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The Future of Higher Education?

Posted on November 5, 2010May 5, 2026 by John Payne

George Leef of the Pope Center for Higher Education Policy has an interesting review of self-described progressive Anya Kamenetz’s DIY U, which argues that higher education would be vastly improved by a greater variety of options, rather than forcing everyone into the four-year college model:

The latter half of DIY U is about the many ways in which innovators (“edupreneurs”) are trying to give students new and better options. Established educational institutions want to sell students a big (and usually very expensive) bundle of education and credentials, but innovators are trying to unbundle those services and sell them separately at much lower cost–or even giving them away.

For example, there is Western Governors University, an online university that costs students less than $6,000 per year. WGU was formed in 1999 and instead of simply following the usual procedure of organizing academic departments in the traditional fields, officials convened a council of employers and asked, “What is it that graduates you’re hiring can’t do that you wish they could?”
[…]
All of this is about unbundling. If you walk into a grocery store wanting just one or two items, you can get just those items. If you want just one of two items of education, you shouldn’t have to buy a whole cart-full of courses. Kamenetz likes the idea that individuals should be able to customize education to suit their particular needs and desires. So do I.

One big problem, though—in a society that has become credential-crazed, how do people who get their education in unstructured, informal ways (I thought of writing “non-traditional” but when you think about it, this idea is very traditional, going back to the ancient Greeks) show that they have a base of knowledge? College degrees don’t necessarily betoken any learning, but they’re better than trying to explain that you got a lot out of the various topics you studied online when the employer insists on a B.A.

“Accreditation and assessment, the source of the ‘sheepskin effect’” she writes, “is proving the toughest nut to crack.” Innovation may crack it, though. Today, students can compile and publish a portfolio to demonstrate their knowledge and capabilities by using free software like WordPress and Drupal. Since the college degree is no longer a very useful screening mechanism, if a few employers would start saying to applicants, “Don’t show us where you’ve taken courses, but instead show us evidence that you’ve learned something that would be useful here,” the dam may break quickly.

Notice what is absent in this vision of the future of higher education. It involves no government subsidies, regulations, or even institutions. What makes it work is voluntary cooperation and the free market’s fabled discovery process. Students will learn more at far less cost. Laissez-faire will produce enormous benefits if existing institutions don’t strangle the educational freedom movement in the cradle.

Of course, the “traditional” college is primarily a product of tremendous government subsidization. Very few people attended colleges prior to World War II, but attendance rates skyrocketed in the late 1940s through the 1960s with soldiers using G.I. Bill funding to obtain degrees, and their Baby Boomer children — often funded by the newly created Pell Grant — following soon thereafter. Attendance rates continued to grow to the present, but now many of those who attend college never finish, and the focus of college has shifted from a liberal education to a form of halfhearted career training. Ending these subsidies could put emphasis back on older forms of education, like apprenticeships and trade schools, which could focus on practical arts without betraying their stated missions.

Musings on the Hotel Tax Vote

Posted on November 4, 2010May 5, 2026 by David Stokes

It may have been a very small issue, but some of the best news out of Tuesday’s election was the defeat of hotel taxes in Clayton, Richmond Heights, and St. Peters. Hotels in Clayton and Richmond Heights already have two taxes imposed on room stays — on top of the local sales tax. These are the same two taxes imposed on hotel rooms throughout the city and county. The reasons why I think the St. Louis hotel tax pool works are described in this article.

I applaud the citizens of these three cities for rejecting the proposed taxes. It would have been so easy for the majority to vote to increase somebody else’s taxes — that somebody being any unknown travelers staying in the hotel. Whatever the reason for the defeat, this is good news for fiscal discipline. Now these cities may have to make the tough budget choices that other cities are making, rather than just raising taxes and moving budget items around so they fit under the heading of “tourism.”

Rapping the Recession

Posted on November 3, 2010May 5, 2026 by John Payne

Back in January, a rap video contrasting the different business cycle theories of John Maynard Keynes and Friedrich Hayek produced by George Mason University’s Russell Roberts and filmmaker John Papola appeared on YouTube, where it has since garnered more than 2 million views. Keynes insists that economic downturns are caused by a lack of aggregate demand brought on by the “animal spirits” of consumers and producers, while Hayek maintains that an excess of credit from the central bank encourages malinvestment in a number of sectors.

Roberts and Papola are producing another video with the same actors playing Hayek and Keynes, and applying their theories to the present situation. You can catch a preview of the video, along with a short interview with Roberts and Papola from a conference sponsored by The Economist magazine, embedded below.

