Regarding the Transparent Nevada figures, it might be worth noting that the large majority of the highest paid faculty in the Nevada System of Higher Education are in the School of Medicine. These faculty typically are M.D.s in specialties, who see patients and train medical students to boot. They are expected to bring in much more in revenue than their salaries, and the doctors they train are more likely to stay in Nevada if we train them here.

Also well-paid are also athletic coaches, and while we may not like the fact that coaches make so much, that is the reality of the marketplace. In the better-paid sports, these salaries often come from sources of revenue other than the state-funded budget.

Finally, NSHE competes for faculty talent in a national market. These people have Ph.D.s from top universities, and we want to attract them to Nevada. In fields like engineering and science, many of these faculty bring in research dollars from federal and private sources far in excess of their pay, and these dollars fund graduate students and other researchers, and produce work of benefit to the state.

There is a national market for talent, and hiring in these top areas continues even in a recession like this one. If we want our universities to be competitive with the rest of the country, then we need to consider what those highly-trained faculty would earn elsewhere. We don't need to pay them more than necessary to attract or retain them, but we can't pay them less for long, not unless we want to see the best ones leave.

If we don't want to compete, then we should just have community colleges, and tell our brightest students they would be better off moving out of state. Of course, you know they won't come back, and our beloved Nevada will forever remain at the bottom of the rankings.

Pardon the umbrage, but one blogger above (Mr. Teatime) called Miller and Parker the worst economists in the state. Actually, if you look them up on RPEc, Miller is the top-ranked economist in the state, and Parker is ranked 7th in the state. Both are ranked in at least the top quarter of economists internationally.

Dear Sgt. Rock,
The sentence you quote is out of context. The ellipsis you used covered up a "but" which showed that the column was making an alternative argument.
Second, a value-added tax is not an income tax, corporate or personal. While all taxes have distortionary effects on incentives, creating economic inefficiencies, a VAT has less than an income tax, and less than our current tax on a firm's payroll (the modified business tax). It also does not contain the progressivity conservatives hate, the idea that people with higher incomes should pay at a higher rate. However, it is not as transparent to the taxpayer as an income tax or a sales tax.
It is clear that our current tax structure cannot generate the revenue it once did. What sort of taxes would you advocate instead? Or do you simply oppose all taxes, no matter the type?

[continued from prior post]

Markets are systems of exchange. Mark 4:25 says "For to the one who has, more will be given, and from the one who has not, even what he has will be taken away." Nowhere does this apply better than to market economies. People without education, skills, property, family, or luck can work very hard for many years and make scant progress. If we can help level the playing field, we help more people compete in a market economy by giving them something of value to sell to employers.

I believe in public universities. You obviously do not.

You use the word "elitist" to describe universities, but what is more elitist than not funding public education? Wealthy students go to private schools, while most of our students come to us because they cannot afford to go where the rich go. We try to provide them with a good education nonetheless, one they can be proud of and one that makes them more likely to stay in Nevada.

Could public education be better? Of course! Could we use private incentives to help improve it? Great idea! But it still needs public funding, regardless of how we provide it. I would support meaningful reforms, and an experimental approach that encourages Schumpeterian creative destruction (an area of my research), but your solution of cut, cut, cut does not get us where we need to be, and it makes you seem less the objective analyst and more the ideological hired gun for those who don't want to pay state taxes.

Sincerely,
Professor Elliott Parker

Dear Patrick,

A failed state is, by definition, one without a functioning government, which should be libertarian nirvana, as I remember my Nozick. Once you need a state to define and enforce private property rights, you admit the need for a legal system, courts, police, and even national defense. Private markets cannot provide this because it is a classic free-rider problem: the person who benefits most from catching a crook is the next victim, not the last one.

But now you are on an ideological slippery slope, because you are admitting the potential existence of externalities and public goods. What about roads, technological infrastructure, education, banking regulation, vaccination, or social insurance? Private interests don't always align with public ones, and one doesn't have to be a loony-tunes Marxist to admit that the state can actually benefit us, though one could not work for the NPRI.

You speak of bureaucracy and the misincentives of those spending other people's money, and of course you are right that the state has these problems. But the private sector has these problems too. What caused the financial crisis but too-big-to-fail private bankers spending other people's money for their own benefit?

Do I think externalities and other market failures are common? Absolutely. But I think in most cases they are outweighed by public failure, the problem of having government come up with better outcomes. I am a pro-market economist. The difference between you and me is that I would use the word "most" while you would say "all." Inefficiency is present in most human organizations, and sometimes the inefficiencies of the private sector outweigh the inefficiencies of the public sector.

