Podcast Transcript

Fred: Miguel Urquiola is Professor of Economics and International and Public Affairs and serves as chair of the Economics Department at Columbia University. He is a research associate at the National Bureau of Economic Research and a fellow at the Bureau for Research and Economic Analysis of Development. Miguel’s research focuses on the economics of education, an area of research where he has published on school choice and public education and on how universities have built their reputations through their research activities. Miguel’s research on these topics have appeared in some of the leading journals in the discipline of economics, including the prestigious American Economic Review, The Review of Economics and Statistics, The Journal of Public Economics, and The Journal of Development Economics, among others. Miguel is also author of the forthcoming book, Markets, Minds, and Money: Why America Leads the World in University Research. The book focuses on the evolution of free market approach to higher education in the United States. It documents how American universities were initially weak at research, how US universities improve along the way, and how they retained their lead as world leaders. I invited Migual to The Dean’s Table to talk about how he decided on becoming an economist, to reflect on his work that explores whether increased school choice helps families and students choose schools that add more value, and to give us insight into how the United States became a leader in producing world class research. Miguel, welcome to The Dean’s Table. 

Miguel Urquiola: Thanks very much for the invitation, Fred. 

Fred: So, you were educated at Swarthmore College, distinguished liberal arts college near Philadelphia. So, many of my friends attended Swarthmore and referred to the college as “Sweatmore” because of its academic rigor. What was your experience like at Swarthmore? 

Miguel Urquiola: I think it was somewhat along those lines. It is known for attracting a relatively intense student and I think on top of that, it had this culture of having these small seminars. There was this honors program where for two years we only did seminars, and they’re very focused on kind of like not meeting that often and doing a lot of work in between. And that’s my experience and it was a good experience.

Fred: Great. So, how did you go about choosing Swarthmore as a college you wanted to attend? 

Miguel Urquiola: It’s a good question. I’m originally from South America, from Bolivia. And back then there was very little information and one of my father’s friends had casually told me that I should go to a small school. And once visiting the US for a kind of vacation, I bought a Barron’s book. And so I looked at what, at the time, you know, I looked for what at the time was the highest rated small school. And I said, this is where I want to go. And my father, who was pretty hands off, said, “OK.” But, I chose it, as many schools were chosen at some point, with very little information. It has a beautiful campus and when I got there, it was clear to me I had never seen a picture of it. 

Fred: Oh, really? So, you hadn’t visited the campus? 

Miguel Urquiola: I hadn’t seen a picture, visited, or anything. And obviously it was pre-Internet when you know, now basically kids know a lot by the time they set foot on campus.

Fred: Right, so, you majored both in economics and in political science. So, but you became an economist and so what sense? I’m a political scientist — I want to know why didn’t you go to graduate school in political science? 

Miguel Urquiola: That’s a good question. I think I started actually being somewhat interested in history. I took some classes there and also political science. And then like many students do, I casually took Econ 1 because that’s just a standard way of fulfilling some requirements or doing something. And it appealed to me, basically. I think many Latin Americans will tell the story that seeing economic crises, you sort of want to understand how these came about, and economics appealed to me in that way. And yes, that’s I think, why I kept up with it. Although, as you say, I didn’t lose interest in other areas, or even in history, as that book you mentioned illustrates.

Fred: Right, so, what before starting graduate school, you worked for a couple years for the Ministry of Planning in Bolivia. What was that experience like? What did you do? 

Miguel Urquiola: It was a very good experience. So, I went there and I was looking for a job. And they basically — so, I thought I would do macroeconomics. It was a very influential job in that way and that’s what I had liked most in college. And then they said, “You know, we can hire you, but we’re full up on macro people. So we would like someone to do, sorry, to look at education budgets, to basically do educational finance.” And that’s what put me onto education, and then that’s basically where I stayed. So, it was — it had an impact in the area. 

Fred: So, what kind of projects did you work on? Because you were there for, what, two years? 

Miguel Urquiola: I was there for two years. So, they would be there actually rather different projects than I think, you know, many people at this level in the US would have. It’s a poor country, Bolivia. It was a very small research outfit, and so some of them were fairly direct involvement with policy, working with vice ministers or ministers, dealing with university budgets or stuff like this or, you know, ranging to writing a speech for the minister here and there. It was basically… it’s a small country, it’s poor, so you get more involved much quicker. That is usually the case. 

Fred: And so you didn’t get the political bug going back to your major in political science. Did you ever consider running for public office?

Miguel Urquiola: No, no, I didn’t. I don’t think I’m suited for it, but it was certainly an opportunity to also see, you know, somewhat, politics close by, because if you’re negotiating with universities or thinking about teacher salaries, sometimes you’re pretty directly involved in what you know there is that there’s a protest outside while you’re doing this. So, it’s certainly I like politics and it’s certainly, you know, it was a good place to see that basically in action. 

Fred: Right, and so from there, you went to graduate school at the University of California, Berkeley. Did you choose graduate school the same way you chose your undergraduate? 