With the Right Strategy, STL’s New Developer in Chief Could Move City Forward Quickly

Posted on November 2, 2010May 5, 2026 by Audrey Spalding

The Post-Dispatch reports that Barbara Geisman is stepping down from her post as Saint Louis’ deputy mayor for development. Geisman has held that post since Mayor Francis Slay appointed her in 2001.

Already, people are speculating about who will fill the vacant spot, and with good reason. The position of deputy mayor for development is a powerful role. Whoever fills it will have significant input on how the city encourages and attempts to attract growth, and that person will help oversee the operations of the Land Reutilization Authority (LRA). With more than 9,000 properties, the LRA is the city’s largest landowner.

I look forward to seeing who will end up filling Geisman’s post. Saint Louis has the opportunity to take a new, more successful approach to promoting economic development. As Thomas Duda has pointed out on this blog, the city has the unfortunate habit of subsidizing, and re-subsidizing the creation of vacant commercial and residential space that no one wants. Those attempts to encourage new development within city boundaries are an extremely expensive betting game that Saint Louis frequently loses.

I hope that the new deputy mayor for development will take a more organic approach to development, by making it easier for private individuals to develop real estate in the city (although not with tax dollars). Revamping the administration of the LRA is one way that the city could promote economic development at little to no cost.

Once per month, the LRA meets to accept, reject, or defer offers from individuals who wish to purchase LRA property. So far during 2010, there have been more than 400 offers to purchase LRA property. Some of these properties have remained vacant for decades, yet only about 140 properties were sold. The rest of the offers were either countered (the LRA frequently asks for higher offers), deferred (the LRA may delay its decision), or rejected. I should note that counteroffers and deferrals can operate effectively as a rejection — the potential purchaser may not have enough money to meet the agency’s counteroffer, or the deferral may be indefinite.

The chart below shows roughly the result of all of the offers that the LRA received this year from people wanting to purchase property. As you can see, a minority of offers have been accepted this year.

I want to focus only on the number of times that the LRA has rejected offers to buy its property. This year, offers to purchase roughly 80 different LRA properties were rejected, some several times.

For example, we can look to 2925 Union Blvd., a property that three different people have attempted to purchase in recent months — but every offer was rejected. Two of those people bid the LRA’s asking price of $2,000 and still were rejected. The third bid $1,500, a price that the LRA could choose to accept, but didn’t. The reason for these rejections — where people are asking to pay to purchase vacant property that costs the city money to maintain — is unclear. Furthermore, by rejecting these offers, the LRA also rejected revenues of at least $100,000 in property sales revenue. Had the properties been sold, the city would receive property tax revenue from the new owners, and the city would no longer have to pay to maintain the properties.

One reason the LRA may reject offers today is that the agency hopes it can attract a developer to remake the entire area if it first amasses a large amount of property. Instead of waiting for a hoped-for developer of the future who may have a chance at redeveloping entire blocks of the city (even if the hypothetical developer shows up, the proposed development will likely cost the city millions and perhaps never even materialize), a better strategy for Saint Louis would be to let private individuals who want to purchase LRA property do so.

The city actually tried the strategy of freeing up LRA property in 1989, by reducing the price of side lots (smaller than 40 feet wide) to a maximum of $135. The pilot side lot program was limited to just a 16-block area within the city. During a two-month period, six side lots were purchased. Throughout the rest of the city, which has an area of more than 60 square miles and encompasses thousands of city blocks, only 17 side lots were sold during the same time period. The LRA executive director at the time, Michelle Duffe, called these numbers inconclusive. I’d say they were evidence of a small-scale success.

The new deputy mayor for development should free up LRA property to potential buyers. City revenues would increase, and we’d see more local development. If he or she wants to take a small but significant step forward, one way would be to push the LRA to implement a side lot program similar to the one tried in 1989. The city has everything to gain, and little to lose.

Real Estate Development With Public Dollars Provides No Demonstrable Net Benefit

Posted on November 2, 2010May 5, 2026 by Thomas Duda

Missouri’s Fifth Senate District — which includes downtown St. Louis — was the recipient of nearly $1 billion in state monies between 2000 and 2010, according to data from the tax credit tool at Show-Me Living.

This amounts to a total of $171.28 for each Missouri resident spent on tax credit projects in just one of the state’s 34 Senate districts.

If we look in greater detail at the more than $600 million expended by the state for “Redevelopment” in the Fifth Senate District, we see that $530 million was devoted to historic preservation.

Of the state historic preservation spending in the Fifth Senate District, $375 million went to projects that also received the Federal Historic Preservation Tax Credit. Missouri’s preservation tax credit reimburses 25 percent of project costs, and the federal tax credit reimburses 20 percent of project costs, so we can estimate total Federal Historic Preservation Tax Credit spending in Missouri’s Fifth Senate District at $300 million.

