Higher Learning, Greater Good: The Private & Social Benefits of Higher Education (review)

Walter McMahon, in Higher Learning, Greater Good: The Private & Social Benefits of Higher Education, argues that the decline in real per student public funding of higher education represents an under investment by the public sector. He further argues that the private sector under invests as well. McMahon believes that this underinvestment is in no small part the result of a lack of accurate and complete information regarding the true benefits and costs associated with higher education.

In chapter 1, McMahon identifies access, affordability, accountability, and privatization as vexing issues in higher education. His goals in presenting the book include offering an analytical framework for working through these policy issues, encouraging accurate and complete measurement of the benefits (both private and social) of higher education, clarifying the true costs of higher education, making the case that endogenous growth and development theory ought can be useful in better understanding policy issues, and arguing that an inadequate understanding of the benefits and costs of higher education represent an under investment in higher education when viewed through that theoretical framework.

Chapter 2 includes definitions of key terms and concepts employed by McMahon. Human capital, market versus non-market benefits, market failure, embodiment and obsolescence of human capital, and external and indirect benefits are described in ways accessible to readers with a modest knowledge of economics. Similarly, McMahon offers brief descriptions of the issues of access, affordability, accountability, and privatization.

Focusing on the case of the United States, McMahon uses the third chapter to layout his argument regarding the impact of higher education on jobs, earnings, and growth. Space limitations for this review prohibit a detailed discussion of the methods employed to calculate these benefits and costs. He identifies a 16% rate of return for individual investment at the associate degree level and a 14% rate of return at the baccalaureate level. Taking into account the effect of investment of higher education to economic growth and the relationship between higher education and new technology, McMahon asserts that there is a positive rate of economic return to public sector investment in higher education.

Chapter 4 presents the private non-market benefits of higher education. Drawing on an extensive body of literature and research, McMahon identifies a host of short-, medium, and long-term benefits. Among these are better health, greater longevity and lower mortality rates, improved child health and lower infant mortality, better child education, higher rates of fertility, greater happiness, more efficient labor markets and reduced unemployment, enhanced lifelong learning, consumption benefits, and greater female participation in labor markets. The author then sets about calculating the economic value of these private non-market benefits. McMahon posits that the annual private non-market benefits of a bachelor's degree is just over $38,000 and the value of these benefits are typically underestimated by potential investors in higher education.

Chapter 5 presents for social benefits of higher education what chapter 4 did for private non-market benefits. Here again, space limitations do not allow for a detailed description of the social benefits identified or the variety of methods used to calculate the value of those benefits. In summary, however, McMahon calculates the non-market public social goods of higher education to be just under $28,000 per year and notes that it is the underestimation of this value that has given rise to smaller estimates in previous studies of the social benefits of higher education.

Moving on to discuss the benefits of higher education, chapter 6 explores the social benefits of research. Drawing on the constructs of embodiment of new knowledge and obsolescence of technology, McMahon observes that much of the relevant activity takes place by faculty and graduate or professional students and that there are variations by field. McMahon puts the rate of return on investments in research to range from 20 to 30% campus wide.

In chapter 7, McMahon puts forward a set of national, state, and campus policy options for...