the content of a class, as opposed to the efficacy with which that content is taught, becomes a reason for non-renewal.

Longer term contracts for NTT faculty also work on a related issue. We argued that personal investment in completing a PhD program is sizeable, and that tenure is a mechanism for insuring the risks associated with that investment. Without tenure protections, we fear that fewer and fewer excellent scholars will opt to pursue a PhD, or having earned one, to work in universities.

While the underlying risks facing NTT faculty are not as severe (you can control the quality of your classroom more than you can control whether a truly innovative research agenda pans out), they are still subject to the vagaries of university budgets and that risk can dissuade potentially excellent teachers from pursuing academic life.

Enhancing Productivity Post-Tenure

As we discussed here, there is no evidence that productivity for the average faculty member declines post-tenure. But that is not the same thing as saying that no faculty member sees a decline in their productivity. How do we address this situation?

First, quit wasting their damn time! One of the biggest drags on faculty productivity is participation in endless meetings that didn’t have to happen, and engagement in meaningless committees that exist only because no one has ever reviewed why the committee exists or made the (perhaps hard) call to shut them down.

Related, federal, state and university regulations impose significant time burdens on faculty, including endless “trainings” (FERPA, Title IX, Cybersecurity, Research Ethics, …) and reporting requirements, which are particularly onerous around research grants. The desire to let faculty be free to do their work is constantly at war with administrators’ and regulators’ desire to know what faculty are doing with all that free time!

Second, we rely on faculty to take a whole host of service positions that pull them away from excellent individual contributions to research and teaching. This includes both formal leadership roles and informal or ad-hoc roles doing the hard work of curriculum development or HR functions. These positions are generally not well-compensated if they are compensated at all, and to do them properly involves either unsustainably long work weeks or significantly sacrificing scholarly output. Positions that extend beyond a few years (and it’s really hard to be effective in a leadership role if they don’t) can permanently impair one’s productivity as a scholar.

So there simply has to be some acknowledgement of this diversion of effort, and some recognition in both current and lasting compensation, and some recognition that research productivity and teaching/engagement contributions on the far end may be impaired. (We know. We know. This sounds like us begging our colleagues to take it easy on us as recovering administrators. But we are working hard to return to our prior research and teaching productivity, in addition to doing some novel things like this Substack!)

Put more directly, if faculty know that they will be severely penalized for slacking productivity, the logical response is to refuse all service effort and all leadership positions. Only someone who was already in a research end-state in their mid-late 60s would rationally agree to serve.

Increasing the Incentives to Produce Post-tenure

We argued earlier that a reason productivity doesn’t decline for a typical post-tenure faculty member is that many universities offer significant financial rewards for continuing to work. Annual raises that compound over time. Summer support. Access to better research resources: labs, grad students, post-docs. But not all universities behave this way.

If a university is struggling with post-tenure productivity the first thing it should do is look in the mirror and ask what its compensation and faculty support scheme actually rewards. If you offer no raise pool, or give all your faculty the same raise, you eliminate a great tool to encourage effort. If no one gets summer support, or if everyone gets summer support, you have eliminated an even better tool to encourage effort. Likewise, you do little to incentivize effort if other forms of faculty support such as graduate students, travel funds, staff assistance, etc. are spread like peanut butter across a unit.

And while this will disturb our faculty colleagues…annual raises don’t have to be a one-way ratchet upwards. You can lower salaries. You can pay salary increases as one-time bonuses instead of layering them into a permanently higher base salary. Behavioral economics research highlights the power of loss aversion. People are far more responsive to losing something they already had than to gaining something they never had. If you want more productivity from your post-tenure faculty, you can use the power of loss aversion to good effect.

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Post-Tenure Review Issues

A number of states, most notably Florida, but also Georgia and Tennessee and others, have put in place a process of post-tenure review. If you are concerned about faculty productivity after tenure this process has a surface plausibility to it. Why not review faculty? To which we have three answers:

1. Most institutions already engage in systematic post-tenure review through the use of annual evaluations of faculty work that feed into raises and many other resource decisions. If this process is weak tea at an institution, the simplest starting point is to bolster it. Establish criteria for evaluation, require written annual evaluations, and tie variation in compensation to variation in performance. If there isn’t already a culture of serious annual review and varying compensation, senior administrators MUST back department heads to make this happen: the screams will be loud.

2. In-depth post-tenure review is costly. We want to draw a distinction between “Excel Macro” evaluations and the types of comprehensive review that are used at major faculty promotion events. One can very quickly count publications, working papers, research presentations, grants received, courses taught, students mentored, student evaluation scores, and so on. It’s so easy to do it can even be outsourced to an Excel Macro. That makes it ideal for annual evaluations, but it’s noisy and it misses things.

The types of review used at the tenure decision and other major promotion events, and at any kind of review that would threaten to strip faculty of their tenure, should be far more comprehensive. Not just counting, but using higher order skills. Like reading. Soliciting and considering evidence provided in outside letters from experts. Weighing intellectual contributions in research, in teaching, and to all the critical service functions that make an academic department go-round.

We calculated that our university absorbs roughly ten faculty-years in our in-depth annual promotion and tenure processes, which involve reviews of perhaps 4-5% of the total faculty. And that’s not counting the costs we impose on outside experts who write letters of review. Asking a university to review all of its tenured faculty this way on a regular basis is an invitation to completely paralyze the university (see the point above about regulatory time wasting as a key impediment to faculty productivity!)

3. Non-performing faculty are outliers, but they exist. When we've gone through reviews of faculty, whether intensive or “Excel Macro” reviews, the evidence has been clear that almost all of the faculty are doing pretty good work! They are teaching well and students are happy. They are actively producing new research, some of which looks like work-in-progress, some of which has been anointed with grants or accepted publications. Most of the faculty who aren’t producing a lot of individual output in the current year often have a compelling reason, like an extended stretch as a department head or associate dean.

But there are exceptions. People who have hung up their research but still have the light teaching loads and heavy paychecks of a productive researcher. People who are doing a terrible job in the classroom. Worse yet, people whose anti-social antics are making life miserable for all the students, staff, and faculty around them.

The trick then is to design a system that catches the outliers without pointlessly absorbing a massive amount of time and effort to carefully evaluate the vast majority of faculty who are doing good work – and then take action on the outliers.

A Better Post-Tenure Review System

What does a better post-tenure review system look like? We think it’s a three-part process:

1. Real annual activity evaluations, as described above, that drive compensation and resource/support decisions.

2. Periodic “Excel Macro” screenings at, say, three to five-year intervals, depending on the discipline and based on the accumulated output of the annual activity evaluations. Everyone can have a low productivity year, or two. But five in a row? The purpose of these screenings is to accumulate the evidence of annual evaluations and to identify outliers.

3. Deep dives on outliers. This starts with asking why these people are not producing to the university’s expectations. Have they invested a great deal of time and effort in much needed leadership and service functions? Have they suffered serious health concerns of their own or a close family member? Or have they simply quit working? In this last case one can pursue performance improvement plans, salary adjustments, changing the focus of work (e.g. an excellent teacher who has lost their taste for research could have their teaching load increased), and ultimately, termination.

We strongly oppose any system that would pre-judge how many low performers there are (say, by singling out the bottom 10%). We also think any evaluation of a low performing outlier has to be both holistic and aimed, at least initially, at improvement. That necessarily involves difficult and context-specific understanding and remedies, which is why it is completely unsuited for addressing more than a handful of cases in a year.

While this discussion has focused on research and teaching productivity, such a process could also be used to identify and correct anti-social behavior. Academic freedom does not include the freedom to be a belligerent a**hole to your colleagues, or to staff, or to students. Anti-social behavior does not have to rise to the level of outright misconduct to be incredibly harmful and there is no reason that a university has to tolerate someone who abuses the people around them.

Why Implement a Post-Tenure Review Policy?

First, it is the right thing to do. Just because relatively few tenured faculty abuse the privilege doesn’t mean we should provide indefinite cover to those who do. And this is especially true for those who subject others to awful teaching and bad behavior.

Two, NOT addressing such outliers is a drain on morale for all those actually doing work. The ‘one bad apple’ proverb applies too frequently in academic units. By addressing productivity issues and not letting bad behavior slide, you can see attitudes and output move quickly to a new and better level.

Three, if we don’t do it to ourselves, someone else is going to do it to us. The best defense to a state legislature that wants to scrutinize tenure protections is to demonstrate the standard we already hold ourselves to, and the rigor with which we enforce that standard.

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Coming Posts

Over the next few posts, we will get into the current – and material - threats to institutional autonomy and self-governance. And we will offer some thoughts on how universities can respond in this incredibly chaotic and uncertain time.

“Finding Equilibrium” is coauthored by Jay Akridge, Professor of Agricultural Economics, Trustee Chair in Teaching and Learning Excellence, and Provost Emeritus at Purdue University and David Hummels, Distinguished Professor of Economics and Dean Emeritus at the Daniels School of Business at Purdue.

The idea of academic freedom as a right of tenured faculty and as a principle of institutional autonomy is being challenged as never before. This post explores academic freedom as one of the primary objectives of tenure: what it is, why it is important, why it is under fire, and how it impacts the choices that faculty make in their research and teaching.

Note these questions are distinct from an issue currently roiling universities: how the reliance on external funding challenges institutional autonomy and academic freedom. We’ll take that on in a future post.

What is Academic Freedom?

The American Association of University Professors provides a formal definition, but the essence of the idea is faculty can’t be fired for what they teach or the research they do – as long as what they are doing is in their academic field. They also can’t be fired for speaking their mind on matters of institutional governance or for expressing themselves outside the university on matters that are important to them.

The idea seems simple enough: faculty are to be left alone to do their work. In practice, this seemingly innocuous idea is anything but simple and it generates a lot of heat – in part because of a lack of understanding of what academic freedom is and what it is not.

Academic freedom does not mean a faculty member can say anything they want in a classroom (they can’t). It does not mean they can behave in any way they want (no again – university policy and regulations (and our legal system) govern faculty behavior). It does not mean they can publish anything they want (the peer review process means other experts dictate what gets published).

While there are limits and constraints, academic freedom does mean that tenured faculty have a lot of control over what they teach and the focus of their research.

Why Does Academic Freedom Exist?

The short version is new ideas aren’t often well received – put forward a new way of doing something or a new way of thinking about something and someone’s proverbial ox is gored. That can be very problematic for the person with the new idea!

There is a long history of scholars being persecuted for new ideas (think Galileo and his crazy notion the Earth rotated around the Sun, Darwin and the theory of natural selection, etc.)

A more recent example comes from the “difficult years” of McCarthyism in the late 1940s/1950s when fears that Communists had infiltrated universities (along with other institutions) were pervasive. In a 1955 survey of 2500 social science faculty, 990 incidents were reported in which an accusation was made against at least one professor. About one-half of these led to some form of sanction and “104 faculty members were forced to resign for political or religious reasons” (Lazarsfeld & Thielens, Jr., summarized in FIRE).

Formalized in the 1940 AAUP Statement of Principles on Academic Freedom and Tenure, one pillar of tenure as a formal condition of employment was academic freedom: allowing scholars to do their work with the confidence that no matter who didn’t like their ideas, they got to keep their jobs. At least those faculty with tenure do…

Does Academic Freedom Still Matter?