[to be continued]

Dear Patrick,
Glad you got out yesterday. I was just amazed at how many posts you made on my column, and wondered where you found the time. My daughter's team won, but she was 0-for-3 and not a happy 8-year-old even though she did well at pitcher and first base.
The budget cuts are not hypothetical, and there is no need to make them look bigger. But your $30,000 per student number obviously has some sort of kitchen sink thrown in. I know that you have included grant funds in the past, to make the Governor's proposed cuts seem smaller, so I was guessing you might be including them again.
Yes, of course the rise in higher education budget was faster than inflation, especially from 2003 to 2008, but our enrollments grew pretty fast in the years prior, and there is a lag effect, as our next budget is built on our past enrollments. If you look over the long-term, however, and don't just pick your starting year strategically, the trend is very different, especially if you remember that we compete with other universities across the country, and when incomes goes up, we have pay more too to get good people.
Your comparison of public vs. private education in less-developed countries is nagging at me, because I think you may be confusing cause and effect. These countries are poor, in part, because they have weak public education systems, and weak government in general.
Successful economies depend predominantly on private markets, but in all successful economies the private sector requires an underpinning provided by the public sector. Somalia is the archetype of a pure free market economy. Markets work best when government works too.
Yes, too much government can be bad, but Nevada is so far away from that amount it is not even worth debating.
Could we do things to make public education more efficient? Sure, though it is harder than you think. But how to you get from there to becoming an apologist for dramatic cuts to education?
Elliott Parker

I am sorry not to have enough time to respond to each and every point Mr. Gibbons has made. I am glad he enjoys his job so much he is willing to spend most of his Sundays blogging. I was watching my daughter play LL baseball.

The state-funded operating budget for UNR peaked at $197 million in the 2008-2009 fiscal year, including student tuition and other sources in the total appropriation. This fell to $172 million for FY2011, including federal stimulus money and increased tuition, a 13% drop.

The state's portion fell by 19%, from $144 to $116 million. For all of NSHE, it fell from $684 million to $466 million, a decline of 32%. Adding back in student tuition and federal stimulus money, it fell from $886 to $779 million, about 12%.

Our student FTE was 12,500 (and our headcount closer to 16,000). Divide this into $197 million, and you will get a number half of what Mr. Gibbons reports. Of course, you could double it by using the biennial amount, or you could toss in the Medical School, Cooperative Extension, and everything else the university does. Heck, you could even toss in the externally-funded grants we work on, the patients the Med School sees, the cost of residential halls and other self-funded budgets, and our capital construction budget, and you can make it look really big. But it wouldn't be any more accurate.

Finally, does Mr. Gibbons really mean to argue that public higher education is a bad investment? Wow.

Dear Sgt. Rock,

Note that I said "fiscal" effects, and what I said is standard in virtually any economics textbook. Yes, perhaps you could find an economist who says different, and so I was not technically correct. Newspaper columns are a difficult place to provide every appropriate qualifier, but perhaps I should have said "any reasonable economist can tell you..."

Regarding the rest of my facts, I would be happy to share with anyone where I found them. As far as the logic, I leave it to the reader to judge whether the facts I cite support the implications I draw.

If you would like a better explanation of the fiscal/macro effects vis-a-vis the micro and distributional effects, please see <http://www.business.unr.edu/faculty/park...>, an explanation I wrote a year ago.

Sincerely,
Elliott Parker

Looking at this report, it seems more true that Mr. Ralston's headline should have been "Rural Continues to Screw Urban," and this is a pattern often seen in the rest of the country. Why do folks in Clark County lump the entire rest of the state into the "North"? The Reno-Tahoe area is very different from Fallon, Tonopah, and Elko. We also have a disproportionately large share of our state general fund revenue coming from gaming, and most of that is in Las Vegas. So the headline could have been "South screws tourists, and Rurals get a Cut." But I guess that headline would not have been as fun.

Let me make a minor correction. The piece I wrote with Bruce Shively was not a shot in response to the memo by UNLV's former president and current financial VP, or an attack of any sort on anyone. It was written as a service to our faculty and our community, and it followed on an earlier piece we wrote that focused on UNR's budget alone, which is on my website at http://www.business.unr.edu/faculty/park.... It is called a Guide for the Perplexed.

I also want to clarify that although I coauthored it with our budget director, it was not an official UNR report. Though I am confident we said nothing in it that would discomfit our adminstrators, readers should know it was neither requested nor approved by them.

Chancellor Rogers argues that we are all underfunded, and that the desire to increase UNLV's budget is not meant to hurt UNR or the other NSHE institutions. As the recent legislative stop-loss maneuver demonstrated, this sentiment is not easy to put into practice. UNLV's stop-loss funding came at the expense of everybody else, especially CSN. When the biggest kid in the class starts complaining that he doesn't get enough allowance, the other kids in the class get nervous about their lunch money.

As the Donner Party so well demonstrated, in times of shortage it is tempting for us to eat one another. While it is fun for our students to compete with each other on the ball field, our institutions need to cooperate with each other for the sake of the state. We are all in this together.

Peegee76 makes a case that UNLV has improved over the past couple of decades. I agree. Though I am only a Nevadan by choice, not birth, I applaud UNLV's efforts because I see them making the state a better place to live, both north and south.

I hope I am making it clear that I think it is harmful to Nevada's higher education for UNLV to play tug-of-war with UNR and the other institutions. I want UNLV to improve, but not at the expense of our institutions and our students.

Bruce and I showed that in our 2008-2009 budgets, UNR and UNLV had almost identical instructional budgets per student FTE. UNR spent more per student, but less overall, for administration, operation, and maintenance. We argued that this can largely be explained by the other budgets that UNR is responsible for.

I guess I can understand why former President Harter and Vice-President Bomotti would like UNLV to have more administrators per student, but I am not sure how that makes a difference to the quality of UNLV's teaching and research.

This week the institutions are putting together their detailed budgets for 2009-2010. Once I can get this new budget data from UNLV, I will rerun the comparison. I will make these results available on my website, however it turns out.

Elliott Parker
Professor of Economics
University of Nevada, Reno