This amounts to $0.98 in federal funds spent on historic preservation in Missouri’s Fifth Senate District for every resident of the United States.

When we consider local tax increment financing (TIF), using data from the Missouri Department of Economic Development’s 2009 TIF Annual Report, we can account for an additional $600 million in taxpayer funding for development in St. Louis city. As we can see in the chart below, as of 2009, less than $100 million of this spending has been paid for.

Given current estimates of St. Louis city’s population from the American Community Survey, TIF expenditures amount to $1,768.61 for each city resident.

The total amount of public funding for real estate development in St. Louis city may be unknowable, given the complex interplay between various modes of taxpayer financing. Data exists for Community Improvement Districts, federal grants, state and local industrial development bond financing, local real property tax abatement, and other public programs, but is much harder to aggregate.

A person almost has to go to law school to appreciate how development in St. Louis works. For those of us living here without the benefit of a legal education, though, it is readily apparent that, although state and local governments spend lots of taxpayer monies on real estate development, no one is providing quantitative evidence that the benefits of these expenditures exceed the costs.

Tax Incentives Are Not Necessary for Economic Development: An Example

Posted on November 2, 2010May 5, 2026 by Christine Harbin

I spend a lot of time arguing against strategies for economic development that have more costs than benefits. Something that I have been meaning to do is highlight examples of economic development occurring successfully in the absence of tax credits.

After reading my editorial about tax credits that ran yesterday in the Springfield News-Leader, a software entrepreneur based in Springfield emailed me. He wrote the following, which I particularly like:

I have directly created 320 new jobs over a 27 year period and none of these jobs were created because of tax credits. With or without tax credits we would still have created the jobs. The jobs were created because of the much larger business opportunity and return realized and expected, not because of tax credits.

If the state and local government facilitated a tax environment that was low and broadly based (i.e., didn’t favor certain parties over others), then more businesses would be able to achieve this same kind of success. As a positive consequence of such policy, businesses wouldn’t need to seek the favor of the government because they would be successful and viable on their own merits, not because they were propped up by government incentives.

There are several reasons why the government can’t identify business opportunities and future successes as reliably as the unrestricted free market. In particular, the government is slow to react to changes in the economic environment because it is so bogged down in bureaucracy. Additionally, the government is influenced by special interests that have an incentive to maintain the status quo and to tilt the playing field in their favor. Plus, the government does not have special access to perfect information. Just as government officials do not know the socially optimal mix of any set of products and services, they do not have special predictive power.

Examples like this demonstrate that incentives like tax credits are not a necessary criterion for economic development. Quite the contrary — true economic development occurs independent of subsidy.

“Government Should Be Operated Like a Business,” Part Two of Two

Posted on November 2, 2010May 5, 2026 by Christine Harbin

In my last post, I argued that inherent differences between government and business prevent government from operating like a business. In this post, I will argue that the examples the author provided do not actually support his argument. Instead, they illustrate how government action restricts businesses.

First, the author villainized businesses:

Businesses, unlike government, like to make profits and many of them are not reluctant to increase their rates or their retail prices.

In the private sector, the act of raising prices is not malicious. Companies incur costs that they have to cover, and they have customers whose willingnesses to pay is largely dependent on price. If a company raises its price too high, then individuals will stop voluntarily buying its product or service. As a consequence, the company will not be able to cover its costs, and then it will go out of business.

Next, the author provided several examples of companies that tend to go out of business when they raise their prices:

Detroit says the new model of car will cost $200 more; the dealer doesn’t like to hold his sales price at last year’s level. More uninsured people show up in hospital emergency rooms; hospitals increase costs to those with insurance. Utilities have to pay more for natural gas and coal to keep the generators spinning; they get a fuel adjustment rate increase and pass along the costs to consumers.

The problem with these examples, however, is that the government has already intervened in these particular markets to an enormous extent. As a consequence of this government intervention, private businesses have much less control over the price they charge to consumers, or the costs of their materials and labor, which causes them to go out of business. These particular examples showcase government-created problems, and the solution is less government — not more.

The auto industry is a prime example of high government intervention. Remember last year’s auto bailout? We don’t refer to GM as “Government Motors” for no reason.

The health care industry is another example of how government intervention has impeded private business. That’s because the government has mandated that hospitals treat everybody who walks through the emergency room doors, regardless of their ability to pay. This level of intervention doesn’t occur in most other industries. If a person shows up at a restaurant and is unable to pay, the government doesn’t mandate that he is served a meal. If a person walks into a clothing store and can’t afford to buy anything, the government doesn’t mandate that she walk out with a new jacket. Quite on the contrary, somebody who tried to walk out with a product without paying for it would get thrown in jail for shoplifting.

