It has long been an article of faith among conservatives that the private sector, through competition and market discipline, delivers better, cheaper and more efficient products and services than government can. In the second Trump administration, this neoliberal economic and political philosophy is a lodestar.
Project 2025, a blueprint crafted for the administration by the Heritage Foundation, recommends making Medicare’s private insurer-run plans the default option. Other candidates for privatization include Social Security, the National Weather Service, Fannie Mae and Freddie Mac, air traffic control, Veterans Affairs, the Transportation Safety Administration and the U.S. Postal Service.
Why not add colleges and universities to the list? A new book tries to make that case — but does not succeed.
In “Let Colleges Fail: The Power of Creative Destruction in Higher Education,” Richard K. Vedder recognizes that “American universities dominate the rankings of the planet’s greatest universities,” but insists that free-market principles should govern higher education. Vedder is an emeritus professor of economics at Ohio University and senior fellow at the Independent Institute, the nonprofit organization that published his book.
Vedder’s book is a paradigmatic example of how misguided and dangerous free-market absolutism can be.
The private sector, Vedder argues, thrives through the process that economist Joseph Schumpeter called “creative destruction.” Businesses that do not adapt to “changing tastes, new technology, or altered prices of productive inputs” fail, allowing markets to “reallocate resources from unproductive to productive uses.” Institutions of higher education seldom fail, however, because of government bailouts and private philanthropy, hindering the “movement of resources toward new ideas and the colleges and universities espousing them.”
Vedder believes “a growing number of young people are ‘just saying no’ to college” because they think it is not worth the cost. The reality is far more complex, a product of demographic shifts and labor market conditions, as well as changing perceptions of value. This school year, first-year enrollment grew by 5.5 percent and total enrollment surpassed pre-pandemic levels.
Vedder is correct that public confidence in higher education has fallen sharply over the past decade. But so has confidence in national institutions generally, with higher ed faring significantly better than big business and large technology companies, market discipline notwithstanding.
Vedder acknowledges, but only once, that “in the private sector there is a profit bottom line that is non-existent in higher education.” He then ignores this profoundly consequential difference.
He asserts that the case for government funding of education “is problematic,” and he makes recommendations for colleges and universities based on excessively effusive claims about the virtues of private enterprise.
Vedder apparently believes that “the indentured servitude of the seventeenth and eighteen centuries was an ingenious solution to a major financing problem.” He maintains, without mentioning the predatory practices that led to the Savings and Loan Crisis and the Great Recession, that competitive markets “keep even the most prudent and profitable banks in line.”
Vedder suggests that students who excel academically should pay less than those who do poorly, and that those who get degrees in majors that pay less than what high school graduates earn should not receive large financial aid packages. He appears to endorse hiring students rather than unionized workers to mow grass and paint buildings. Vedder attributes administrative “bloat” in significant part to increases in diversity, equity and inclusion staff, but ignores expenses for mental health, fitness centers and luxurious housing, changes made at the behest of customers (i.e., students and parents).
“Why,” Vedder asks, “are universities given special [tax exempt] status not given to other providers of useful services such as used-car dealers or fast-food restaurants?” He leaves readers wondering whether he also advocates removing tax exempt status from churches, hospitals, foundations and many other nonprofits, ranging from the American Cancer Society and Human Rights Watch to his own Independent Institute.
Although Vedder acknowledges that higher education might have “positive externalities,” for example, by raising living standards, he emphasizes what he sees as the negative externalities, such as “declining objectivity” in the press and underemployment for graduates “with woke majors like gender studies.” He finds for-profit universities “more in keeping with the American tradition with respect to the production of goods and services,” despite their history of predatory recruitment tactics, high costs and poor student outcomes.
Vedder recognizes some innovation and variety in higher education, pointing to new universities, zero-tuition schools, religious institutions, online degree programs and massive open online courses. If these innovations have not caught on widely, one might conclude that the market has spoken.
Instead, Vedder concludes that government support for higher education is a substantial impediment to innovation and that “American universities in the long run would benefit from the federal government stopping its involvement.” Nowhere does he consider seriously the catastrophic impact that ending federal support for university research would have on America’s scientific, technological and economic success, or how ending federal student loans would limit poor students’ access to higher education.
Many of Vedder’s reform proposals, such as outsourcing non-educational activities from food service to information technology and finding ways to utilize campus buildings year-round, are already in place on many campuses or have been tried. Others, such as using income-share agreements to fund a student’s education, warrant further study. Some, such as his endorsement of Adam Smith’s “enormously perceptive” suggestion that students should pay faculty directly, should not be taken seriously.
Ultimately, Vedder concedes that “universities are the worst form of providing advanced education to the citizenry — except all others.” On this much, at least, we can agree.
Glenn C. Altschuler is the Thomas and Dorothy Litwin Emeritus Professor of American Studies at Cornell University. David Wippman is emeritus president of Hamilton College.