NCPA - National Center for Policy Analysis


August 18, 2006

All over the country, states are trying to turn their universities into engines of regional economic development, says Austan Goolsbee, a professor of economics at the University of Chicago, Graduate School of Business.

This strategy is based on the view that research done by professors can form the basis for local start-up companies and that the graduates of the university can supply the entrepreneurs and employees, says Goolsbee. 

  • But subsidizing teaching is problematic as a development strategy because graduates frequently move out of state. 
  • In addition, a new study by University of California, Los Angeles, shows little evidence that ideas created at any one school helped local businesses any more than businesses in other areas. 


  • One area the study did find consistently associated with high-tech start-ups is the presence of star scientists -- not the ideas, which can be copied, but the scientists themselves.
  • This seems to be the one way in which a university can be used as an engine of business growth.

But as Goolsbee points out, trying to form a university around star scientists is like trying to start a major league baseball team:

  • Creating the next Silicon Valley by attracting the best scientists is rather like trying to start a new baseball team and turn it into the New York Yankees.
  • In addition, ambitious state university systems will find it easier to steal the stars of another team than to develop their own prospects. As a result, salaries will go through the roof -- just as in baseball.
  • And while everyone pays more, only a tiny number of cities will ever win the World Series; one will increasingly hear about how the costs of college are rising everywhere and that local economies have little to show for it.

Source: Austan Goolsbee, "What Baseball Can Teach Those Who Dream of Creating the Next Silicon Valley," New York Times, August 18, 2006; and John Bound et al., "Trade in University Training: Cross-State Variation in the Production and Use of College-Educated Labor," Journal of Econometrics, vol. 121, 2004; and Lynne G. Zucker and Michael R. Darby, "Movement of Star Scientists and Engineers and High-Tech Firm Entry," National Bureau of Economic Research, Working Paper No. 12172, April 2006.

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