Miguel Urquiola: No, no, I was much more informed by that. Basically, as you know, economics tends to produce, like many fields, these… You know, there’s lots of information and fairly ranked places. And so, yeah, I mean, my teachers at Swarthmore had already told me, you know, “These are the X schools you will look at; this is the order you got.” And so, yeah, it was much more informed. I was happy to get into Berkeley and had a good experience there also. 

Fred: Right. By the way, just going back a bit — why did you feel that you had to go and sort of have that experience working in a bureaucracy in Bolivia? Do you think it was necessary for your graduate studies? 

Miguel Urquiola:That’s a good question. I don’t think it was necessary. I had a teacher at Swarthmore, Bernard Safran was his name, a well-known economist who has since passed away. And he once told me, “Even if your goal in life is to get a PhD and be an academic,” he said, “it will serve you well to go and work someplace and to do something real for a couple of years. It makes you more concentrated; it makes you more focused.” As you know, and it’s certainly you know, it’s certainly affected my research research path. By the time I got to Berkeley, I knew I wanted to do the economics of education. So, it was true in that way. Although as many things one does when one is young, you know, there would have been other paths, I just thought this makes sense.

Fred: That was very specific because, you know, the economics of education, you know, people go in to, sort of, study macroeconomics, microeconomics, you know, economic theory. Trade. 

Miguel Urquiola: Correct. This is fairly specific.

Fred: Yeah, this is very specific. 

Miguel Urquiola: Yeah, I think it was a product of my work there. Also, when I started working there, my boss raised that a couple of us who were working there and were new should go into, sort of like, this area. And he said, why don’t you travel to Chile, sort of see what’s going on there. Chile is a leading country in Latin America. You can see what reforms are happening. And so there I saw, you know, these like voucher systems and school choice systems. And so I got into educational competition, which in a way is an old economic area since Milton Friedman and others wrote about it. But at the same time, as you well say, it is fairly specific. So I think I landed onto, kind of, a specific area early.

Fred: Yeah, you know Eric Hanushek. Yeah. Yeah. He’s my former colleague at University of Rochester. And that’s the only other person I know who taught the economics of education. 

Miguel Urquiola: No, it’s true. It used to be an even more specific area. Yeah. Yeah.

Fred: Yeah, yeah. Well, we may talk about him in a moment, so… But, let’s talk about your research on primary and secondary education. You just mentioned part of it a moment ago. You’ve done some interesting work on the dynamics of school choice. In one piece, you provide some nuance to the work of the famous economist, as you just mentioned. Milton Friedman, as you and your co-author stated in this piece, this is Bentley MacLeod, who’s our colleague here at Columbia. I’m quoting here, “Milton Friedman argued that giving parents freedom to choose schools would improve education. His argument was simple and compelling because it extended results from markets for consumer goods to education. We reviewed the evidence, which yields surprisingly mixed results on Friedman’s prediction,” unquote. The big takeaway from this piece, by the way, and I’m here also quoting directly “households often seemed to choose schools based on their absolute achievement rather than their value added. In other words, based on how good their students skills are as opposed to how good they are at improving their students skills.” So, could you say more about what you mean by choice being decided by absolute achievement rather than value added? 

Miguel Urquiola: Sure. So, basically what we understand by a school’s value added might be how good the school is at raising student skills. So, for example, a university, let’s say they had high value added would be very good at teaching students to be a good engineer or to be a good political scientist or what it were. By absolute achievement, we basically mean just which ones produce the students who are the most successful or who have the highest levels, you know. They may also be the schools that have incoming very good achievement. And so, for example, you could find a very fancy school that takes in very good, very good students. And naturally those students will do very well afterwards. And that could be, in some sense, a school with low value added if it’s really not teaching that well. And conversely, one could find a school that took students who knew little and then really elevated them and taught them a lot. And what we work out, and I think one thing I have learned about school competition, is that, you know, we would like as policymakers or as basically academics or as economist people to choose the schools that are most productive, the schools that have high value added. And in my observation, people don’t always do that. So…

Fred: Why don’t they do that? Do they have the information to do that? 

Miguel Urquiola: That’s a good question. So, one possibility is that they can’t observe the value-added. But, what we show in that particular paper, which you mentioned, is that even if the value-added were fully observable, student, basically families might rationally choose the low value-added school. And the reason for that is basically that there, schools provide other services. For example, suppose that you go to a school that is fancy, and I’ll say how it’s fancy in one second. But, you observe that it has low value-added. But it’s a school that places students into the right school trajectory or where you make very valuable friends because you have very fancy peers, so to speak. Then you might rationally say, well, even though I can see that has lower value added, I will rationally trade that off and I will still choose that. These things can happen as long as, for example, there is a limited number of schools. And, my sense is that sometimes education markets get to get into these configurations where basically people make that tradeoff willingly. As you mentioned, this goes back to Friedman in the sense that what economists usually, how we usually think of a market is that consumers will choose the firms that have the highest productivity or value-added. And that’s a market that works well. And so, our intuition should be that the school market should work in that way also so that the free market must be the best thing. And I think one thing that I’ve you know, this is not a modern controversial position, but it’s something that I’ve basically come to conclude and that we elaborate on in that paper. That doesn’t always happen.

