Academic journal article Independent Review

Myth Busting: The Laissez-Faire Origins of American Higher Education

Academic journal article Independent Review

Myth Busting: The Laissez-Faire Origins of American Higher Education

Article excerpt

Harvard University is named after its first private benefactor, John Harvard, a statue of whom remains a landmark on its campus as a legacy of his generosity that helped finance the nation's first college in its infancy. Although Harvard's gift played an important role in the school's early development, the institution's history was powerfully shaped by a significant amount of state intervention that sheltered it from competition and kept its doors open with a steady stream of subsidies and protections during its formative years.

Similar stories of state intervention contributing to the development of colleges can be found for most of America's colonial institutions, but many scholars nevertheless conclude that American higher education had become a laissez-faire market in the decades before the Civil War. This view has been shaped largely by knowledge of the rapid expansion in the number and diversity of colleges following America's independence, which resulted in the establishment of as many as eight hundred colleges by 1861 (Westmeyer 1997). For example, John Brubacher and Willis Rudy suggest that the sector's growth was "fostered by the conditions characteristic of the laissez-faire, individualistic society of the time" (1997, 59).

The 1819 Supreme Court ruling in Trustees of Dartmouth Coll. v. Woodward. (17 U.S. 518) is widely viewed as contributing to the rapid growth of private institutions during the period, with many education scholars depicting the decision as unleashing capitalism on higher education. Jurgen Herbst, for instance, suggests that the decision "ensured that higher education . . . would draw on the strengths and suffer the liabilities of laissez faire capitalism" (1982, 147). Arthur Cohen and Carrie Kisker add that with this decision the "federal government enhanced the free and open market" in higher education (2010, 65).

The sector's growth during the period has also been attributed to a liberal regulatory environment. Referring to the diversity of colleges that emerged during the period, Martin Trow suggests that the lack of regulation constituted a "kind of license for unrestrained individual and group initiative in the creation of colleges of all sizes, shapes, and creeds" (1989, 12). Cohen and Kisker comment that "[i]n the absence of regulations . . . [a]ny group could solicit funds . . . obtain a business license . . . and open for instruction" (2010, 64).

Although aspects of the antebellum higher-education market were undoubtedly characteristic of free-market capitalism, this essay serves as a critical challenge to the hypothesis of the laissez-faire origins of American higher education. An examination of the political economy of the period against a true free market for higher education shows clearly that the state was more involved in shaping the sector than has generally been recognized. The laissez-faire origins hypothesis is largely a myth that has been propagated by a misunderstanding of the enduring effects of state intervention in altering the market process.

Framework for Analysis

What would a truly free market for higher education look like? A free-market economy is devoid of distortionary government interventions such as regulatory requirements and government subsidies, which often add unnecessary costs, constrain competition, redirect market allocations, or impede economic agents' decision-making ability. When the market process is unhindered by state intervention, a great deal of experimentation is undertaken as entrepreneurs and nonprofit organizations try out different ideas to determine what the market will sustain. Consumers vote with their wallets for the products and services that they most highly value. Products with a high demand remain in production and generally attract additional investment. Products and services with weak demand are rooted out by market forces. As such, free markets are characterized by experimentation that involves both success and failure as the market process leads to innovation and the production of highly valued products and services (Kirzner 1973,1985; Bennett, Lucchesi, and Vedder 2010). …

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