For a New Liberty: The Libertarian Manifesto

With the exception of the effects of compulsory attendance laws, the same strictures we have levelled against public schools can also be directed against public higher education, with one noteworthy addition. There is increasing evidence that, certainly in the case of public higher education, the coerced subsidy is largely in the direction of forcing poorer citizens to subsidize the education of the wealthier! There are three basic reasons: the tax structure for schools is not particularly “progressive,” i.e., does not tax the wealthier in greater proportion; the kids going to college generally have wealtheir parents than the kids who do not; and the kids going to college will, as a result, acquire a higher lifetime working income than those who do not go. Hence a net redistribution of income from the poorer to the richer via the public college! Where is the ethical justification here?

Professors Weisbrod and Hansen have already demonstrated this redistribution effect in their studies of public higher education in Wisconsin and California. They found, for example, that the average family income of Wisconsinites without children in Wisconsin state universities was $6,500 in 1964-1965, while the average family income of families with children at the University of Wisconsin was $9,700. In California the respective figures were $7,900 and $12,000, and the subsidy disparity was even greater because the tax structure was much less “progressive” in the latter state. Douglas Windham found a similar redistribution effect from poorer to wealthier in the state of Florida. Hansen and Weisbrod concluded, from their California study:

. . . on the whole, the effect of these subsidies is to promote greater rather than less inequality among people of various social and economic backgrounds by making available substantial subsidies that lower income families are either not eligible for or cannot make use of because of other conditions and constraints associated with their income position.

What we have found true in California — an exceedingly unequal distribution of subsidies provided through public higher education — quite probably is even more true for other states. No state has such an extensive system of local Junior Colleges as does California, and for this reason, no state has such a large percentage of its high school graduates going on to public higher education. As a result we can be rather confident that California has a smaller percentage of its young people receiving a zero subsidy than do other states.22  [p. 139]

Furthermore, the states, in addition to putting private colleges into financial jeopardy by their unfair, tax-subsidized competition, enforce strict controls on private higher education through various regulations. Thus, in New York State, no one can establish any institution called a “college” or “university” unless he posts a $500,000 bond with the state of New York. Clearly, this severely discriminates against small, poorer educational institutions, and effectively keeps them out of higher education. Also, the regional associations of colleges, through their power of “accreditation,” can effectively put any college that does not conform to Establishment canons of curriculum or financing out of business. For example, these associations strictly refuse to accredit any college, no matter how excellent its instruction, that is proprietary or profit making, rather than trustee-governed. Since proprietary colleges, having a far greater incentive to be efficient and to serve the consumer, will tend to be more successful financially, this discrimination places another heavy economic burden on private higher education. In recent years, the successful Marjorie Webster Junior College in Washington, D.C., was almost put out of business by the refusal of its regional association to grant it accreditation. While one might say that the regional associations are private and not public, they work hand in hand with the federal government, which, for example, refuses to provide the usual scholarships or GI benefits to unaccredited colleges.23

Governmental discrimination against proprietary colleges (and other institutions, as well) does not stop at accreditation and scholarships. The entire income tax structure discriminates against them even more severely. By exempting trustee-run organizations from income taxes and by levying heavy taxes on profit-making institutions, the federal and state governments cripple and repress what could be the most efficient and solvent form of private education. The libertarian solution to this inequity, of course, is not to place equal burdens on the trustee colleges, but to remove the tax burdens on the proprietary schools. The libertarian ethic is not to impose equal slavery on everyone, but to arrive at equal freedom.

Trustee governance is, in general, a poor way to run any institution. In the first place, in contrast to profit-making firms, partnerships, or corporations, the trustee-run firm is not fully owned by anyone. The [p. 140] trustees cannot make profits from successful operation of the organization, so there is no incentive to be efficient, or to serve the firm’s customers properly. As long as the college or other organization does not suffer excessive deficits it can peg along at a low level of performance. Since the trustees cannot make profits by bettering their service to customers, they tend to be lax in their operations. Furthermore, they are hobbled in financial efficiency by the terms of their charters; for example, the trustees of a college are forbidden from saving their institution by converting part of the campus into a commercial enterprise — say a profit-making parking lot.

The short-changing of the customers is aggravated in the case of current trustee-colleges, where the students pay only a small fraction of the cost of their education, the major part being financed by subsidy or endowment. The usual market situation, where the producers sell the product and the consumers pay the full amount, is gone, and the disjunction between service and payment leads to an unsatisfactory state of affairs for everyone. The consumers, for example, feel that the managers are calling the tune. In contrast, as one libertarian remarked at the height of the student riots of the late 1960s, “nobody sits in at Berlitz.” Furthermore, the fact that the “consumers” are really the governments, foundations, or alumni who pay the largest share of the bill, means that higher education inevitably gets skewed in the direction of their demands rather than toward the education of students. As Professors Buchanan and Devletoglou state:

The interposition of the government between the universities and their student-consumers has created a situation in which universities cannot meet demand and tap directly resources for satisfying student-consumer preferences. In order to get resources, universities have to compete with other tax-financed activities (armed forces, lower schools, welfare programs, and so forth). In the process, student-consumer demand is neglected, and the resulting student unrest provides the ingredients for the chaos we observe . . . . The mounting dependence on governmental financial support, as this has been translated into the institution of free tuition, may itself be one significant source of current unrest.24

The libertarian prescription for our educational mess can, then, be summed up simply: Get the government out of the educational process. The government has attempted to indoctrinate and mould the nation’s youth through the public school system, and to mould the future leaders through State operation and control of higher education. Abolition of [p. 141] compulsory attendance laws would end the schools’ role as prison custodians of the nation’s youth, and would free all those better off outside the schools for independence and for productive work. The abolition of the public schools would end the crippling property tax burden and provide a vast range of education to satisfy all the freely exercised needs and demands of our diverse and varied population. The abolition of government schooling would end the unjust coerced subsidy granted to large families, and, often, toward the upper classes and against the poor. The miasma of government, of moulding the youth of America in the direction desired by the State, would be replaced by freely chosen and voluntary actions — in short, by a genuine and truly free education, both in and out of formal schools.

• 22W. Lee Hansen and Burton A. Weisbrod, Benefits, Costs, and Finance of Public Higher Education (Chicago: Markham Pub. Co., 1969), p. 78. On Wisconsin and its comparison with California, see W. Lee Hansen, “Income Distribution Effects of Higher Education,” American Economic Review, Papers and Proceedings (May 1969), pp. 335-40. On the general problem of redistribution from poorer to richer in the modern “welfare state,” see Leonard Ross, “The Myth that Things are Getting Better,” New York Review of Books (Aug 12, 1971), pp 7-9.
• 23On the Marjorie Webster Junior College case, see James D Koerner, “The Case of Marjorie Webster,” The Public Interest (Summer, 1970), pp 40-64.
• 24James M. Buchanan and Nicos E. Devletoglou, <em>Academia in Anarchy: An Economic Diagnosis</em> (New York: Basic Books, 1970), pp. 32-33. [p. 142]