Galileo got in trouble with the Church about 500 years ago and Senator McCarthy began his search for Communists 75 years ago. Do the protections of academic freedom for faculty still matter in the 21^st century? The answer is a resounding yes! In our leadership roles, we have dealt with plenty of issues where the academic freedom of a faculty member was challenged.

Research findings put a company’s product in a bad light – you need to rein that rogue faculty member in! A study offers up a controversial position on a social issue – watch the internet trolls bombard the faculty member with disgusting comments and threats. A student hears a perspective that is not aligned with their view of the world – get that faculty member out of the classroom!

Such pressures come from inside the academy as well – if you are in a pre-tenure or non-tenured position, and another (tenured) faculty member really doesn’t like what you are teaching or the focus of your research, you may find yourself looking for a job with your tenure denied or your annual employment contract cancelled. Tenured faculty have no such worries.

This stuff happens – regularly – and protecting the faculty member’s right to keep their job while they do their work in the face of such pressures is what academic freedom is all about. Basically, it guarantees the university has the faculty member’s back.

Why Should Society Care about Academic Freedom?

Good research changes our understanding of the world…great research changes the world. If we already knew everything there would be no point in doing research. When you change an understanding…of politics, history, economics, biology, engineering, soil science… someone is going to be unhappy with the new understanding. So, all good/relevant research offends someone, hence the need to protect the researcher.

Think about research in areas that have been called out for funding cuts such as racial inequality and health access, vaccine hesitancy, and climate science. Do we really think we are better off if we don’t know why certain groups have worse health outcomes, why people don’t want vaccines, or how sea level rise will affect coastal communities?

Great teaching works the same way – challenging ways of thinking, deepening perspectives, building skills in discernment. Academic freedom empowers faculty – who have spent years mastering their discipline – to make decisions on what material needs to be taught and how to teach it.

Constraining these rights of faculty to choose what they research ultimately limits creativity, shuts down promising ideas, slows/stops innovation and progress. Restricting what faculty teach leads to groupthink and limits development of critical thinking skills by students.

Why is Academic Freedom Under Fire?

Control, accountability, and politics. The fact that academic freedom gives faculty the right to do their jobs without outside influence is infuriating to some outside influencers. Public universities are funded by taxpayers, and governed by Boards that are typically appointed through a political process. And, you are telling these elected officials and governing boards to keep their hands off what faculty teach and research, the broader curricula, who is hired and retained? That just doesn’t sit well…

In fairness, many of the political critiques of the university cast political intervention as a necessary antidote to the university’s own failure to protect academic freedom as well as the decline in public trust of universities.

They would claim that politically unbalanced hiring or cancelling `controversial’ speakers is evidence that academic freedom as currently practiced is a one-sided affair. Those paying the bills question the cost of education, student debt, student preparation for the work world, etc. And because the university and its faculty can’t be trusted to right their own ship, politicians will do it for them.

While there is some truth to the idea that universities have provided plenty of kindling for the fire currently burning, even well-intentioned interventions can spin out of control. What starts with a call for balance can quickly land on the outright prohibition of teaching particular ideas and/or directing research agendas in destructive ways. We’ll dig deeper into this in a future post.

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Academic Freedom and Research in Practice

Academic freedom as guaranteed through tenure means faculty have the right to ‘publish findings without interference’. But this is far from a blank check to work on whatever you want. Four practical constraints shape the research that a faculty member does and the impact that it has.

First, who gets to do research? You don’t have much academic freedom if you don’t have a job, and you don’t have time to do research if you aren’t hired into a tenure-track position. While faculty are involved in the hiring (and promotion) process, central administration typically controls whether or not available faculty positions enjoy the protections of tenure.

Second, who decides what faculty work on? University research (particularly capital-intensive research in engineering, science, medicine, agriculture,…) is dependent on competitive grants to support the work. Even for non-capital-intensive disciplines such as some of the humanities and social sciences, you still have to find funds for graduate students, post docs, data collection, travel, etc. And the federal agencies, NGOs, and private sector firms that sponsor these competitive grants/provide such funding determine what topics/areas get funded.

Yes, faculty can be engaged by funding agencies in helping define topics/areas. And, faculty have the freedom to compete for the funds and to do the work (if they are one of the few to get funded), but this is all within the constraints of the grants program that dictates what kind of research proposals the funding agency will consider. In many disciplines (but certainly not all) this affects who gets tenure: no matter how talented you are, if you can’t fund your research program, no tenure for you.

Third, faculty peers can limit the research domain. Before your research gets published, it must pass muster with a group of peers working in your discipline/general area. While some would say this process leads to insular thinking/constraints on bold ideas in a discipline, there is a strong argument for such a hurdle.

The standard that a faculty member must meet - presenting compelling evidence that their idea/perspective adds something to what is already known in a discipline - separates a faculty member from a You Tuber. Pitching a new idea: not so hard. Pitching a new idea with the evidence that it clearly adds to/turns over the knowledge we have accumulated in a discipline over the course of human history: hard!

Fourth, universities face a dilemma when trying to be relevant with their research agenda. For research to have an impact, people need to know about it. But bringing attention to the outcomes of research on a contentious issue makes it much more likely you will invite complaints. Would you rather remain quiet, and uncriticized, or highly public and face a backlash? Such increased scrutiny can have the unintended consequence of faculty just keeping research quiet, at best, and shifting the direction of their work to something less relevant at worst.

The bottom-line: faculty have some leeway in the research they do and how they communicate their work. But, the constraints imposed by funding agencies and peers are real, as are the implicit pressures that come with working on relevant, contentious issues.

Academic Freedom and Teaching in Practice

What does it mean to ‘teach without interference’? In preparing a course, a faculty member makes thousands of decisions, large and small, about what content to include in their course. (The exception is new faculty, who try to include everything known to humanity in their course the first time out – trust us, we have been there...)

Academic freedom says this choice of what to include in the course and how to teach the course belongs to the faculty member – they are the disciplinary expert, they choose the content and the approach.

Note this does not say faculty have the right to spout off about something unrelated to their discipline in the course – they don’t. If you are teaching calculus, academic freedom does not mean you can take the first 25 minutes of class railing about the Russia-Ukraine war, local zoning issues, or your busted NCAA basketball bracket (unless you can somehow weave a team’s win/loss trajectory into a discussion of derivatives).

This business of what is germane and what is not may be pretty straightforward with a calculus class, but can get far trickier in the humanities and social sciences – and likely focuses as much on how a topic is discussed as the topic itself. Faculty have the right to bring any contentious topic into their course if relevant to the course. That said, faculty also have a responsibility to students to help them put that contentious topic into context so they can form their own opinions about said topic – and to have a reasoned, civil discussion about it.

To take a current example: the Trump administration is in the middle of igniting the biggest international trade war in the last century. And in the view of these authors (one of whom is an actual expert on the subject), these policies are likely to lead to a lot of grief. But to teach the topic properly one needs to acknowledge that there are theoretical economic arguments that describe the conditions under which tariffs can raise national incomes, or lower them. And other arguments about how tariffs can be used to redistribute income within a country. And other arguments about how tariffs can be used to pursue national security or other non-economic objectives. And there is a lot of evidence about all of the above.

Strictly speaking, academic freedom as conventionally conceived would allow a faculty member to cherry-pick only those arguments that support their own view of the topic, perhaps inflected by support or dislike for the Trump administration itself.

In our experience, faculty members generally do their best to reflect conflicting major strands of thinking and evidence on controversial topics. But this balancing act is constrained by the faculty member’s editorial function in constructing a class – there isn’t time to talk about everything. And providing a balanced treatment doesn’t mean that students actually *hear* the balance in what is presented. Students’ own prejudices about the subject can influence what they remember.

Many current challenges to academic freedom are based on some vague allegation that universities ‘indoctrinate’ students. There are some students we wish we could indoctrinate with economics – getting them to read the syllabus is challenge enough! That said, when it comes to affecting views and how they are shared, students likely have far more influence on one another than the instructor does.

Source: Chronicle.

Upshot

We have argued there is societal value in allowing faculty to do their work as free from constraints as is possible. Tenure protects this right by connecting continued employment to that freedom. However, only about 1/3 of the faculty in the US enjoy the protection of tenure. If freedom to make choices about research and teaching is so important to the operation of the academic enterprise, why do so few faculty enjoy it? Is the promise of continued employment the only way to guarantee that right? We will take this issue up next week.

More broadly, issues of trust and accountability set up the fundamental problem that universities face concerning increasingly suspicious external stakeholders. We ask them to trust us as experts: to make good decisions about what we research, what we teach, who we hire and promote, how we operate our campuses.

Our external stakeholders have very little evidence on which to base criticism of any of the above because, as non-experts, they don’t know what good research is, or how to teach a controversial topic, or who the best candidates are for hiring and promotion, or even how to operate a university. So they have to trust our judgments, and that trust takes the shape of academic freedom, as protected by tenure, and institutional autonomy and self-governance, which higher education has enjoyed over time.

What we are learning now is what happens when the non-experts stop trusting us.

Next Week

The current tenure system has clear pros and cons – tossing it is a bad idea, but so is preserving the status quo. We will share our thoughts on some alternatives in our next post.

Research assistance provided by Marley Heritier.

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“Finding Equilibrium” is coauthored by Jay Akridge, Professor of Agricultural Economics, Trustee Chair in Teaching and Learning Excellence, and Provost Emeritus at Purdue University and David Hummels, Distinguished Professor of Economics and Dean Emeritus at the Daniels School of Business at Purdue.

In this post we make an affirmative case for tenure using arguments from the economics of executive compensation and thin labor markets.

Tenure and Executive Compensation

Many corporate executives receive significant compensation packages that include not only base salaries, but shares, or options to purchase shares, in their firm. Some argue these packages are too generous in terms of overall dollars, but the comparison that interests us is the structure of the compensation. Why do boards give executives equity (ownership) shares in the firm?

The problem facing a corporate board is this. The value of the firm (and the corresponding returns to its shareholders) depends on a number of factors. Some of these can be controlled by the firm and depend on the effort and quality of decision making by its leadership. But other factors are outside the control of the firm – are input costs rising or falling, is the economy growing or shrinking, have competitors developed fabulous new products or suffered major quality defects.

Unfortunately, the board has a difficult time assessing the effort their executives put into the job and the quality of their decisions. Boards struggle to separate whether sales and profits are rising because of great executive decisions or because the external competitive environment is rosy. How then do you write a contract that incentivizes executives to work hard and make great decisions when you can’t clearly assess whether they have?

The answer is to provide an executive with a base salary along with a share of ownership of the firm. Sharing in the rising/falling fortunes of the firm aligns the incentives of the executive with the interests of the shareholders, resulting in more effort and better decisions.

Incentivizing Hard-to-Observe Effort

What does this have to do with faculty and with tenure? Faculty are expected to do many things: generate high quality scholarship, teach effectively, and provide service to the university. In land-grant and many other public universities, the to-do list also includes engagement with external stakeholders.

Research, teaching, and engagement are the university’s main products, and service to the university makes providing those products feasible. “Service” means that faculty act as human resources officers in hiring, developing, and evaluating other faculty. They also work as product designers (creating and improving curriculum) and in operations roles, assisting with a host of other administrative chores that are adjacent to the other roles.

