The Economics of American Higher Education.

This book is a collection of papers that examine the role of higher education in economic development in the U.S. Since the editors examine macroeconomic development in a related book, American Higher Education and National Growth, the papers included in this volume focus on microeconomic issues.

The book begins with a preview chapter written by the editors. In addition to outlining the remainder of the book, the editors give a brief and accurate summary of the difficulties facing higher education. The remainder of the book is divided into four sections: "The Missions of Higher Education," "Higher Education as Personal Investment and Advancement," "Higher Education and Regional Growth," and "Higher Education as Social Investment for Equity."

The first section, "The Missions of American Higher Education," contains two papers. The first, by James C. Hearn, addresses what he claims is an emerging paradox in American higher education. This paradox is between popular perception and organizational reality: the public continues to believe that teaching is the cornerstone of American higher education while in reality teaching is being degraded by an increasing emphasis on research. Hearn's article is scholarship at its finest and is enough to make the book worth owning. This reviewer can think of no better place to start a serious self examination in academe of what constitutes an appropriate balance between teaching and research. The second paper in this section is by G. Edward Schuh and Vernon W. Ruttan. This paper traces the history and evolution of the research and service missions of American institutions of higher learning. As an interesting point of departure, the authors characterize the research and service missions of institutions of higher learning as parts of the human capital production process. The other highlight of the paper is the convincing rationale they offer for the need for social science research. In short, the authors argue that the demand for social science research is derived primarily from a demand for institutional change and improvements in institutional performance.

The second section, "Higher Education as Personal Investment and Advancement," begins with a paper by William E. Becker. This paper gives a thorough and refreshingly candid overview of the methodological issues facing anyone who wishes to estimate the value of college degree. The paper also addresses the well-known (and now largely discredited) thesis of Richard Freeman's The Overeducated American as well as the human capital building and screening functions of post secondary education. The second paper in this section is by Kevin M. Murphy and Finis Welch. This paper is a traditional wage study of college graduates that documents how the returns to higher education have changed between 1963 and 1986. The primary finding is that the returns to higher education fell through the seventies then rebounded strongly through the eighties. The authors speculate that although demographics may have been a contributing factor, there is little doubt that the demand for college educated workers also rose dramatically through the eighties. The third paper in this section is by Mark C. Berger. Rather than look at the returns to higher education in the aggregate, this paper examines the private returns to specific majors. Drawing on several data sources, the author estimates the impact on relative earnings of choosing majors in business, liberal arts, engineering, and science while controlling for the problem of self-selection bias. From the analysis a very interesting result emerges: students that choose the category with the highest starting pay (engineering) suffer the slowest earnings growth, yet liberal arts graduates, which have the lowest starting pay among the categories examined, have the highest earnings growth. The last paper in this section is by Elchanan Cohn and Terry G. Geske. Unlike the preceding two papers, in this paper the authors examine the private nonmonetary returns to getting a college education. The authors review the literature to make a rather convincing case that nonmonetary returns are significant and should not be overlooked by public policymakers.

The third section of the book, "Higher Education and Regional Growth," contains four papers. The first paper is by Tim R. Smith and Mark Drabenstott. The authors review the literature which attempts to uncover links between higher education and state and regional growth. The authors conclude that: 1) business location decisions appear to be influenced by the presence of institutions of higher learning, and 2) an examination of the history of the land-grant system clearly reveals that institutions of higher learning contribute to regional economic growth. The second paper is by Larry L. Leslie and Sheila A. Slaughter. In this paper the authors review the results of over seventy studies that examine the economic impact of institutions of higher learning on local communities and regions. Their most important finding is that the effect an institution has on the local economy depends critically on the type of institution and the nature of the local economy. They also argue that since studies focus on what is observable and measurable, they tend to understate the full long-term impact of symbiotic relationships between institutions and local businesses. The third paper is by Rebecca Dorsett Goodman and William C. Weiler. This paper attempts to measure the state-wide economic impact of federal grants for the University of Minnesota. Using a two-region input-output model the authors find that state-wide employment rises by 250% of the direct employment of research personnel. The last paper in this section is by Roger L. Geiger. This paper examines the trend toward promoting formal linkages between private industry and university research. In addition to chronicling the history and outlining some of the benefits of this phenomenon, the author points out some of the potentially damaging aspects of an entrepreneurial university.

The last section of the book, "Higher Education as Social Investment for Equity," contains only one paper by Melissa S. Anderson and James C. Hearn. In this paper the authors look at how three types of benefits resulting from attending college (educational, occupational, and enhanced income) relate to the socioeconomic factors of status, gender, and race. They find that students from lower socioeconomic backgrounds have the most to gain from higher education, but that it is these very same students that are the least well served by higher education. Interestingly, higher education seems to have more of a positive impact on the women and minorities than lower class white males.

This book has much to recommend it. The papers are well-written and well-researched. The bibliographies are very rich. Any economist with an interest in the economics of higher education should make this book a part of his or her collection.