Fred: Right. So, this is the thing and it goes back to my question about information, so do you think people are confusing reputation with quality of education? I mean, couldn’t it be one in the same?

Miguel Urquiola: Yeah, so, I think that basically when I think people, you know, obviously they must understand what they own, what they think is quality and they must choose the school that for them is the highest quality because, you know, people usually, we don’t think of them making mistakes and stuff like this. It’s just that that’s basically what I would say is quality is probably multi-dimensional, and so you could say, you know, on the one hand, this school is good at teaching, but on the other hand, it may produce good outcomes such as good networks. People, you know, families, when they’re choosing schools might have in mind that my kid could meet someone here and marry this person. So that they’re thinking of a fairly, fairly sophisticated, multidimensional product and the ability to teach well or to have high value added as we would like, and sort of creating what economists call human capital is only one dimension. And the consumer might rationally say, “OK, that’s that’s great. And I see that dimension.” But there’s also other things that I’m looking for. And so I won’t always choose the one that has the highest value-added. I think basically it comes down to sort of schools do lots of things. And one of the things that they do is, as you say, sort of provide a reputation that’s tied up a lot with how good the people coming into the school are. Mm-Hmm. So for example, I’ll cite a paper by an economist recently. Josh Angrist at M.I.T. that shows that Stuyvesant High School here in New York City is extremely, extremely selective. In his results, it does not necessarily have a higher value-added than other schools that in other schools that provide the alternatives to the kids who go there.

Fred: Even at the independent private schools?

Miguel Urquiola: More relative to other public schools, yeah.

Fred: And in New York or just nationwide?

Miguel Urquiola: In New York City. The paper is titled “The Elite Illusion,” sort of as if the elite is kind of deluded and really wants to get this. And what we point out in that theoretical paper with Bentley is that this may be a rational response that they say, look, getting the, as you say, reputation, the sort of Stuyvesant stamp on my forehead might me so valuable that I’m willing to do that, even if it is the case that it has lower value-added in some dimension. Although once again, it’s a multidimensional product and they might see that it has high value-added in other dimensions. And that’s kind of the tradeoff that we emphasize.

Fred: Right. Right. I may be asking this question in another way, but I find it fascinating. So does the average parent know about the marginal gains in educational improvement?

Miguel Urquiola: That’s a good question. Probably not. Right. So. So beyond that, also, as you already raise, like we can get these results and we do get these results even if we assume that parents observe everything. But you’re absolutely right. I know that you have chosen schools as a parent. So have I.

Fred: Right.

Miguel Urquiola: And as a parent, one is much less sure about everything. And also, one’s aware that once kids may be different than the model kid at that school in different ways. And you say, “I wonder whether, you know, maybe the school is actually very good for my kid or not good even if it is different for other kids.” So you’re right. Beyond that, there’s an informational challenge and that just aggravates the issue. I would argue that there are other markets where we have fewer informational challenges, like if you buy an Apple computer, which I see that you’re using,  it’s easier for you to, sort of, know what that is. And and, you know, and the other issue is that you have bought a computer several times in your life. So if you decide that you don’t like Apple, then you can switch to IBM or whatever. With college, we usually go once, and by the time you discover that it may not be that well suited, it’s too little late.

Fred: Right. Right. Right. Right. So markets are different. Yes. OK. Let’s switch to your work on vouchers. You mentioned it earlier. You’ve published extensively on the topic of vouchers, particularly in Chile, which in that country’s case, they adopted a universal voucher program in the 1980s. You found that in Chile’s case, public school performance as measured by test scores got significantly worse with the implementation of vouchers. You conclude that the program was, quote, “disappointing reform effort, noting specifically” and I’m quoting here, “school choice and the privatization of schools are fun things to argue about. But in terms of real effects, they are a bit of a red herring,” you say. And you go on, “the evidence indicates that, perhaps surprisingly, such reforms do not make education really good. They do not make it really bad either.” Your findings from your work in Chile flies in the face of advocates of educational vouchers in the US who believe that vouchers can improve public education, especially for poor kids. What does your research tell us about what’s likely to happen if educational vouchers are adopted widely here in the US?

Miguel Urquiola: Right. So I think that it’s interesting you cite, you know, what I would call fairly old papers. And it’s always fun to hear what went wrong a long time ago.

Fred: Have you updated your views?

Miguel Urquiola: No, I don’t think I’ve updated. I would update the way in which I put it. But let me, well, let me explain. I mean, no, I don’t update any of the bottom lines. I think that those are pretty much what I think I now. But let me tell you how I sort of see this. Basically, once again, whether… So in the more theoretical work I’ve done since that paper, which which you cite there, including, as you mentioned with Bentley McLeod, one thing that we show is that if there is a free market in education and people care about things like reputation and sort of care about peers, as I mentioned, having fancy friends, this and that. What such a market will naturally do if it’s left unfettered, as Milton Friedman would say, is it will segregate people. It will basically segregate, you know, either the highly able or the artistic or the rich or the, into certain schools. When that happens, if you introduce vouchers, which give people a lot of choice and that happens. What happens is that the public schools, in the case of Chile, often begin to lose quotes “some of the best kids.” And it’s not that they’re the best in the sense that they have high achievement. It’s not that the voucher makes those schools lower value added or somehow damages what the teachers are doing there. It just kind of mechanically hurts them because they are losing the most privileged, so to speak, students. And why are they losing those students? Because those students would rather be segregated on their own. Right? So like they would rather form clubs, loosely speaking, schools where, you know, if I’m a very talented student, I would rather be with other talented students, which is what we see naturally emerging in many free educational markets. The US universities, as you mentioned, being one of them that they sort of stratify. So that I wouldn’t say that this process damages the public schools necessarily. It makes them look bad mechanically. And that is what we basically pointed out happened in the case of Chile.