Just as with corporate executives, it can be extremely hard to evaluate the effort that faculty put in and the quality of work they produce. University boards and executive leadership can look at a CV to count publications or citations or tally up research dollars, but it takes someone working in closely related fields to truly evaluate a research record. That is so time consuming (we estimate our institution invests ten professor-years of work every year to evaluate candidates for tenure and promotion) and so reliant on experts outside the university that we do it perhaps twice in a career – corresponding to two major promotion windows.

University boards and executive leaders can look at faculty teaching evaluations in individual courses, or increasingly, at student complaints. But as we earlier argued, those are very poor measures of student learning in a course, let alone learning across a student’s cumulative experience in college.

Still, when it comes to teaching and research, boards and university leaders have some ability to evaluate and incentivize individual output. You can tell if someone is a disaster in a classroom or stops producing research entirely. If you wanted to strengthen these incentives toward individual production, you could do that pretty easily. (More on that in a few weeks.)

However, boards effectively have no ability to observe the effort and quality of decision making that goes into faculty’s HR and product design functions. If we consider the ongoing viability of the university as a whole, these may be the most important activities in which faculty engage.

A university might currently have great individual faculty and great programs. But if those faculty do not invest thoughtfully in their HR function - hiring, developing, and evaluating peers – the quality of faculty will degrade quickly, and with it, the main outputs of the university. Similarly, neglect of programs and curriculum quickly leads to outdated learning and inferior job market outcomes for students.

In the face of the difficulties in carefully assessing research and teaching output, and the comprehensive inability of university boards to measure effort or quality of service output, tenure is the academic equivalent of sharing the equity of a firm with a corporate executive.

How Does Tenure Tie a Faculty Member to University Performance?

Struggling institutions do not give raises. They provide inadequate benefit packages. They attract poor students who are a chore to teach. They inhibit faculty research productivity by housing faculty in sub-standard spaces or failing to provide adequate support for advanced computing, laboratories, grant-writing, or a host of other services. They are not able to hire strong research colleagues with whom to interact and innovate. In extreme cases, they close down departments and lay faculty off.

Because thriving and struggling institutions treat faculty very differently, the success of the university is strongly linked to desirable personal and professional outcomes for individual faculty. Contrast a faculty member with tenure to an adjunct delivering coursework piecemeal. If you have no long-term connection to the university, the variability in outcomes at an institution is far less concerning. You go and find another place to work that offers better pay and better working conditions.

Sometimes university leaders (us included) bemoan the fact that faculty invest less time in the institution itself than leadership might hope for. What is actually amazing is that faculty invest any time whatsoever in improving the institution.

Since service of the sort described here (HR function, product design, operations) generates little or no direct short-run financial returns to individual faculty, you might think an optimizing faculty member would eschew this activity altogether. Yet we consistently saw faculty invest time and thoughtful effort in their critical HR functions, in their critical product design functions, and in a whole host of necessary administrative chores. Many of these investments pay off over the very long-run, years or even decades. Yet faculty continue to provide this service.

Some would ascribe this to intrinsic motivation, that is, to an uncompensated motivation to make their university better. We think it is better described as faculty recognizing that tenure has provided them with an equity share in the university and they want to maximize the value of that equity share.

In short, while some argue that tenure insulates faculty from the consequences of institutional success or failure, we think this is completely backwards. Tenure causes faculty to take a much stronger interest in the long-term viability and strength of their institution than they otherwise would.

Extreme Specialization and Thin Markets

In the early days of universities, faculty were polymaths covering broad subject matter. But as disciplines developed, and the associated knowledge base deepened, it became necessary to specialize. Social sciences divided from the humanities and then divided into psychology, political science, sociology, and economics and these in turn divided into sub-specialties again, and again. Engineering divided from science and then divided into a focus on mechanical, or electrical, or chemical properties and systems, and these divided into sub-specialties again, and again.

From the outside all this specialization invites mockery, with scholars knowing “more and more about less and less” in Nicholas Butler’s memorable phrase. But this specialization is an inevitable consequence of scientific progress. In their research duties, we ask our faculty to do nothing less than produce a piece of science, or analysis, or understanding, that no person has previously produced in the history of mankind! And to do it over and over again. That is a tall order.

Alas, there are no more DaVincis or Jeffersons creating breakthrough knowledge across a wide range of disciplines. Or rather, knowledge has advanced so far that it is no longer feasible to be such a person. The only way to expand the frontier of what we know is to narrow the scope of focus so that we can accumulate the learning and experience necessary to reach the frontier in the first place.

(For a formal economic model of this process, we recommend reading Jones, The Burden of Knowledge and the Death of the Renaissance Man or the highly accessible summary written by Matt Clancy here which summarizes a number of additional provocative implications of this idea.)

How does this relate to tenure? Because of the extreme specialization we demand of people who can push out the knowledge frontier, we are asking them to take two kinds of big risks: temporal and spatial.

Temporal Risks for Faculty

Innovation is inherently risky. Many research ideas don’t pan out and represent what looks like, in retrospect, wasted resources. That isn’t just true of academic research, it is also true of private sector research.

In our last post we mentioned the extremely low success rate of new molecules explored by pharmaceutical firms – just 10% make it through regulatory approvals and that’s only counting as a share of molecules that make it far enough through the scientific process to begin clinical trials. In that industry the cost of developing a successful new molecule, including the cost of failures, is nearly $1Bn on average, though some estimates place the number as high as $4.5Bn.

The inherent risk in innovation – in generating a successful new idea nobody has previously thought of – is that many projects don’t pan out. You can try and fail and try and fail repeatedly, and without an external signal of production (a success that yields a grant, or a publication, or a patent) it may look to an outside observer that you have been doing nothing at all.

When your review is time limited (as it is prior to tenure) faculty respond by de-risking their investments and taking on projects with higher probability of success. That usually means taking on projects that add small increments to our stock of knowledge to generate the tangible outputs needed for their promotion.

The question is whether we want faculty to take big swings and big misses in order to solve big problems. If we do, tenure provides an insurance policy against being evaluated only on the basis of your most recent quarter of production.

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Spatial Risks for Faculty

Because faculty are so specialized, there are at any one time a very small number of positions anywhere in the world that are of suitable quality/value to interest a high performing faculty member. And if you are located in a medium-sized college town somewhere in the Midwest, there is zero chance there is another position you would want to take anywhere in the same commuting distance.

You might have wondered why certain occupations are so heavily concentrated in very specific areas: finance in New York and London, software and venture capital in Silicon Valley, film-making in Hollywood. One reason is that these places host dense concentrations of firms who can hire someone with a very narrow specialization in sub-specialties of finance or software engineering or film editing. That means a person can choose to specialize very narrowly, move to where there is a concentration of firms, and be assured that they have options if employment in their first firm does not pan out.

Universities do not much cluster. Even the world’s great cities have only a small handful of top places, and most universities are the only game in town. From a labor supply standpoint that is an incredibly risky proposition. It gives the university what we call a monopsony position (monopolists are the only sellers in a market; monopsonists are the only buyer). If business turns down, the monopsonist university can lay you off, or slash your wages, or demand twice as much teaching. And you have no outside option.

Tenure is a guarantee against both kinds of risk. The temporal risk that you have a bad quarter or year of production. The spatial risk that in a downturn the only university in your city will be tempted to balance the budget on your head.

You might ask, why do faculty need that guarantee if most workers don’t get it? And the answer is, almost nobody in the labor market is as narrowly specialized as faculty are. The more narrowly you are specialized, and the thinner the market for your services, the more at risk you are.

Investing Half Your Working Life to get Tenure

You might think, well, life’s tough, you get a bad draw, so what? Here we have to ask about the incentives to become a faculty member in the first place. Faculty members invest four years in college. Another 6-8 years in a PhD program, and for many fields another 2-4 years in post-doc positions. Another 6-8 years as an untenured assistant professor before being granted tenure, and increasingly twice that with “tenure re-starts”.

Altogether this represents 22+ years invested in a research specialization, along with paying the associated costs for their academic program and the opportunity cost of foregone wages. These costs are substantial. About one in five PhD students use their own resources to fund doctoral study, and those numbers are dramatically higher in minority populations. For those who are on paid assistantships, PhD stipends are much lower than one could earn with a bachelor’s degree. (In our discipline, PhD stipends are about 33% of what you could earn in the private sector; for engineering it’s likely closer to 20-25%.) Further, if you are out of the private workforce, you aren’t accumulating the occupation- and firm-specific expertise that leads to really significant wage growth.

And now imagine at the end of all that highly specific investment and time to be a faculty member, your employment is at the mercy of your university’s short-run budget situation. Or at the mercy of a university leader or a legislator who doesn’t like the conclusions of your research. Massive upfront investment to generate meager and variable returns is not likely to attract smart people to pursue faculty careers.

Academia vs. Industry

These big upfront investments are one reason that many of our brightest scholars have given up on academia and opted for industry instead. In the most recent year, fewer than 12% of new PhDs in engineering took academic positions. Some of that reflects the length of investment and uncertain returns just described. Some of that is no doubt because academic institutions are expanding non-tenure track lines while reducing tenure track positions. Given the precarity of lecturing roles, new PhDs are saying: no thanks.

Of course, there is a level of compensation that would make all this investment worthwhile even without the insurance offered by tenure. What can we say about wages for a new PhD considering the academy versus industry?

Faculty wages vary widely across institutions and disciplinary areas, and the premia involved in industry positions also varies widely. Engineers and scientists are in great demand in industry, as are, for example, finance PhDs. Using data from NSFs “Survey of Earned Doctorates”, industry employment offered a 67% premium over academic employment for science and engineering fields overall, but only about 10% for the humanities. That probably tells us a lot about why 2/3 of new humanities PhDs but fewer than 1/8 of new engineering PhDs take jobs at a university.

But what about pursuing the PhD path in the first place? Our discipline, economics, tends to be well-paid relative to most faculty areas. In 2023-24 the median salary for a tenured economist at associate professor rank in the US was a little over twice what a newly minted undergraduate could expect to earn. But that’s after investing almost half of their working life, foregoing better earnings all along the way, to earn tenure.

So, you can revoke tenure, and eliminate stable returns on the decades of investment needed to earn it. You just shouldn’t expect many people to be interested in taking that deal.

Next Week

We’ve stalled as long as we could, but next week we tackle the 800-pound gorilla in the tenure debate: academic freedom. What it means, who has it, and how actions in DC and in state houses around the country will impact it.

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“Finding Equilibrium” is coauthored by Jay Akridge, Professor of Agricultural Economics, Trustee Chair in Teaching and Learning Excellence, and Provost Emeritus at Purdue University and David Hummels, Distinguished Professor of Economics and Dean Emeritus at the Daniels School of Business at Purdue.

In this post we take on the arguments against tenure to see which have merit and which do not.

Do Faculty Quit Working After Tenure?

Perhaps the strongest conceptual argument against tenure is the possibility that post-tenure faculty work and produce less. This notion seems to be a motivating factor for stringent post-tenure review processes in states like Florida. On its face, the argument seems plausible. Who wouldn’t back off a bit from a job where effort cannot be monitored effectively and where protections against firing insulate you from the consequences of taking it easier?

Yet, there is little evidence in the research literature to support this hypothesis, though faculty may change the type of work they do, e.g. emphasizing quality over quantity. This tracks with our experience with our colleagues. Yes, a small number of faculty become unproductive, or “deadwood” in academic parlance, after earning tenure. But others become much more productive, freed from the ticking clock of an impending tenure review and able to go deeper into difficult research topics – topics that were too risky to explore given their focus on tangible results while in the probationary period.

