Better Investment in Education
Brian Gongol

Is education a good tool of economic development?
Proponents of different economic development strategies tout a variety of studies for and against the use of education as a tool of economic development. But empirical data is limited in that it isn't alway capable of identifying causal relationships. Empirical studies are forever limited by the imaginations of those conducting the research and by the limitations of econometric analysis.

But education is clearly one of the most significant sources of the difference between the quality of life in the Western world today and the quality of life in the same places in 1800. The efficient transfer of the accumulated knowledge of all of those lifetimes in between forms the foundation for a profound source of improvement in living standards.

Education and personal self-sufficiency
Almost as important as its value on the large scale, perhaps the most critical value of education is in its ability to make individuals self-sufficient. Education enhances individuals' ability to hold jobs and carry out the functions of their daily lives, like voting, paying bills, driving safely to and from work, obtaining medical care, and making purchases.

While an eight-year education may have sufficed to make individuals self-sufficient in 1900, we are today in a period that makes it difficult to achieve self-sufficiency without a high-school diploma. High-wage, high-salary jobs are almost out of reach to those without an associate's or bachelor's degree from college. An increasingly complex economy requires an increasingly complex set of skills and learning abilities in order to synthesize knowledge and apply it in a changing environment.

Thus it becomes incumbent upon the state to ensure the maximum possible access to the educational tools that help people avoid dependency. France has experienced a profound challenge dealing with a class of people who have become dependent upon the state (thanks to government policies discouraging work), and the result hasn't been just political -- it has turned violent on more than one occasion.

What about the mobility of labor?
Some believe that education shouldn't be the first priority of the state, especially since it is mobile. People can learn in one place, then move somewhere else. But so what if educated labor is mobile? It also agglomerates. But we accept some losses with every investment -- we don't stop generating electricity because 40% to 60% of the energy inputs are lost to transmission. So it is with education -- even if some people move away, the attendant benefits to those who stay form the cause for state action.

Maximizing return on our investments in people
What is strangest is how people who are willing to offer bribes of $10 million, $40 million, and even more for specific projects balk at the opportunity to use the same amount to enhance the self-sufficiency of taxpayers -- who count on the state for educational resources specifically because they individually lack the market power to form and sustain educational institutions.

In 2006, Iowa Governor Tom Vilsack proposed a $95 million incentives package to help keep the Maytag appliance factory in Newton open. But in the 2006-07 class year, in-state tuition and mandatory fees for students at the University of Northern Iowa cost $6,112. Thus, for the same amount that the governor offered to subsidize 1,800 jobs for a single firm in the private sector, one could have paid for 15,543 student-years of in-state university tuition -- or the equivalent of 3,886 four-year degrees. Even assuming that state appropriations cover about half of the true cost of education for in-state residents, then the same amount proposed for incentives for Maytag could have given almost 2,000 Iowans free college educations.