Fred: So education becomes more economically stratified, right?

Miguel Urquiola: That’s definitely what happened.

Fred: So there’s an abandoned bit by the upper middle class or…?

Miguel Urquiola: Yes, basically the story of what happened in Chile is that as vouchers were given, as you said universally to everyone, the middle class largely left public schools. So if you go to a Chilean city these days, something like 60 or 70 percent of the enrollment will be in private schools, many of which are voucher subsidized. And then the people who are left in the public sector tend to be poor. And so that the public sector looks worse, you know, naturally, just because it’s been left with people who come in with less initial achievement. I don’t think that this means necessarily that the private sector is better in the sense of value-added or that the public sector has been made worse. This is why I use that term red herring in the sense that there is nothing per se about a school being private or public that is causing this is just this natural kind of sorting sorting scheme. And I said something which you mentioned there, which is introducing competition is not, you know, sort of the… I said fun to argue, because basically whether schools should be private or public is something that even in politics, I think is like a litmus test. We say something, we ask someone, what do you think of private education? And we think they’re telling us a lot about them. And that I view, my research has taught me at least, that this is a bit of a red herring, that there’s nothing a priori that one should have for or against private schools. It’s more a question of what are the incentives going in. So, for example, one could imagine, I think that the US sort of happened upon a different design, which is interesting, which is charter schools. You could allow charter schools to even be for profit. One thing that I like about charter schools is that they often in the US have these rules that say if you’re oversubscribed, you must randomly choose kids through a lottery. This makes it harder for them to build the reputation on: I just select kids who are initially already able. If I have to select random kids, it must mean that I will have to find out. I’ll be more likely to have to find out some way to teach well, actually. So one could have lots of choice, like Friedman wants, and one could even have for-profit participation, but design it in a way that is more likely to raise value-added or productivity. I don’t think Chile did that. Partially, I think it was just that at the time, in the early 80s, this wasn’t well understood. And so it’s. Yeah.

Fred: Is there still a voucher program in Chile?

Miguel Urquiola: There still is a voucher program in Chile. Basically, 30 years later, it’s going strong. And there is still a lot of discussion as, you know, Chile recently has suffered this kind of mini political explosion. There were these riots, things like that. And, in my own reading, it’s hard to know exactly why these riots happened. But for a few years already, maybe like ten, Chile has been having these strong protests. A lot of them are by students, and my sense is that basically the country’s still trying to figure out how to design its educational system. You know, if vouchers were a silver bullet, Chile would have been done. You would have done this in 1980, and right now you’d be golden. And in fact, they’re not. I think that’s partially what — and they create things like sorting and exclusion. And I think that’s part of what that society is trying to deal with. Also, if you let markets run loose, you often get into situations where it’s hard to reverse things, some things, and I think that’s one thing Chile has discovered also.

Fred: But again, what could we learn here in the US, particularly for those advocates who are pushing vouchers?

Miguel Urquiola: Right.

Fred: Would you expect the same thing that ended up in Chile?

Miguel Urquiola: I think that if one implemented the vouchers as they are in Chile, I would expect the same thing, basically. I think that there has been some some some some learning. As I mentioned, for example, in the US, actually vouchers are a fairly small phenomenon. There’s not a lot of what has grown a lot, for example, is charter schools.

Fred: But even with the charter schools, is there something we could learn? Would there be a wholesale abandonment of public schools, even in affluent areas?

Miguel Urquiola: I think ultimately it does hurt public schools. However, I think that the charter school model is better designed than, say, the universal voucher system in Sweden or in Chile. It has some good properties, and it has also been shown in the US that some charter schools, not all do actually have pretty good value-added. So, I think that the US by, you know, for whatever reason, did come generally onto a better designed to introduce school choice than Chile did.

Fred: Okay, so let’s talk about your forthcoming book, Markets, Minds, and Money: Why America Leads the World in University Research, to be published very soon by Harvard University Press. What is this book about? 

Miguel Urquiola: So basically, one way of saying what this book is about is that I had made a reputation for myself, as you said, such as it is my reputation, for basically saying that the market does not deliver good things in education. And I had said that about vouchers in Chile. And then for various reasons — this wasn’t the only reason, but I thought, maybe I should say something about when markets work well in education. And so, one thing that I would say is that if one wants to create a university sector that produces good research, the free market is actually one good way of achieving this. And basically, what I argue in that book is that that has been the case over time in the US. Initially, actually, the market was something that made the research sector weak in the US but with time and given certain dynamics, it improved. And so, I’ve tried to sort of think about markets in education, but in a different setting and relative to a different outcome as research rather than, say, value-added in K-through-12. 