The lack of evidence for systematic productivity decline is even more surprising given the changing work expectations of a tenured faculty member. Well-run departments insulate junior faculty from significant service obligations. But somebody has got to run the place, and the (long!) list of service and leadership obligations that post-tenure faculty must discharge can significantly reduce time for research and teaching.

To be clear, there are outliers, individuals who take advantage of tenure protections to coast, and others who just get tired and mail it in. We’ll discuss strategies for these outliers in a subsequent post, but the larger point here is that they are *outliers*… and productivity decline post-tenure is not a systemic problem.

Why Doesn’t Post-tenure Productivity Diminish More?

We think there are four reasons.

• One, we all learn by doing, and faculty a decade out from grad school are simply better at teaching and research than new PhDs. For many faculty it takes several years to build momentum in a research program. By the time of the tenure decision, the question of whether a faculty member can be productive is settled. After tenure we start to see faculty building scale (larger labs with more PhD students and post-docs), taking risks, and gaining the national recognition and visibility to lead/partner on bigger and more ambitious grants and projects.

• Two, as we discuss here, there are strong financial and professional motives for continuing to be productive. Raises, summer salary (whether internal or grant funded), additional promotions (to full or chaired/distinguished professor), and the prospect of outside offers can create very large differences in financial compensation for more productive faculty. Faculty who are not meeting basic responsibilities may see their appointments reduced and their compensation actually cut.

• Three, most faculty self-select into the profession because they love to research and teach, and this intrinsic motivation drives them to produce even if they are (somewhat) insulated from termination.

• Fourth, and perhaps most important, nobody dislikes “deadwood” faculty more than other faculty! As a result, tenure review processes focus as much on a forecast of future productivity as on past production. There are a lot of things that go into that forecast, including pipeline performance but also subjective assessments of whether a promotion candidate has the intrinsic motivation to continue doing the work.

Do Tenured Faculty Reduce Budget Flexibility?

This argument also has some surface plausibility. Let’s say we tenure someone at age 35 and they retire (of their own volition) at age 75. That’s a 40-year salary commitment! Accumulate that across hundreds or even thousands of faculty across a large university and it is a massive commitment indeed.

This commitment becomes most problematic when a department accumulates more tenured faculty than are justified by the teaching needs of the department, or when a surplus of tenured faculty in one area reduces the budget flexibility needed to provide resources for fast-growing units. That can happen, especially in departments that were once well-subscribed and now struggle for students.

This is not just a humanities issue…it would not surprise us if the current land-rush into computer science enrollments were to ebb, repeating the boom and bust cycle from 1995-2010. And if the Trump Administration makes good on its intention to severely slash research funding, colleges of Agriculture, Science, Engineering, and Medicine may have more tenured faculty than they know what to do with.

These large shifts in faculty demand notwithstanding, three factors argue strongly against budget flexibility as a major consideration for eliminating tenure.

• First, fewer and fewer of the credit hours delivered in undergraduate programs are delivered by tenured faculty! As we described here, non-tenured faculty have grown rapidly at nearly every university and now comprise nearly 2/3s of all faculty nation-wide. And since it is typical for non-tenured faculty to teach two to three times as much as tenured faculty, they (and graduate students) are delivering the lion’s share of undergraduate credit hours. We’re not so sure that’s a good thing for students, but if a university administration needs to adjust teaching capacity/budget at the margin, that is a vast reservoir of adjustment unimpeded by tenure contracts.

• Second, while there can be short term fluctuations in demand for certain degree areas, most of the changes we see in enrollments reflect slow moving, long run trends. This usually provides leadership with ample time for adjustment in tenure lines, making use of the steady process of attrition and faculty turnover, provided leadership is even a little bit forward looking.

• Three, if push comes to shove, departments can be disbanded, majors discontinued, and tenured faculty laid off. If federal funds used to buy out faculty time dry up, affected faculty can simply teach more.

In short, we think the budget flexibility argument against tenure is wildly overstated, except in cases where smaller colleges really have loaded themselves up with vastly more tenured faculty than they can use. When it comes to the operations of nearly all comprehensive universities today, budget inflexibility stemming from tenure is a red herring.

Do Tenured Faculty Stand in the Way of Needed Change?

This brings us to what we believe is the real source of opposition to tenure: tenured faculty constrain the ability of university leadership to remake the university in the way they please. This constraint is real: it flows from the combination of shared governance, particularly faculty control of the curriculum, and tenure protections which prevent administrators from firing faculty who disagree with their preferred approach.

Unhappiness with recalcitrant faculty abounds among executive leadership. Former Purdue president (and our former boss) Mitch Daniels published an op-ed in the Washington Post pointing to tenure as a barrier to innovation. The former president of Macalester, Brian Rosenberg, wrote a provocatively titled, thoughtful and entertaining book Whatever It Is, I’m Against It, pointing to tenured faculty as standing in the way of any kind of change at the university. Former Berkeley chancellor Nicholas Dirks’ book City of Intellect: The Uses and Abuses of the University also strongly criticizes the unwillingness of his faculty to be reasonable in their response to budgetary crises. And now we have a survey saying two-thirds of college presidents seem to agree with this negative sentiment. Ouch.

Look we get it. Shared governance means that tenured faculty can resist change, they can slow and, in some cases, even stop what administrators think is progress. Sometimes that happens with overt votes. Sometimes it happens by slow walking proposals in the hopes that administrators will lose interest (or leave). There were certainly times when we, as university leaders, were really frustrated by faculty who had different ideas than we did.

The question is, what approach to governance would you prefer?

Be More Like Business?

It is often argued that universities need to be more like business: more nimble, more agile. Implied in this notion is that if faculty can’t or won’t be nimble and agile, strong central leadership can and will. If we simply let powerful boards and presidents act like corporate CEOs and drive aggressive change without faculty obstruction, perhaps universities would move rapidly and get better.

Speaking as two economists, let’s be clear about a couple of things.

• First, private business isn’t always agile and disruptive, and the more successful a company has been with past innovation the less likely it is to continue to innovate. The tendency to stick with successful existing lines of business in lieu of forward-looking innovation was famously named the “Innovator’s Dilemma” and extensively documented by Clayton Christensen, the late guru of business disruption. Kodak anyone? Xerox?

• Second, when it does innovate, private business screws up all the time! Christensen and coauthors wrote that repeated studies have found 70-90% of mergers and acquisitions are failures. The vast majority of new product launches fail to gain sizeable new markets. A great deal of corporate investment in innovation generates nothing of market value. For example, in the vital pharmaceutical sector only about 10% of new molecules that are even promising enough to test in clinical trials make it through those trials to be granted regulatory approval.

• Third, perhaps owing to the difficulty of successfully leading large businesses, CEOs don’t stick around long. The median tenure of S&P500 CEOs is 4.8 years, a number that has been steadily declining and is remarkably similar to the average tenure of university presidents (5.9 years). Governing boards frequently make big mistakes in hiring their strong central leaders: one in seven CEOs of large public firms are out of the job within a year.

We’re not saying universities are currently as innovative and nimble as they need to be – they aren’t. (Christensen was also pretty critical of universities. We’ll come back to this in a future post.) And we are not being critical of private business leadership or second-guessing their strategic choices. These are hard jobs! We’re just saying, there is nothing magical about strong CEOs or a private business approach that guarantees success.

Rather, the magic of the market is that successes are rewarded and screwups are punished. Firms that make bad decisions lose their shareholders’ money or go out of business. And at a really high rate! About 20% of business startups close shop in the first year and only half make it five years. In the strong economy of 2022, almost half a million US firms went out of business, leading to over 5 million employees losing their jobs.

There is no reason to think that a more business-like, strong CEO approach to university governance would generate higher success rates than it does when applied to business itself. For every Michael Crowe of Arizona State, there is a Ben Sasse of Florida.

Move Fast and Break Things?

There is, however, a huge difference between universities and business in the consequences of failure. The problem with “move fast and break things” in a university context is that the “things” are students. And for most of them, the time they spend in college has more impact on their career and life outcomes than any other thing they will do in their lives.

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And it’s not just the students, there are other important stakeholders. Wild swings in the scope and focus of university activity directly affect non-tenured faculty and staff, the communities that host universities, and the employers who rely on them to supply talent and research.

Alumni have a stake in university choices as well. If Frito-Lay discontinues Flaming Hot Nacho Doritos you might be a little sad but you can switch to classic Nacho Cheese Doritos, or perhaps Fuego Takis instead. No great loss.

But if a university discontinues a degree program, that is a loss felt by all the alumni who received that degree. A degree is not a one-off consumption decision. It is an investment whose value depends not only on what happened while you took the degree, but on the public perception of the value of that degree in the years since graduation. Why else do alumni get so worked up about, e.g. MBA rankings? It’s not just pride in their alma mater. It is a perception that falling rankings affect the ongoing value of their degree and its associated human capital.

People who run universities hear from all these stakeholders all the time. You think faculty are the only ones who resist change?

Improving Shared Governance

None of this is meant to excuse faculty recalcitrance, which is a real thing. But it does suggest that the actual problem lies not with tenure but instead with an imbalance in shared governance.

Shared governance between university leadership and faculty plays out in many different ways across institutions. But at its core is the idea that disciplinary faculty know things about their discipline that leadership does not, and leadership has perspectives on broader issues that faculty do not.

This seems to suggest a pretty clear delineation of roles. Faculty voices should be strongest in matters that require deep disciplinary knowledge: the content of courses and curricula, and yes, what scholarly records demonstrate sufficiently impressive accomplishment that they deserve tenure. Administrative voices should be strongest in matters that concern the allocation of resources across different areas of the university. And, both faculty and administrators benefit when decisions in their realm are informed with information from the other.

Reading Dirks’ and Rosenberg’s accounts, it seems to us that their frustrations arose because faculty had been granted more power over budgetary matters than was warranted.

All this is solvable, and we’ll have more to say about this in a few weeks. But there is no reason to think that abolishing tenure as a first step in giving university leadership unconstrained power over all decisions, academic or otherwise, is a reasonable or necessary part of that solution.

Next Week

In summary, we don’t think these common arguments against tenure hold a lot of water. But what about the arguments in favor of tenure? We tackle that next.

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“Finding Equilibrium” is coauthored by Jay Akridge, Professor of Agricultural Economics, Trustee Chair in Teaching and Learning Excellence, and Provost Emeritus at Purdue University and David Hummels, Distinguished Professor of Economics and Dean Emeritus at the Daniels School of Business at Purdue.

Rankings and Quality?

One of James Cattell’s original goals when ranking institutions was to encourage universities to take actions improving their ‘judgement of quality’. But given the heavy focus on inputs instead of outcomes in ranking criteria and the role of ‘reputation surveys’ in the ranking process, it’s hard to say that rankings provide much insight into the actual quality of a university.

That said, motivating excellence as a goal of rankings sounds good – perhaps there is some level of accountability in rankings? A university with a lousy graduation rate getting called out through its rankings might be motivated to do something about it.

Maybe this happens more frequently than we think. But, a lot of the conversations we have been in/are aware of go something like this:

“Our ranking is X and it needs to be X-n. How do we move that ranking?”

