The Public Role in Higher Education

Abstract

Most students attending colleges and universities, in the U. S. and the rest of the world, attend public institutions. This is a bit of a puzzle for economists, as it is clear that higher education provides private benefits to those who acquire it. This paper evaluates a number of arguments for publicly provided and publicly supported (via both nonprofit provision and direct support of students) higher education. We find that the arguments for nonprofit provision, whether public or private, are powerful for most undergraduate education and for basic research. We suggest that there are strong equity reasons for public support of higher education for lower-income students, and that general public support may have good efficiency properties as well. We also show that the common system of tiers in public higher education, with flagship universities, regional campuses, and community colleges, is economically efficient under plausible assumptions.