Fred: Right, so let’s get back to this question of reputation we talked about in primary, secondary schools. Let’s think about it more in your research. Yeah so the primary tool you used to measure a university’s research output is the number of Nobel Prize winners, right? You give credit to each university that the Nobel winners studied and taught at. So, you know, for instance, if the Nobel recipient was a graduate of Columbia or professor at one time at Columbia, that would count as a measure of prestige. The measure, you argue, captures intellectual development of the university over time. Now, you admit that this is not a perfect measure of reputation since it excludes quality measures in the humanities. Did you consider other measures of reputation in your study? 

Miguel Urquiola: Yeah. So I think that, you know, if we looked, if we wanted to measure the university’s research output right now there’s lots of measures and I’ve used those in other research. For example, we could look at articles produced or books produced, science and stuff like this, and there would be very good measures. And, you know, there’s no perfect measure, but there would be lots of them. In the book, as you well explain, I basically look at the Nobel Prize as a way because basically the interest in the book was trying to go as far back as possible and of course, even though the Nobel Prize is limited to some fields and so on and so forth, the benefit is it has been around a long time. So, I just looked for a rough and ready measure that would let me go even into the 1800s. And that’s why I focused on that, but if one did it more recently, one could use a lot more. And by that measure, which you cite, for example, the US was basically at the bottom of the pack into the late 1800s of new countries. 

Fred: In terms of the Nobel?

Miguel Urquiola: Yeah, and at some level that’s not that’s not so surprising. For example, it wasn’t until late in the 1800s that Yale first awarded a PhD. The US was just not active in sort of high level scholarship in this period. What that measure illustrates is that the US began to improve around then, basically it was I think on a very steep improvement trajectory, certainly by 1910 or something like this. And one reason I also wanted this long term measure is that some educational historians, and some economists who have emphasized that World War II really changed the performance of American universities. And as an economist, you know, that could be true or not, but I sort of wanted to think what market dynamics were there? And when I look at the data, I see the improvement of American universities beginning much earlier.

Fred: Okay, so tell us, our listeners, when do you start?  When does your analysis start in terms of time?

Miguel Urquiola: Yes, so for the US case?

Fred: Yeah. But you also look at German universities.

Miguel Urquiola: Yes, I also look at Germany. So, the first part of the book basically starts with American university or, you know, colleges, I should say, since the colony. And as you mentioned, I claim that the market at that point made colleges weak. And the reason I claim is, going back to this stuff in Chile, people in Chile might have wanted to stratify by income, by education, you know, by sort of socioeconomic status, as we would say in the university. In the American colonies and into the 1800s, one thing that people wanted to basically sort out by was their religious affiliation. They’re sort of like denomination. Presbyterians wanted to go to school with Presbyterians, Baptists with Baptists, and so on and so forth. They also wanted to go to college close to home and this created a massive entry by colleges in the US. There were something like 900 colleges opened between independence and the Civil War. And this kept the colleges very small and very poor and therefore focused on very basic instruction and almost nothing having to do with the research. Columbia College, for example, had long periods, where it had five teachers and maybe, you know, 80 students. Long periods. After the Civil War, what basically changed is that there started to be the colleges. And through the 1800s, but particularly after the Civil War, some colleges realized that there was a demand for more specialized instruction and that one could maybe try to offer something at a higher level and more specialized. Many people realized this through the 1800s. I go through that in the book. But it was hard to achieve. Basically, two schools that really revolutionized things. I think one was Cornell, which came in and tried to offer lots of things. The other, of course, that’s famous is Johns Hopkins. Yes, they did it at first. 

Fred: Did it have one of the first PhD programs in the country?

Miguel Urquiola: The first one, ironically somewhat, was Yale. Because Yale was considered this very conservative place and many it still is. But, Hopkins was the first university that, getting back to something you mentioned, tried to model itself somewhat on a German university, which was much more, you know, trying to teach at a graduate level. And these two schools basically showed that one could do this. Now, granted, they had big donations, Cornell and Hopkins money and state help in the case of Cornell, The Morrill Act, but they basically show that this could be done. And at that point, schools like Harvard and like Columbia, some all incumbents had to decide what to do. Harvard and Columbia responded very aggressively and went into this, you know, trying to create professional schools, trying to…

Fred: Expansion in late 19th century?

Miguel Urquiola: Exactly. Creating arts and sciences departments. And what I claim that basically by, you know, 1900 hundred roughly, these schools were really on an upward trajectory, training people, trying to get qualified researchers, and so on. 

Fred: So, did their longevity count at any level? Because there are also new entrants around his time in the late 19th century like the University of Chicago. And they I guess later on, Stanford?