“I don’t know, what are the inputs into the ranking? Can we figure those out and reverse engineer them? Which of those inputs can we manipulate to move the ranking quickly and at the lowest cost?”

That conversation is vastly different from…

“We want to improve graduation rates, and it will be great if in the process of doing that, we are ranked higher.”

Rankings and Mission

Rankings are a lazy approach to framing a university’s mission. ‘We want to be top 10!’ seems like a great rallying cry, until you take about 5 seconds and try to unpack what that means: Top 10 in size? Top 10 in graduation rate? Top 10 in research dollars? Top 10 in … ?

The danger is that making rankings a priority precludes deep thinking about what a university’s mission should be. Decisions get focused on the very narrow set of criteria that ‘count’ in rankings as opposed to the much wider set of criteria stakeholders care about.

Rankings are also a force for homogenization, and not in a good way. Scan the communications/mission statements/key initiatives of most major universities and you would be hard pressed to identify the institution without the school colors and mascot present.

Finding your point of difference is hard work but it is necessary work. We are all in the higher education business: what is unique about our institution? Why does our state/nation need our institution when it could just make the others a bit bigger and save the overhead?

Public institutions have a very direct obligation to the taxpayers of the state – who likely care little about some national ranking. Taxpayers do care about the educational opportunities the university provides residents of the state; the contribution to the state’s economic and social vitality; how the university supports key industries; and the contributions made in addressing critical state problems such as public health. Nothing good happens when the quest for a higher ranking becomes a substitute for being the university the state needs it to be.

Rankings and Decision-Making

When rankings drive decisions, you have a problem. If investments are guided by rankings and rankings aren’t aligned with mission and student success, you don’t meet the needs of students and stakeholders. And you lose public trust – or worse.

There is certainly evidence of this misalignment. Some studies (using an earlier version of the USNWR rankings) have shown that universities tend to 1) spend more and 2) allocate funds differently to improve rankings. There is also evidence that such ‘striving’ behavior is most pronounced for those institutions on the ‘border’ between ranking classes – just outside the top 25 for instance – as being in a better ranking neighborhood is perceived as bringing prestige to the campus.

As an example, admission decisions can have a direct impact on rankings – and can make holistic admission a joke. Take a highly laudable goal like improving access to education among first generation or Pell-grant eligible students. On average these students tend to have lower SAT scores, lower completion rates, lower starting salaries,… A rankings-focused admissions strategy might start with: only admit rich kids.

Spending more to educate each student can drive some rankings higher – but is antithetical to a mission of controlling the cost of education. Reputation building investments can grab headlines, but starve less flashy initiatives that are essential in serving students and stakeholders. When it comes to university budgets, it is a zero-sum game: a dollar spent to move a ranking is not available to spend anywhere else.

There is no shortage of recent examples of decisions that are rankings driven. Louisiana State University altered hiring and promotion and tenure processes for librarians as part of their push to enter the AAU. Columbia was taken to task and ultimately apologized for misreporting data which had inflated rankings. At the extreme, a Temple business school dean was sentenced to prison for providing false information in an effort to boost rankings.

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Improving Rankings: Sticky and Costly

Rankings are amazingly ‘sticky’ over time - most institutions stay in a +/- 4-point band. In our time in leadership, we saw plenty of examples of programs that seemed to be showing steady progress up the rankings ladder, only to inexplicably slide right back down the rankings chute the next year.

Why is that? Rosenberg argues that university rankings are nothing more than a mirror for reputation and that university reputations are ridiculously hard to change.

In 1983 when the US News and World Report Rankings were launched, the top four universities were Stanford, Harvard, Yale, and Princeton. In 2022, the top four were Princeton, Harvard, MIT, and Yale (Stanford was 5^th). Rosenberg contrasts this list with Fortune’s Most Admired Companies. In 1983, the most admired companies were Exxon, General Motors, Mobil, Texaco, and Ford. In 2022 the top five were Apple, Amazon, Microsoft, Pfizer, and Disney - “none of which were in the top 100 in 1983, and one of which had not been founded” (page 38).

A reason for the ‘stickiness’: the cost of moving up in the rankings is crazy high. One 2014 study explored the cost of a university moving from a ranking in the mid-30s to the top 20 of the rankings. Using the USNWR criteria at the time, it would take over $100,000,000 per year (forever) in additional financial resources per student and in faculty salaries to make that kind of jump. And, the university would still need to improve their peer assessment score – which basically doesn’t move.

Are Rankings Useful to the Institution?

One argument is that higher rankings boost enrollment and attract better students. We covered this in some detail in our earlier post. Far more undergraduate students use the data that ranking services provide (as opposed to the ranking itself) when they make their college choice. However, numerical rankings seem to matter to some students, and are probably quite important for elite professional graduate programs.

What about those high profile students and their parents that place more weight on numerical rankings? There is an element of prestige in a school that has a high ranking and prestige alone has value to certain students/families. And that probably makes sense if you want to serve as a Supreme Court clerk or justice.

More practically, high profile students have stronger educational outcomes, typically come from wealthier families, and may well be out of state students paying much higher tuition. So, high profile students attracted by high rankings are a win from an input metrics standpoint and a win from a financial standpoint for universities.

Another argument is that employers use rankings and highly ranked institutions offer more and better job opportunities for their students as a result. There is little evidence employers use rankings this way, perhaps in part because they directly assess the quality of students they hire from various universities, basically creating their own internal rankings. As a caveat, this would not necessarily be true for professional schools as top legal posts, consulting jobs, and medical positions tend to be filled by graduates from ‘highly ranked’ schools. And, sheer enrollment may send some employers to much larger public flagship campuses, than smaller (and lower ranked) public regionals.

Source: Strada

Some universities (Florida for example) have been able to lever the quest for improved rankings into additional funding – maybe rankings provide a simplistic measure of excellence that connected with Boards and legislatures.

Finally, there is an element of sport here: much like athletic team rankings, administrators and alumni certainly enjoy bragging rights when the rankings look good. (We both bragged about our rankings while serving in administrative roles.) We don’t deny a lofty position can make faculty, staff, students, and donors feel good about a place – even if the ‘why’ behind the ranking is murky.

A Better Path

We know plenty of folks who think about rankings the way we do – but what do you do about them? Given the pervasive nature of rankings and the pressure that can come to ‘improve’ them, they are impossible for any academic leader to ignore. That said, you can work to keep rankings in perspective as you make the strategic decisions to deliver on your unique mission.

An Inc. magazine article many years ago talked about ‘image positioning’ vs. ‘character expression’. Image positioning is basically using communications tools to self-promote a desired image. Character expression is doing the hard work of living a mission, and reaping the benefits of delivering authentic value to your clientele and stakeholders.

Rankings smack of image positioning and are noisy, misleading, and confusing signals of excellence. Universities that express their character by knowing who they are and defining and delivering excellence accordingly lay the foundation for long-term success.

These places who are comfortable in their own skin are bold enough to only pay attention to the rankings and/or the components of rankings that reflect the excellence they seek and that matter to their stakeholders (including peers). They use peer comparisons to support excellence in chosen target areas. These universities do not let the pursuit of rankings or peer comparisons take them in directions which are not aligned with their chosen goals and those of the communities they serve.

Is your teaching mission maximizing incoming student quality, or is it transforming student potential while they are at the university? Is your research mission to rank in the top ten in federal funding, or is it advancing disciplines and addressing societal issues? Is your engagement mission contributing to workforce and community development and a healthier, more prosperous state?

You can’t point to a ranking to demonstrate such impacts. But you can and must tell your story, using quantitative metrics where possible, using qualitative narrative where appropriate, but always focused on the mission itself.

Perhaps most importantly, mission-driven excellence happens when there is a shared sense of responsibility for achieving goals across campus – an internal accountability and understanding of how individuals contribute to the broader goals of the institution.

Getting a campus, alumni/donors, employers, and the state excited about a mission which makes a difference is a far more engaging and motivating exercise than chasing a ranking. Accomplishing this means rewards and recognitions for administrators, faculty, and staff must be aligned with the specific goals and aspirations of the institution.

This is incredibly hard work: it demands relentless communication everywhere, all the time by the campus and its leadership to scream to stakeholders: this is who we are, this is why it matters, this is how we are doing, and this is how we will get better in service to you – with your help.

Next Week…

We are going to take a look at tuition with an ‘explainer’ on trends in tuition and the cost of attending college. As always. thanks for reading and for your support.

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Research assistance provided by Marley Heritier.

“Finding Equilibrium” is coauthored by Jay Akridge, Professor of Agricultural Economics, Trustee Chair in Teaching and Learning Excellence, and Provost Emeritus at Purdue University and David Hummels, Distinguished Professor of Economics and Dean Emeritus at the Daniels School of Business at Purdue.

One of the aspects we enjoy most about writing Finding Equilibrium is that putting our weekly post together forces us to clarify our thinking – and justify our perspective – on the topic du jour. Having an opinion is one thing, being able to communicate why you hold the opinion (with compelling reasons, at least to us) is something different.

So, right up front this week, we are not a fan of university rankings. Probably better said, we are not a fan of the administrative behaviors that university rankings can promote. This week and next, we’ll talk about those administrative behaviors, where rankings add value for students and universities and where they don’t, and how to navigate in a world where rankings aren’t going away.

Nothing New

There is nothing new about university rankings. In 1900, Alick Maclean, an Englishman, published the first university rankings. Universities were ranked in order by “the absolute number of ‘eminent men’ who had attended them”. A few years later in 1910, Americans began ranking universities when James McKeen Cattell created a list of 1000 men (accomplished scientists) and then ranked their alma maters/where they taught based the number of the men from/at the university relative to the university’s total number of faculty.

Cattell wanted to measure the “strength of each institution” and he recommended that students should be attending schools that have “large proportions of men of distinction among their instructors”. Cattell also suggested that institutions take actions to improve their “judgement of quality”.

In the process, two potentially valuable uses of university rankings were born – providing information on the quality of the university to prospective students and providing a guide for how universities could improve. While crude (who decided the men (and men only) were eminent?), these rankings were focused on outcomes.

Reputational rankings came later in 1924 when Raymond Hughes, a chemistry professor at Miami University (Ohio), asked faculty in 19 disciplines at Miami to rate 36 U.S. universities on the quality of their graduate program using a 1 to 5 scale. Additional reputational studies followed.

While outcomes-based rankings were the primary focus until the late 1950s, reputational rankings took off in the 1960s and beyond. Myers and Robe attribute the rise of reputational rankings to the work of Allan Cartter who published an influential reputational study of graduate programs in 1966.

Today we have a literal blizzard of rankings that are a mix of outcomes, inputs, and reputation/opinion.

Criticisms Abound, But Rankings Aren’t Going Anywhere

The last thing needed is a rant from us calling out all the issues with university rankings. Despite serious criticisms, rankings – and rankings services - aren’t going anywhere. It is more productive to revisit Cattell’s two objectives for his early rankings: 1) where do rankings add value for students and where do they not; and 2) where are rankings useful/misleading/poisonous to universities? We’ll look at the student question this week and consider the institutional question next.

What Information do Students Need in a Ranking?

As we have discussed previously, there is a dearth of timely, relevant, easy to access data to help students choose the right university. Rankings services have stepped up to fill that void and promote it as the reason for their existence (and of course make some money in the process).

