Deirdre McCloskey argues that to flourish we need market-tested innovation. Ivy League universities are increasingly funded through semi-automatic government funding, avoiding a market test, and allowing the growth of administrative bloat, the monopolization of faculties by the ideological left, and the canceling of any surviving voices that are insufficiently politically correct and woke.
(p. A15) A social-media post last month from the Trump administration triggered fainting spells throughout the academy. The National Institutes of Health, which funds biomedical research, announced that it is reducing the amount of money the government pays grant recipients for overhead costs.
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The labor economist Richard Vedder thinks this is exactly the shock to the system that higher education needs. “Of course the universities with heavy research grants are going crazy over this,” he told me. “But if you talk to anyone at a university, you know that those overhead costs are vastly inflated compared with the true marginal cost, or extra cost, to the university doing the research.” He added that many schools collect so much overhead money that they give some of it back to researchers as an incentive to apply for more research grants. “It’s kind of a con game, all based on false assumptions and faulty economics,” Mr. Vedder says. A nonnegotiable uniform rate would be far more efficient.
In a . . . book, “Let Colleges Fail: The Power of Creative Destruction in Higher Education,” Mr. Vedder argues that one of the biggest problems with higher ed today is that colleges aren’t sufficiently disciplined by market forces. The result is too much administrative bloat subsidized by the government. His subtitle is a reference to the free-market economist Joseph Schumpeter (1883-1950), who described capitalism as a process of “creative destruction” whereby markets reallocate resources from unproductive to productive uses. “It’s worked pretty well for American business,” Mr. Vedder said. “Why don’t we have it for higher ed?”
One problem, the book explains, is that universities are essentially wards of the state. “Colleges and universities are dominated by people operating outside of the normal profit-oriented private market economy,” Mr. Vedder writes. By his calculations, the productivity of university employees over the past 50 years has declined not only in comparison with the average U.S. worker but also in absolute terms. It took more faculty and staff to educate a college student in 2021 than it did in 1972.
For the full commentary see:
(Note: ellipses added.)
(Note: the online version of the commentary has the date March 4, 2025, and has the title “Trump Plans to Shake Up Higher Education.”)
The Vedder book discussed by Riley is:
Macedo, Stephen, and Frances Lee. In Covid’s Wake: How Our Politics Failed Us. Princeton, NJ: Princeton University Press, 2025.
McCloskey discusses market-tested innovation in:
McCloskey, Deirdre N. Bourgeois Equality: How Ideas, Not Capital, Transformed the World. Chicago: University of Chicago Press, 2016.