Miguel Urquiola:  Stanford also. Yes. So, I think basically in the market, when the market changes like that, you can get entrants. And, you know, certainly there were entrants that changed the system like Cornell and Hopkins. And as you say, entrants at the point that really became very successful like Chicago and Stanford. I think longevity helps in the sense that the older schools, the older like the Ivy League, for example, had a bit more time to react to this. So let me, like, raise a contrast between two schools or, you know, two sets of schools. On the one hand, you have Princeton and Yale that moved relatively late. But of course, they were very rich schools, you know, sort of comparatively with a long history and with good alumni networks. In a way, Princeton and Yale had the luxury of sort of thinking about this, what they go in this path. Princeton hasn’t fully gone on this path, even now. Contrast that with a university like Clark University, which was actually doing quite well.

Fred: This is in Massachusetts.

Miguel Urquiola: Yes. That got completely blown out of the water for several reasons, but one was that basically Chicago went and with the Rockefeller money, essentially poached half of their faculty away. 

Fred: I did not know that. 

Miguel Urquiola: Yes, so that basically, you know, Princeton or a Yale could afford at some level, you know, longevity helps and its brand helps to take it slower and make very good decisions, whereas Clark stumbled a little bit. And next thing you know, you know, Hopkins, Chicago had taken its position. So I think that in all educational markets, longevity helps. There’s this book by Goldin and Katz at Harvard that, you know, one of the things that they point out is that even though Stanford and Chicago are super successful schools, we don’t see in this top elite in the US schools that came into existence after roughly 1920. I don’t know exactly what the data that they point to is. Later on, it’s been much harder to open schools that would rise to the top. 

Fred: So this is an interesting sort of story because what we normally get, I guess because they’re written as history is the great man theory, the great presidents theory. Yeah, these great men who came in and just turned everything around. And this is why, you know, people like Seth Lowe and there’s a guy can’t remember his name, the University of Chicago, who was a famous figure, who turned the university around. Well not turned around, would create it in the late 19th century. Leadership doesn’t figure in any of this?

Miguel Urquiola: So in the book, I actually, you know, often give at least half a page, maybe two pages to speaking about these people. And some of them, like Charles Elliot at Harvard are, you know, very much part of the book. I think that the leaders matter in the sense that the leaders kind of see the opportunity. Right? And for example, Hopkins would not have had that lead where not that Gilman, the president there, kind of, you know. Really. So I think actually that leaders do matter. That’s my sense, of course, you know, had there not been an Andrew White at Cornell, someone else would have occupied that space. So I think that these, the market dynamics that allowed this to happen, it would have been someone else in that sense. I don’t think that the leader is crucial. But if you want to know why Columbia did better than that school. I think that leaders can really matter there. Barnard was a key leader for Columbia. 

Fred: Right, so one of the most interesting points you just mentioned a moment ago you make in your book is that you argue that World War II did not dramatically increase the quality of American universities. And so the conventional wisdom is that the war effort encouraged the US government to invest lots of funds into the physical and natural sciences, for instance, and into computation sciences that in turn help to nurture the development of the quantitative social sciences, like econ and political science, actually. Why wasn’t World War II a critical juncture for the development of American research universities?

Miguel Urquiola: That’s a question. I should be clear. I think World War II is really, really important for two reasons. One is that most mechanically, basically there were many German, particularly Jewish scientists who just left him to the west and that surely strengthened many departments, particularly science. And second, as a result of the War, federal funding increased a lot as you say, and that has, you know, even though it has declined in more recent years, that really helped American universities a lot. So I think that the impact of World War II is important. It certainly is important to explaining things like why the German universities lost their lead and so forth. I guess that my point is that really, for example, World War II alone would probably not have improved American universities that much. That what was necessary was a structure that was already, like, in place for basically the US to take advantage of this talent fleeing or funding coming in. And what I argue in the book is that structure came into place already, you know, in the late 19th century, that by the 1930s or the early 1930s, the US university was ready and was already attracting top talent. But it was certainly ready to get more money and to attract more top talent. So I think that World War II is very important. I just don’t think it is what really changed the course of American university research. 

Fred: Yeah, so this is related to a question and I’m curious about is the role of the State. And you mentioned some of it. But as it relates to World War II. I’m going to ask it first at this point, what impact did the G.I. Bill, if  any, had on… these are sort of hundreds of thousands of veterans who poured into colleges and universities after the Second World War. Did they influence the development of the great universities in the US in some way? 

Miguel Urquiola: That’s a good question. It’s not something that I emphasize in the book. And maybe that’s that’s an oversight on my part. I think by that point, the universities were on a distinct growth path somewhere. And I don’t think that it changed what was going on qualitatively. It certainly had a large impact on the beneficiaries of the bill. And it might have affected some schools that, you know, it allowed to grow. But my sense is, and you know, this may be just something I have to be honest that I’ve missed, it’s not an integral part. I don’t think that the book, I think that, you know, that that the book is about university research. And I think that my guess is that the GI Bill did not have a huge impact on the top research universities. One reason, let me speculate a little bit. One reason for that might be that by that point, the top research universities had already become selective. And so they were less interested in sort of absorbing large numbers of people. They were by that point already interested in, you know, choosing people. So that, my guess would be and once again, I haven’t looked into this carefully, that the G.I. Bill had had a stronger impact elsewhere, where universities were less selective. But that’s, I’m speculating and I might just be revealing my ignorance also.