That said, if a ranking is going to be useful to students what information should it include? Students need information on educational outcomes. They need to know if students graduate and graduate on time, if graduates get jobs and what starting salaries are. They need to know the actual cost of education (not the sticker price) and how much debt graduates have.

Students need to know about the student experience. They need to know who teaches classes (permanent or adjunct faculty or TAs) and whether or not students participate in high-impact learning experiences, internships, and co-curricular activities. They need this information at the program level given wide disparity across programs within a university.

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Do Rankings Meet Student Needs?

Let’s take a look at how rankings stack up against the kinds of information students and their families need.

Who’s Number 1 and Does that Matter? Universities are complex organizations producing research, human talent, and services for stakeholders. When a place claims ‘we are number one’, just what is being ranked? Many rankings focus on undergraduate programs and graduate and professional programs, while others attempt to assess research.

Rankings focus on the number of CEOs the university has graduated, the quality of the food, and, yes, beer consumption. The notion that any institution is ‘number one’ in some comprehensive way across all missions (and areas) is ludicrous – though any correlations between the CEO and beer rankings would be interesting...

As an aside, between the myriad of things being ranked and the use of sub-categories (public vs. private, regional breakdowns, etc.), the good news is almost everyone can find a ranking where they shine. “We’re the fourth-ranked public online nutrition science program in Kentucky”. Trophies for all!

Another key point: given the variance around any quantitative measure of ‘performance’, is there any real (statistical) difference between number 1 and number 10 – or number 20? One study (using an earlier version of the USNWR criteria) found that rankings moves of +/- 4 points should be considered statistical noise and were not reflective of actual differences in quality. Rankings such as Niche (letter grades) or Money (stars) provide ratings of institutions, in addition to ordinal rankings – which makes way more sense to us as a way of comparing institutions.

Digging Out the Useful Information. The data used to construct these things continues to evolve. The 2025 US News and World Report national university rankings used the following components: 52% outcomes (graduation rates, debt,….); 11% faculty resources (faculty salaries, student-faculty ratio,…); 20% reputation (as ranked by other academics); 8% financial resources (per student); 5% standardized test scores; 4% research reputation.

Wall Street Journal/College Pulse uses a different set of measures, same with Money, Forbes, Niche, QS, ... Within a given set of overall rankings, you can find a plethora of other rankings: student experience, best salaries, best value, social mobility, by major, test optional, colleges with no application fee,… The rankings measure different things, so they tell you different things – confusing students and their families in the process.

An especially troublesome issue is that few consumers of rankings know what is actually being ranked. Someone who cares a lot about undergraduate education might be appalled to learn that the ranking they are following is actually based on research reputation and that marginal investments taken away from undergraduate education to boost research standing will improve the ranking.

Source: CARPE.

So what is useful here? Some of the rankings try to get at value or ROI. The Wall Street Journal/College Pulse ranking includes a measure of how much more a graduate of a specific university earns relative to what would be expected regardless of college attended, and a measure of how many years it takes to pay off the net price of attending the college. Niche rankings attempt to get at student life. USRWR offers a number of rankings that dig into the student experience, affordability, etc.

Reputational Components of Rankings. While many rankings use outcome data on completion, retention, starting salaries, etc., others are based solely or largely on ‘reputational’ components. We have a very low opinion of reputational rankings.

Let’s use USNWR to see how this works. USNWR uses a 5-point scale for the peer assessment portion of overall university USNWR rankings. Specific program rankings (e.g. colleges of business or engineering, computer science programs) are entirely reputational and the ranking is determined “solely on the judgements of deans and senior faculty members”.

To get at these judgements, USNWR sends university administrators long lists of other universities or specific programs. They score each on a 5-point scale from excellent to sub-standard, or acknowledge that they have no basis for judgement. When there is a deeper drill down into sub-disciplines (say AI, cyber security, software engineering, etc. for computer science), these same individuals are asked to simply list the best 5-10 programs in each sub-area.

When we filled out these surveys we had no information at all on about 99% of the programs we were asked to rank. For the remaining 1% we knew only snippets. And it’s not just us. The thought that any administrator has deep insight into more than a handful of programs beyond their own is just a fallacy – it is hard enough to know every nook and cranny of your own institution.

This lack of insight on other places leads to some interesting behavior. About the time rankings surveys would come out, our mail would bring fliers, cards, buttons, magnets, other bling, and occasionally something useful like coffee – all from universities that wanted to be remembered at rankings time. Maybe that stuff works better than we think it does…but it has nothing to do with the substance of which programs are excellent or substandard.

As contrasted to feedback from university administrators, some rankings services like Niche are using student feedback for the reputational component. Plenty you could get exorcized about there, but at least students have direct experience at a place.

How are Students Using Rankings?

Is the ‘number 1’ institution the right one for every student? Of course not. Picking the right college is about much more than some single indicator of ‘quality’. Given all the flaws, do university rankings create value for students? Overall, the real value looks to be the readily accessible information on outcomes ranking services provide and the ability to compare universities on those outcomes.

Some good news: there is evidence that students are all over this point – they seem to be using the data rankings services provide more than the rankings themselves. (High academic profile students do appear to pay more attention to a university’s numeric rank relative to other students.) While the sheer number of rankings services can be overwhelming to students, several of the ranking websites have filters that allow students to dig more deeply into a university’s performance and make comparisons across universities – and that looks to be what is most important to students.

Source: Student Poll.

Some Guidelines for Students and Their Families

• Think about what is most important to you when choosing a college and let that guide your choice of which ranking to explore. Make sure you understand how the ranking was constructed and that those are the factors important to you.

• Rankings with ratings will likely provide better information on groups of universities that fit your interests. When looking for a short-term rental, the fact the owner has a 5-star rating is more important than the fact they are number 12 of 50.

• Get beyond rankings and ratings whenever you can. Use the websites to compare metrics such as graduation rate, starting salaries, cost, and debt. A few of the services allow students to determine their own weight on the various components of the rankings – a custom ranking reflecting their priorities.

• Get to the program level when you can. An average salary for university graduates tells you something about the place, but if you are interested in business school, the average salary for business school graduates is what you really want to know.

What’s Coming

Next week we explore how university rankings can influence decision-making on campus – for good or ill.

Research Assistance provided by Marley Heritier.

“Finding Equilibrium” is coauthored by Jay Akridge, Professor of Agricultural Economics, Trustee Chair in Teaching and Learning Excellence, and Provost Emeritus at Purdue University and David Hummels, Distinguished Professor of Economics and Dean Emeritus at the Daniels School of Business at Purdue.

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The headline above and several other recent stories are based on the report Talent Disrupted – College Graduates, Underemployment, and the Way Forward from The Burning Glass Institute and Strada.  In the Burning Glass/Strada study and much of the research on underemployment, a college graduate is underemployed “based on whether the majority of workers in an occupation have or are required to have a bachelor’s degree”.  For example, if more than half of those employed in the occupation “Sales” don’t hold a bachelor’s degree, then a college graduate working in “Sales” is considered underemployed.  (Other studies use the number of people working in an occupation who say you need a college degree to work in that occupation to define underemployment.)  

How do we interpret this?  A causal read might suggest something like ‘if you could have gotten this job without ever going to college, wasn’t college just a waste of time and money?’  

The strongest support for this view is that underemployed college graduates are less likely to capture the wage premium that typically comes with a college degree and may compromise their future earnings potential given their first job does not fully utilize their skills.  In the Strada/Burning Glass study, graduates employed in college-level occupations show an 88% earnings premium over high school graduates, while the earnings premium for underemployed college graduates is 25%.   Beyond earnings, underemployment has been associated with a variety of negative health and social outcomes including depression, mental well-being more broadly, and personal relationship issues.

While some college graduates do end up flipping burgers and staffing coffee bars, was college really a waste of time for half of our graduates?   We’ll dig into this and explore several critical questions. Is underemployment a new phenomenon?  How severe is the problem? Is it persistent? And ultimately, why are college graduates underemployed?

History, Severity, and Persistence of Underemployment

While the recent focus might suggest otherwise, there is nothing new about underemployment.  As defined above, the proportion of recent college graduates underemployed has hovered between 38% and 48% for decades.   Notably, these numbers are considerably lower for all graduates, and the underemployment rate gets worse immediately after a recession.      

Source: Federal Reserve Bank of New York

The Burning Glass/Strada study take a deeper look at the severity and duration of underemployment.  They find 52% of college graduates are employed in a job that has been classified as not needing their degree.  Most disturbing is the finding that almost 9 out of 10 of those underemployed are “severely underemployed” – working in jobs that typically require only a high school education or less.  (The remaining 12% are moderately underemployed - working jobs that require some education beyond high school (associate degree, etc.), but not a bachelor’s degree.) 

The Burning Glass/Strada study finds that underemployment persists for long period, and this state persists for many years after graduation – 73% remain underemployed after 10 years.  But another  study found underemployment was “a temporary phase for recent college graduates as they transition to better jobs after spending some time in the labor force” – a very different situation.

Trying to put the severity of the issue in perspective, we think the technical definition of underemployment is somewhat problematic: while 51% of the jobs in a specific occupation may not require a college degree, the other 49% may!  As an example, a number of job categories including the word ‘sales’ are classified as jobs that do not require a college degree – and we have no doubt that many do not – average salaries for those classified in ‘sales’ positions range from $31,190 for those salespersons working retail sales or in gasoline stations to $146,080 for those selling commodities and financial securities.  While many jobs in ‘sales’ may not require a degree, literally hundreds of students graduating annually from our institution with degrees in engineering, pharmacy, agriculture, science, and business take jobs in highly technical sales positions.

Within the set of occupations that sometimes employ high school graduates and sometimes hire college grads, there is likely an estimable wage gradient for more years of education – the more education, the higher the salary within specific occupations - and there is some evidence for this.  Still, the college wage premium is considerably smaller for graduates in the underemployed category than overall, which suggests that a college degree is less valuable in these cases. 

Why are Grads Underemployed?

First, graduates may not be able to find a first job in the field they studied – or they may not find it immediately upon graduation.  There may be an imbalance between supply and demand, with too many graduates competing for too few jobs in the field.  This problem can be exacerbated when a job search is geographically constrained, or when trying to solve a dual career placement with a spouse/partner. 

Second, employers may post positions as available to either college or high school grads in order to expand search pools (something happening with increasing frequency).   But if given a choice they’ll still hire college grads and pay them somewhat more because they believe the college grad will perform at a higher level.  Why else would an employer ever hire a college graduate into a job that only requires a high school education – and pay a 25% premium for the overqualified college graduate?  In short, using job postings/education requirements to conclude that “workers don’t need a college degree for this job” doesn’t speak to the question of whether employers prefer a college degree holder. 

Do underemployed college grads take just any job available at the time?  The answer appears to be no.  One study found that after the Great Recession, underemployed college graduates took positions that utilized their skills at much higher rates than those without a college degree – 25% of the college graduates technically underemployed were working in physical labor/low-skill service jobs compared to over 50% for those without a college degree.  The real problem here is that when graduates who begin their job search during a recession suffer a lasting employment impact that economists call labor market “scarring”. 

Source: Abel and Dietz, NBER 2016.

A third reason for underemployment is that grads may not have the skills and capabilities needed to take a job in the field they desire due to poor advising, a weak curriculum, or perhaps a lack of effort on the student’s part while in college.  We’ve both had students who didn’t decide what they really wanted to do until they were seniors, and then went to graduate school to get the prep they could have obtained as an undergraduate. 

