Click here to view the full text of this report as an Adobe Acrobat PDF.

The prevailing view among leaders in the university community is that America is not investing enough in higher education. A recent survey of the American economy by the Organization for Economic Cooperation and Development (OECD) echoed that concern. After all, college graduates are dramatically more productive than those without higher education preparation, and America is falling behind other nations in the proportion of the adult population with college degrees. National competitiveness and economic well-being are at risk, or so it is argued.

The conventional wisdom downplays the concerns about rising costs, particularly soaring tuition fees. One argument is that the cost explosion is an illusion: "net tuition fees" (sticker tuition prices minus scholarship aid and loans) have risen less dramatically than gross tuition fees (published rates). Americans think college costs are greater than they really are. Besides, the rate of return of a university education remains high, since the earnings differential associated with college has risen over the past several decades in tandem with fees, maintaining a high return on the financial investment.

Yet I think most of these arguments are flawed, even downright wrong. An excellent case can be made that we are over invested in universities, that too many students attend school, that much of our investment is wasted. Moreover, the rise in costs--to society, to taxpayers, and especially to consumers--is excessive, and has been made more so by well meaning but inappropriate public policies. The law of unintended consequences looms large in any discussion of America's colleges and universities.

 Click here to view the full text of this report as an Adobe Acrobat PDF.

Richard Vedder is a visiting scholar at AEI.