Fred: All right. Well, well, let’s let’s — let me ask you this. So, you also note that the highest quality research output in the US comes from approximately one percent of colleges and universities. What are the factors that led to schools being a part of that one percent? Was it just having a large endowment for much of this school’s history, as we mentioned a little bit ago? Does that matter? Or, is the one percent a result of a self-fulfilling prophecy, in a sense? In a sense that elite decision makers confer strong reputations on a select few universities? 

Miguel Urquiola: Yeah, that’s certainly relevant to the general story. So basically, the one percent reflects that. One thing that an educational market would do, getting back to those models that you mentioned earlier, is it creates stratification and so to speak, winners and losers. And the one percent in one dimension are winners in the sense that they have, as you mentioned, a lot of money, a lot of endowment and access to a lot of talent. Essentially, they’re able to get their pick of faculty and so on and so forth. What accounts for that? Part of it is just the natural forces of the market. But as you say, there is an element of not not not purely. Like if you were one of the people who moved early, if you started, you know. So let’s look at, you know, one of the most successful universities. Harvard has everything going for it. Right. It basically is the oldest school. Age matters. It had a large endowment, and it also benefited from good leadership in the form of Elliot. And so by the time Harvard started making its reforms, it was, I use this term in the book, it got into what I would call like a virtuous circle, which is, basically it starts getting prestige. It hires good people. That helps it get good students. Those people turn around and give money when they graduate. And basically, it just feeds on itself. And as other educational researchers, like Caroline Hoxby, have pointed out, on the other side, there are losers also. Right? Because there might be a university that, you know, was initially not so different from Harvard College that basically didn’t make the right moves and then falls off in either selectivity or wealth and so on. And so, I think that one of the things that markets naturally do is they create inequality sometimes. And the US, as we know well, is the poster child for, sort of, market mechanisms that create inequality. Because one point that I’m making in the book is that in terms of generating university research, this can actually be a good mechanism in the sense that it has produced a one percent of schools that are very well resourced, that do very well. In other senses, like the Chilean public schools, which I mentioned. These types of market mechanisms may not produce things we like. And so I think that that’s part of what went on. There are good old schools in the US like let me mention Amherst College or Williams. Which interestingly, these two schools, for example, were historically stronger if one looks at the history than, say, Columbia College. They were wealthier. They were stronger. They were often considered better reputation. Those two schools are still wealthy. On the other hand, they opted not to go down the Columbia path, which is to try to create a major university. It was a conscious decision. And so if you’re wealthy enough and old enough that you know, you could still retain a very nice position in the market. Swarthmore actually is, you know, it also falls into this category. But other schools that didn’t, you know, that weren’t, that didn’t have that, are much less selective and much less prestigious these days. And that illustrates this sort of inequality tendency.

Fred: But doesn’t also demonstrate that the one percent has changed very little over the years? I mean, you mention Hopkins and Cornell. And then Yale and Harvard and Colombia came on later on. So, again, if you look at the US World News World Report rankings, whatever one might think of those. Such as they are. Those are the same schools that are pretty much… 

Miguel Urquiola: Absolutely. Absolutely, and I think that this illustrates part of what I mentioned, that educational reputation will tend to be very persistent. Right? And so, for example, I think one market…markets that economists generally like are markets, say, like the cell phone market or the phone market, if we think about. You know, there used to be firms that were dominant like Palm or Nokia that we don’t even think of today that are basically dinosaurs. And these were, you know, that that lost their market position. And these are firms that, you know, were big 20 years ago. In education, that’s not the case, as you well point out. There’s much more persistence. And I think this speaks to those reputational mechanisms that tend to create persistence and virtuous and vicious circles. But it also speaks to why the Friedman conjecture might not quite hold. Right? It’s hard to have a good idea and shake up the university market completely, whereas it is possible to have a good idea and shake up the phone market completely or, you know, the cab market or, you know, the transportation, the urban transportation market. They’re just different sectors. And so, that sort of innovation that is based on productivity, I think is harder to see in the educational sector. And that speaks of good dynamics and of bad dynamics also.

Fred: Right, so let’s think about this term, these reputations in terms of public universities. So, what role did the government play in building great research universities, particularly public ones such as University California, Berkeley, where you got your great degree? The University of Michigan or even with the development of private universities, as you mentioned previously, Cornell University, which got an infusion of public money? Did government funding matter in building reputations and in research output and in what ways? 

Miguel Urquiola: I think so. So, certainly the government was active, you know, initially in distributing funds for the creation of basically universities in the form of the Morrill Act. Interestingly, the Morrill Act, in a very US fashion, basically allowed for the sale of federal funds, federal lands, sorry, to fund universities, but it left who would get the money to each state. So it basically said, you know, the state of Connecticut will get this money and then it can do whatever it wants, but has to be related. What Connecticut does essentially is to give it to Yale. New York State split it a bit, but gave it mainly to Cornell. Other states, Wisconsin did different things. And so there was, there was a lot of flexibility, but that federal subsidy mattered. And as you said, it helped create that. Then, that combined with state subsidies, like those available in California and in Michigan, helped create outstanding public universities that, you know, Berkeley, as you know, Fred, given our jobs here is one of our headaches. And that basically compete directly with the private universities, as does Michigan. The other way in which the federal government helped a lot, as you say, is through the research funding that came online, after World War II. That funding is quite interesting, and as I emphasize in the book, because unlike many other types of funding, even in the US, that funding does not mind inequality. Right? So that the lion’s share of the federal research funding goes to schools, to this day, like Johns Hopkins and like Wisconsin, basically the very successful research university because that funding is based on kind of grant quality. And so in a way, the federal government is interesting because when it comes to research funding, it has not resisted inequality. It has, I would say actually, reinforced inequality to some extent. And once again, that works well if what one is trying to generate is research. But, and I would say, that the federal fight, you know, that the role of the State, both the 50 states and the federal, has been very important also in creating research sectors. Hopkins, I mean, Cornell, as much would not exist were there not for the Morrill funding. And so it has been a big State role. 