Looking at the data across college majors, students majoring in more quantitative fields are less likely to be underemployed.  While 23% of the students who majored in the health professions and 26% of the engineering majors are underemployed, 55% of students majoring in humanities and cultural studies and 57% of those in business majors which are not math intensive (management, marketing, HR,...) are working in jobs where more than ½ of the positions don’t require a college degree.

A final point is choice.  Students may choose employment in a field where most jobs don’t require a college degree because the job offers an opportunity to pursue personal values such as social justice or working out-of-doors.  While they may look “underemployed” to a statistician, the graduate who is pursuing a personal passion does not consider themselves underemployed.  Now the evidence is a bit mixed here with some support for the idea that if I chose a particular job because it had meaning for me (helping make the world a better place, …) or brought something else of value to me (geographic location, flexibility, …), I don’t consider myself underemployed no matter the education requirements of the job.  Other work doesn’t find such effects.

Closing Thoughts

Like many questions about college value, underemployment is complicated.   We think it is a real issue, just not one as severe as the raw statistics cited by some recent studies.

The choices students make about where to go to school, what they study, and where they take their first job do have profound implications on the cost of their education and the earnings path they start down.  To this end, the Strada/Gallup study points out the importance of career counseling, more transparency in job outcomes by major, securing an internship, etc.  And, we certainly applaud such interventions. 

That said, stepping back and considering ‘underemployment’ more broadly, while we would tell them their career earnings are likely to be lower than other majors, we aren’t ready to tell a visual and performing arts major that they won’t use what they learned in college when they enter the work world.

Research assistance provided by Marley Heritier

Finding Equilibrium” is coauthored by Jay Akridge, Professor of Agricultural Economics, Trustee Chair in Teaching and Learning Excellence, and Provost Emeritus at Purdue University and David Hummels, Distinguished Professor of Economics and Dean Emeritus at the Daniels School of Business at Purdue. 

If going to college is such a financial windfall, why has student loan debt risen so fast and with such calamitous consequences for so many families?

Some history behind the current student loan crisis

A recent article by Adam Looney and Constantine Yannelis, “What went wrong with federal student loans?” surveys the changing legal and economic landscape that gave rise to the current situation.  We highly recommend it to our readers – here is a quick summary.

The total number of borrowers and total debt exploded over the last 25 years, largely as a result of changes in federal rules on borrowing.

This isn’t the first time that student loan debt and debt defaults have risen rapidly.  In response to a previous student loan crisis, Congress passed a series of constraints on student loans in the late 1980s: prohibiting schools from accessing loans if their borrowers had systematically high default rates; limiting the share of revenue that for-profit schools could obtain from federal loans to 85 percent; and banning the use of federal student loans at institutions that enrolled more than 50 percent of their students in a distance-based or online platform.  These rules caused a dramatic decline in student loan defaults (and many loan-dependent educational institutions to exit the market!).

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But a decade later Congress changed its tune, repealing the exclusion of distance/online programs from student loans and increasing to 90 percent the share of revenue that could come from student loans plus Pell grants.  Borrowers were allowed to defer or reduce payments during military service, while attending grad school, or if unemployed.  While interest charges facing the borrower continue to mount during a payment deferment, these deferments do not count toward a poor-performing school’s default rates.  (Which if you think about it, is crazy:  the federal government says, “We’ll count non-payment against schools unless the education they offered was so bad that students couldn’t find any job and exited the workforce.”)  Finally, after 2007, caps on borrowing for graduate programs were lifted, so that students could effectively take out unlimited loans for graduate school.

What effect did looser federal rules have on borrowing?

What happened?   Well, just about what you would expect.  Beginning shortly after these changes there was a sharp rise in both the number of undergraduate students enrolling and the share of these students who borrowed to pay for school.  Combining the two, there were particularly sharp increases between 2000 and 2012 in the total number of borrowers among Black (+167%) and Hispanic (+172%) students, first-gen students (+113%), students who declared themselves independent from parents (+165%), and finally, students attending for-profit institutions (+250%) and community colleges (+290%). 

Similar patterns held with graduate program enrollment, but there the biggest increases came not from the number of borrowers but the now-astronomical tuition prices that could be funded entirely through student loans.  Again, for-profit institutions were responsible for the largest growth, an astonishing increase of 926% from 2000-2012.  But there are plenty of examples of traditional universities charging high graduate tuition prices for programs that seem unlikely to generate commensurate returns for students.

There is good news and bad news in these data.  The good news: increasing access for low income and traditionally unrepresented students can yield significant earnings increases and make the return on investment large and positive. But that only occurs if students graduate, and only if the institutions in questions provide students with an education that prepares them for higher paying jobs.    

Graphic from Looney and Yannelis, “What went wrong with federal student loans?”

The bad news: during the 2000-2012 surge in borrowing, Looney and Yannelis show the largest increases in enrollment occurred in those institutions that had the worst student loan repayment rates. They single out for-profit institutions for particular criticism, citing a variety of studies linking them to higher debt, higher default, and lower earnings after enrollment.

The effect of non-completion and institutional quality on loan performance can also be seen by examining the amount originally borrowed by students to the amount now owed.  (If you are not making loan payments, interest payments cause debt to grow beyond the initial loan amount.)  An analysis by the HEA Group shows that the growing loan balance problem is primarily concentrated among non-completers, students who take out loans but do not finish degrees and thereby fail to earn the associated wage premium.  An exception is student loans taken out for study at two-year institutions, certificate programs, and for-profit four-year programs.  In these cases, even students who complete these programs now face, on average, greater loan balances than what they originally borrowed.  In the case of for-profits, much greater!  

(An analysis that we haven’t seen, but would like to:  what is the student default rate for two-year public community colleges?  The data above lump them in with a wide variety of professional, technical, and vocational programs - many for-profit.  The return on this investment, and the associated default rate, seems particularly relevant in light of a recent push to provide entirely free access to community college education.)

That’s the past.  What’s the current situation?

It is important to note that many of the changes highlighted here reversed themselves after 2012.  Data from the College Board shows that the percentage of students who borrow for college rose steadily from 2000 (25%) to 2012 (38%), but declined each year since, returning to 2000 levels by 2023. That is, in the most recent year 75% of students didn’t take out any loans at all !

Looney and Yannelis  show that, of the minority of undergraduates who do take out loans, they borrow small amounts — on average only $6500 a year. This results in a remarkably low finishing loan balance for the typical undergraduate student: only $27,400 for a graduate from a four-year public institution ($29,400 if we include public and private four-years.)

For comparison $27,400 is just over half the price of the average new car purchased in the US, and about *one year* of earnings premium for the median college grad compared to the median high school grad.

Yes, there are many stories in the press featuring students laboring under unsustainable debt burdens. But it is important to keep in mind how unusual these cases are. Very large debt balances (greater than $50,000) are concentrated among grad students, and undergraduates who attended for-profit universities. As the remarkable chart below shows, only 10 percent of borrowers hold 47% of total loan debt, and 57% of all loan debt is held by those with graduate degrees.

Graphic taken from College Board “Trends in College Pricing and Student Aid, 2023”

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These subtleties are entirely lost on the reader of a typical scare story highlighting the student debt crisis, with higher education as a whole being found guilty by association.  Given the reversals of many of these trends, why is student loan debt still such a hot button issue?  There are four reasons.

First, the excesses of the 2000-2012 era are still with us, resulting in an accumulation of debt that peaked at $1.75 trillion before starting to decline. Student loans often come with a ten-year repayment plan, but deferments and missed payments can extend this time period for many decades. Students who made poor decisions during this period are laboring under an unrecoverable debt load.

Second, there are still bad actors – institutions who encourage students to rack up huge loans without generating sufficient value for their students to repay these loans.  Many of these are for-profit institutions, others are traditional universities operating primarily in the over-priced graduate degree space.  We’d recommend a new report out by the Georgetown University Center of Education and the Workforce. We’ll follow up on this in a later post, with some proposed solutions.

Third, non-completion of degrees is a critical issue.  Nationwide, completion rates at four-year universities have *risen* to 67%  (78% for four-year private schools, but only 46% at four year for-profit schools, and 43% at public two year schools).  And to be clear, the completion rates at “four-year” schools are actually measured six years after matriculation, with far too many of these graduates paying five or six years of tuition and other expenses, not four.  Sadly, after decades of improvement, one in three matriculants at traditional universities still do not finish their degrees.  We’ll have more on this later as well.

Fourth, the cost of college varies widely across institutions and the returns to degree vary significantly across majors.  Leaving aside the contribution of financial aid (more on this later) an excellent in-state institution charges as little as $20,000 a year for tuition, room and board, while some private institutions charge almost five times this amount.  

If one were to attend, say, Duke or Columbia University and pay $370,000 dollars for an undergraduate degree in performing arts to earn a $2000 a year wage premium over a high school degree, the financial return on that college investment isn’t positive.  In fact, at current rates, the opportunity cost of those investment dollars is about 10 times their return!

But if one were to attend a flagship public university in-state and earn an engineering or computer science degree, one would earn back the entire cost of tuition, room and board from the associated wage premium in as little as two years. 

Put another way, we believe that much of this problem comes down to a fundamental failure of financial literacy connected to college choices, including the complexity of college pricing and financial aid. In our experience, students have a very weak understanding of how their choice of institutions (and the true cost of those institutions) and majors maps into expected earnings, with a host of consequences for careers and debt.  We’ll take those issues on in future posts as well.

Next up: the underemployment problem.  Why do so many college grads work in jobs they say do not require college degrees?

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“Finding Equilibrium” is coauthored by Jay Akridge, Professor of Agricultural Economics, Trustee Chair in Teaching and Learning, and Provost Emeritus at Purdue University and David Hummels, Distinguished Professor of Economics and Dean Emeritus at the Daniels School of Business at Purdue. 

Data from the St. Louis Fed “FRED” website show that, as of July 2024, college graduates aged 25+ had an unemployment rate half (2.3%) that of high school graduates (4.6%).  While neither seems high, these numbers are taken from a period in which the labor market was very tight: lots of job openings and relatively few available workers. 

High school grads face a tougher job market in recessions

When the economy slows in a recession, the gap between college and high school graduates explodes.  During the pandemic, unemployment among college grads was very high, at 8.4%, but high school grads had an astonishing 17.7% unemployment rate (it was more than 20% for those who didn’t finish high school)!   Something similar happened during the 2008-2009 financial crisis.

Why does the unemployment rate rise so sharply for high school grads during recessions?   First, many of these workers are employed in fields like construction that experience cyclical demand.   Put simply, people stop building new houses and remodeling older houses when the uncertainty of an economic slowdown weighs on spending decisions.  From peak to trough in the 2008-9 recession, 30% of construction workers lost their jobs! The same basic pattern is true of manufacturing workers producing durable goods: cyclical downturns hit these products and these workers harder than other sectors.

Second, when deciding whether to retain or layoff a worker during a downturn, a business needs to consider the difficulty of rehiring and retraining that worker or a close substitute for them when sales improve.  For workers engaged in “routine” (easier to learn and execute jobs) it will generally be less difficult to find replacements when the economy bounces back, and therefore more sensible to lay them off in a downturn.  For workers engaging in more complex tasks, the difficulty of rehiring and retraining provides insurance against layoffs during downturns.   While routine-ness and complexity are not synonymous with low- and high-education levels, respectively, they are often highly correlated.