Furthermore, the fact that hospitals increase costs to those with insurance is a consequence of this government intervention — and the solution is less government, not more. As I have discussed previously on Show-Me Daily, in order to stay in business, hospitals have to make up for those patients who cannot afford to pay more than the government-mandated price.

The author’s gas station example provides a third illustration of how government intervention can restrict a business. He wrote:

When wholesale prices go up, business often pass on those higher prices to the consumers. We don’t know of many gas stations that are paying higher wholesale prices for fuel this year than last year that are still selling gas at last year’s prices, or the year before. We’ve seen old prices on some pumps in a few gas stations. But weeds are growing around those pumps and the sign doesn’t light up anymore, and the convenience store is empty.

He leaves out the fact that the government levies taxes on gasoline that can greatly affect the price at the pump, and also limit the control that a gas station owner would otherwise have to set a price that will cover his costs and that consumers will be willing to pay.

The gasoline tax in Missouri is 35.7 cents per gallon (including the federal tax of 18.4 cents per gallon). Because the tax rate applies per gallon, rather than as a percentage of the price, it means that the amount of taxes paid as a percentage of price is higher when the price at the pump is low. For example, if the price at the pump were $1.75, the percentage paid to the government would be 20.4 percent. If the price at the pump were $3.35, then the percentage paid to the government would be 10.7 percent. The price at the pump in Saint Louis is $2.65 right now, which means that more than 13 percent of that price constitutes taxes paid to the government.

“Government Should Be Operated Like a Business,” Part One of Two

Posted on November 1, 2010May 5, 2026 by Christine Harbin

In an editorial on Missourinet, Bob Priddy critiques the statement “Government should be operated like a business.”

On a high level, running government like a business is a good principle. Government should be as efficient, accountable, and transparent as possible because taxpayer monies are at stake. However, the statement “Government should be operated like a business” is a gross oversimplification. I agree with the author that there are many differences between businesses and government that make it nearly impossible for the government to operate like a business — but they are not the differences that the author describes.

He writes:

Here’s one big, really big, difference. When income slows, or when expenses rise, businesses can and often do increase their prices. Businesses, unlike government, like to make profits and many of them are not reluctant to increase their rates or their retail prices.

I think that the converse statement has more truthiness: Governments, unlike businesses, like to run a deficit and are not reluctant to increase taxes.

Here’s a different difference that the author overlooks: In the private sector, consumers decide to patronize businesses voluntarily, whereas they are required by law to pay money to government. If a person thinks that a price of a good or service is too high in the private sector, then she will choose not to pay. If a person thinks that taxes are too high, well, too bad, she has to keep paying them or get thrown in prison.

Here’s another difference: Because businesses face competitive pressures, they have an incentive to innovate their products, improve their services, drive down prices, become more efficient, etc. Government doesn’t experience this kind of competitive pressure, so it does not have an incentive to do those things.

Urban Planners Give Award to St. Louis, Part 2

Posted on October 29, 2010May 5, 2026 by David Stokes

A few days ago, the American Planning Association (APA) named Wydown Boulevard, which runs through Clayton and the city of St. Louis, as one of the great streets in America.

This post I wrote three years ago is part one of the series on urban planning that I’m continuing today. The theme of this post is different from the first, because although planners had almost nothing to do with the success of the Delmar Loop, they certainly did with Wydown Boulevard. But the planning that shaped Wydown was the work of private industry and individuals, not the government. I want to make that clear.

“Planning” today is intimately linked in most people’s minds with government oversight and regulation. At the APA’s website, both the “What is planning?” and “What do planners do?” questions immediately begin with a reference to government.

Many of the subdivisions that were built along the St. Louis central corridor (Wydown is in the heart of that corridor) were built in a unique, intensely private style found throughout St. Louis. That includes private roads, sewers, and other infrastructure paid for by internal assessments and fees from property owners, not by general taxes for government provision of those services. I don’t think Wydown was ever a private road, but many of the neighborhood streets along it were (some still are), and I believe the streetcar that served Wydown was likely a private company, too, although I have been unable to find conclusive information about that particular streetcar that reveals whether or not it was actually private.

As the APA itself says:

Subdivisions along trolley line originally developed as “private places,” characterized by large 1- to 3-acre lots with traditionally designed single-family estates, mature trees, and native plants

Yes, some of the more recent cited reasons for issuing this award involve government planning — the bike lanes, for example. But the neighborhoods of St. Louis’ central corridor have historically been some of the most privately operated urban subdivisions in the country. Wydown is a beautiful street that I have enjoyed traveling many times. It deserves an award for planning. But it’s important to remember that it was private planning, not government planning, that made Wydown what it is.

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