Fred: Right. So I want to switch a bit and talk about, still stay on the things of a theme of reputation, and talk about your article you co-authored with some colleagues in American Economic Review called “The Big Sort: College Reputation and Labor Market Outcomes.” What is this article about?

Miguel Urquiola: So, this article is on the country of Columbia. I specify that since when I say Colombia, people think of us. So, there we look at a university system that exhibits many traits that the US won, which there is — there’s a free market, there’s, you know, schools that dwell in. What Colombia did that was interesting was that it introduced an end of college exams. That is a major specific and that happens across university. So, for example, how would work is that if you’re a graduate of a field like economics in Colombia or a field like dentistry. It was in all kinds of fields. You have to take an exam when you’re a senior in college. What does this do? And this gets back to the discussion we’re having earlier. If you are someone who is at City College, but you were trained well or you’re smart or your teachers really taught you well, and you think you’re just as good an economist or a dentist as someone who’s coming out of Columbia, which let’s assume has higher prestige, or NYU. You can show through this exam your quality. You can say, look, I may have gone to City College, but I’m actually better than many economists or dentists coming out of NYU, let’s say. This should reduce the weight that the labor market places on college reputation. So I, at that point, when I see these tests, I should say, you know, I should hire the person from City College who aced this test rather than the person from NYU or Columbia, who’s basically riding on the fact that he or she has pooled with all these fancy people. And what we claim in that paper is that the introduction of these tests have, kind of, this effect in the country of Colombia, that they help kind of clean up the market a little bit and put the weight more on students’ actual skill and on the productivity of schools rather than just reputation. So it’s a way of, if you will, cleaning up the market of these, you know, of these bad properties. We’re just riding a reputation and so forth. 

Fred: Right. So, the final question I have. So, I understand that you have a daughter who attends a, let’s say, a well-regarded university north of New York City. 

Miguel Urquiola: Correct. 

Fred: What advice did you give her when she was making decisions about college? Was her final choice influenced by the reputation of the school? Was the choice based on the chance to enhance particular skills? What about the potential for a nice salary post-graduation, as we see from the Education Department, which is now publishing these sorts of things. Any of this was a part of her decision. Basically, what I want to know is what does a kid decide when their dad is an economist of education?

Miguel Urquiola: That’s a good question. My answer would probably be not that different from what most kids decide. I think that, you know, my daughter was certainly, you know, because I talk about this stuff all the time. She was certainly, you know, like, alert to these issues. On the other hand, I don’t think that she made a radically different decision than so many of her friends whose parents are lawyers or whatever. 

Fred: Right. And so I thought there was no advantage of having a dad who’s a…. 

Miguel Urquiola: No, I don’t think so. I think that basically, you know, that children like her certainly weigh reputation. And they certainly, you know, they’re very aware, they’re keenly aware about school prestige. And then they also — so that’s the, you know, I don’t want to say a bad part, but it is something that parents and kids have. If I have to say one thing that surprised me about my daughter that I think is true of many kids is that when they go on these college tours, they have very strong reactions. 

Fred: Oh, really? 

Miguel Urquiola: That’s been my experience.

Fred: So, emotions matter in decision making?

Miguel Urquiola: It’s true. You know, so like, very, very soon they will, I mean, you will just look around these tours and you’ll see that some kids are on their phone or just look… And other ones are engaged. And they’re kind of, like, excited and stuff, like, as you can you can see it. And I think that was certainly true of my daughter, that she formed very quick reactions. This I like, and this I don’t like.

Fred: Based on what? Like the look of the campus?

Miguel Urquiola: The look of the campus. Something, something, you know…

Fred: A lecture or some…

Miguel Urquiola: Some feel about something. But very quick also, and I think that… So, that part of the reaction is a very, like I would say, economostic, kind of rational reaction. And part of it is, is… I remember visiting one campus of a very distinguished young college with my daughter. She will laugh if she hears this. And I think five minutes into the visit, she said, this is not my dress. And left it there. That’s it. That’s it. And so I think that there’s both elements of strong rationality and just emotion in this, as in many markets. 

Fred: Yeah, yeah. Well, Miguel. Thanks for coming through The Dean’s Table. 

Miguel Urquiola: Thank. It’s been fun. I was nervous about this interview. 

Fred: Oh, no, this is fun. It’s like a seminar. Thanks a lot.