Source:  “Jobs Involving Routine Tasks Aren’t Growing” Maximiliano Dvorkin, 2016, https://www.stlouisfed.org/on-the-economy/2016/january/jobs-involving-routine-tasks-arent-growing

The astonishing drop in labor force participation

The unemployment rate represents the share of people who are actively looking but unable to find work.  An even better measure to illustrate differences between high school and college grads is “labor force participation”, which reports the fraction of all people in a particular category who have a job or are actively searching for a job.  In 2024, 73% of college graduates aged 25+ are in the labor force while only 57% of high school graduates aged 25+ are in the labor force - a 16 percentage point difference!

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These numbers can be greatly affected by changes in the age and gender composition of the workforce.  (Currently, there is a gap between men’s and women’s labor force participation, but 60 years ago it was a chasm, with more than 2 men for each woman in the labor force.) So, let’s zoom in on men in their prime working years (25-54) with data taken from a fascinating paper by Ariel Binder and John Bound, “The Declining Labor Market Prospects of Less-Educated Men”.  

Figure 2 of their paper shows a pronounced drop over the last 50 years in labor force participation for men without a college degree, with this drop growing larger the less education one has.

What’s driving these enormous differences, both over time, and across educational groups?

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Education and disability

Some of the variation in labor force participation is likely linked to disability. Focusing on the working age (25-64 year old) population, data compiled by the National Center for Education Statistics shows that 11 percent of high school degree holders (and 16 percent of those who didn’t finish high school) had disabilities compared to 4 percent of college grads and 3 percent of graduate degree holders.  This gap grows significantly as workers age.  For a given age level, people with disabilities are dramatically less likely to be in the workforce than those without.

Why are these rates so different?  Workers without college degrees are much more likely to hold physically demanding jobs.  These workers suffer disabling injuries at a higher rate, and physical disabilities are much greater impediments to manual work than knowledge work.  Further, access to health insurance is highly correlated with educational attainment (in 2021, the uninsured rate was almost four times higher for high school grads compared to college grads) and with lower incomes, less educated workers are less able to afford medical care out of their own pockets.

Family structure for men without college degrees

While noting the role of disability, Binder and Bound highlight the role of family structure – marital status and the likelihood of living at home with parents – in undermining less-educated men’s labor force participation.   They argue that without a family to support, and with parents providing housing and food, men’s incentives to go find a job are greatly weakened.  

The statistics are astounding.   Marital rates for men without college degrees have fallen dramatically at all age ranges.  For example, 83% of white male high school grads aged 25-34 were married in 1970 while only 38% of this group were married in 2015.  Meanwhile, the probability of an adult man living at home with a parent has nearly tripled.  These numbers look worse for younger men, for black men, and for those who didn’t finish high school.  (College educated men are much more likely to be married at a given age.)  Binder and Bound go on to show that labor force participation is strongly linked to these family structures.

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Less education, shorter lives

Low education levels are not just associated with disability; as Anne Case and Angus Deaton have shown, college graduates live longer.   In 1990, the average 25-year-old college grad could expect another 54 years of life ahead of them (that is, live to 79 years) compared to just under 52 years (or 77 total) for a 25-year-old high school grad.   Life expectancy rose steadily for both groups (but faster for the college educated) until 2010 when it slowed and then started to reverse for high school grads.  High school graduates can now expect to live nine fewer years than a college grad.  

Why this has occurred is a subject of open research, but it seems connected to a whole host of adverse outcomes for workers who don’t complete college – worse job prospects, worse family prospects, higher incarceration rates, higher sickness and disability rates, all connected to and exacerbated by the opioid crisis and the pandemic.    

Whatever the reason, pause for just a moment to re-read this sentence.  High school grads can now expect to live nine fewer years than a college graduate.  And while they are living, to have almost four times the rate of disability, be four times less likely to have health insurance, be far more likely to live at home with their parents, and far less likely to be married.  Even at a time when the labor market is tight and unemployment rates are low, high school graduates have dramatically lower labor force participation rates than college grads. And the ones who actually are in the labor force are, on average, earning much less than college graduates.

Now, can you tell us again why people think that college isn’t worth it?

Next up:  if things are so great for college grads, what’s going on with the crisis in student loan debt?

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“Finding Equilibrium” is coauthored by Jay Akridge, Professor of Agricultural Economics, Trustee Chair in Teaching and Learning, and Provost Emeritus at Purdue University and David Hummels, Distinguished Professor of Economics and Dean Emeritus at the Daniels School of Business at Purdue. 

The New York Fed maintains an excellent interactive website “The Labor Market for Recent College Graduates” where you can explore median wages for recent college graduates in contrast to high school diploma holders, compare the range of wages paid, outcomes by major, and unemployment and underemployment. 

In 1990, the median wage for recent college grads was 38% more than the median wage for a high school diploma holder.  That premium had risen to 67% by 2023, which reflected both a 10% rise in real (inflation-adjusted) wages for college grads and almost a 10% decline in real wages for high school grads. 

Wages vary (a lot) among college grads

Of course, not all college graduates earn the median wage, some earn much more and others much less:  using the New York Fed data for 2020, a 75^th percentile college degree holder was earning 233% more than the high school median, while a 25^th percentile college degree holder had only a 17% premium over high school median.  In addition, the highest earning high school grads will earn more than low earning college grads.  A study published by the Center for Education and Work at Georgetown University found that about 16% of high school grads and 28% of Associate Degree holders earn more than about half of college grads.

But one should not think that these higher paying jobs are easily available to anyone finishing high school.  Some of the high earning high school grads are employed in skilled trades, and these skills can take as long as a college degree to obtain.  For example, becoming a journeyman electrician or a skilled plumber requires four to five years of schooling and apprenticeships!  Beyond these occupations that take several years to master, some of the high earning high school grads are receiving what an economist would call a “compensating differential”, that is, higher pay for dangerous or difficult work.   With some months of training a high school grad could become a crude oil hauler and make more than $100,000 a year… sitting atop thousands of gallons of volatile fuel in heavy traffic every day.

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Much of the variation in earnings for college grads is driven by choice of majors (not choice of universities).  Looking at the “outcomes by major” tab from the NY Fed data tool:  early career engineers are the 75^th percentile types, earning twice the salary of 25^th percentile types in education, liberal arts, hospitality, or theology degrees.  Some of the variation in earnings is driven by where graduates choose to work.  The returns to college degrees in cities are much higher than they are in rural areas, where fewer firms employing college graduates choose to locate.  

And while this is very hard to measure carefully, some of the earnings variation is no doubt due to variation in the cognitive and non-cognitive abilities of graduates as well as differences in their personal traits and underlying preferences/values.  Some graduates are smarter than others.  Some graduates work harder than others. Some graduates have better networking/relationship-building skills or have stronger pre-existing social capital (i.e. family-based connections that open doors to internships and first job offers) than others.  Some graduates focus on earnings, others on raising a family, others on pursuits that are meaningful to them but not especially remunerative.   We should not think college a failure because it inspired some graduates to serve as pastors or create art or raise children or provide care for the aged.

Grad school and on-the-job experience

The comparisons above have all been for recent college grads 22-27 years old.  Mid-career the salary gaps between college grads and other workers explode, for two reasons.  First, an undergraduate college degree opens the door to graduate degrees, which can generate earnings that are, on average, three times those of a high school degree holder and much higher than those for certain professional degrees in health, law, and business.

Source:  Jonathan James, “The College Wage Premium” https://www.clevelandfed.org/publications/economic-commentary/2012/ec-201210-the-college-wage-premium

Second, while all workers earn higher wages as they gain experience, recent evidence from David Deming demonstrates that college degree holders enjoy greater wage growth from experience than do high school degree holders, even accounting for the ability of the graduate in question.  He attributes that fact to the notion that over the course of a career, the superior learning ability of college graduates enables them to master jobs of rising complexity and earnings power.  (In the figure below, the solid line represents how wages grow with experience within the same job; the dashed lines represent “between-jobs” wage growth that occurs over time when job switching.)

Source, David Deming, “Why do wages grow faster for educated workers?” 2023. https://www.nber.org/papers/w31373

Where do skeptics have a point?

All this evidence points strongly to the idea that college education is imparting a significant benefit to its graduates, something that is valued in the form of higher wages in the market place.   Still, if you were inclined to be skeptical of the value of attending college, what data might you point to?

First, after decades of rising rapidly, the college wage premium calculated over all workers (not just recent grads) has flattened out over the past ten years.   The decline after 2020 seems to be primarily driven by a post-pandemic rise in wages for high school educated workers rather than a fall in wages for college educated workers.  And the overall wage premium remains very significant:  somewhere between 75 and 80% over this entire period.  But there is no mistaking the flattening of the premium.  We’ll tackle this question, and how it relates to the expansion of college-going and increases in retention and completion rates, in an upcoming post.

Source:  Bengali, Sander, Valleta, and Zhao, “Falling College Wage Premiums by Race and Ethnicity”, 2023

Second, as we’ve noted, wages at the lower end of the earnings distribution for college grads are below those of many high school grads.  This is likely linked to the issue of “underemployment”, that is, college grads doing jobs that they could have done had they simply finished high school. The New York Fed website tracks these data and reports that a third of all college grads and over 40 percent of recent college grads fit this category: working in occupations where more than half the workers report a college degree is not needed.  That seems like a problem!  We’ll tackle this issue in a follow-up post.

Third, we cannot say with certainty from the above evidence that going to college caused wages to rise.  It might be that there is some unobserved characteristic (say, cognitive or non-cognitive ability) that both enables students to succeed in college and leads to higher wages.  True ability is notoriously hard to measure and so this is a hard criticism to refute.  (We can say that many of the highest earning professions are not available to high school grads, because lack of a college degree forecloses the option of attending graduate school.)   We’ll come back to this question of the causal returns to college in later posts, as well as the idea that students don’t actually learn anything in college but that college represents only a massive experiment in signaling true ability to employers.

Fourth, we haven’t said anything yet about the rising cost of college and whether the return on that investment is still positive. This is tricky because the eye-popping sticker prices you may have seen often have little to do with students’ actual cost of attendance. We will dig into this in some detail as well.

What have we learned? And coming attractions…

Taking all this together, it seems clear that the typical college grad earns much more than the typical high school grad, and these differences get larger as one acquires more education and gains more experience in the workforce.   Nevertheless, there are significant numbers of college grads who, for a variety of reasons, work in the jobs that also employ many high school grads, and there are also significant numbers of college grads who earn little more than high school grads. 

We think the most important questions about the value of a college education and whether universities could do much better by their students should focus on this sizeable but atypical group of underemployed graduates.  We’ll tackle this issue in the coming weeks. 

But before that, we’ll examine three questions closely related to the college wage premium.  

• How do college grads perform on measures other than salary and wages?  

• If the earnings power of a college degree is so great, why has student loan debt grown so rapidly and perilously?

• If employers are willing to pay college graduates a sizeable wage premium, why do employers also complain so much about students’ lack of preparation?  

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“Finding Equilibrium” is coauthored by Jay Akridge, Professor of Agricultural Economics, Trustee Chair in Teaching and Learning, and Provost Emeritus at Purdue University and David Hummels, Distinguished Professor of Economics and Dean Emeritus at the Daniels School of Business at Purdue.