The Worst Malinvestment

Austrian Economics argues that growth comes from innovation and entrepreneurship, with “the market” directing resources to areas of the economy that provide the greatest returns. It also observes that when government uses interest rates, subsidies, taxes, or other types of market interference, it can cause “malinvestment” – or investment in areas that wouldn’t receive market support. This leads to losses and wasted resources.

While there are many examples of this as government has become bigger and more unaccountable, recent events on many college campuses around the US show some of the worst malinvestment our country experiences year in and year out.

Public universities certainly don’t run like capitalist institutions, but neither do private colleges (like the Ivy League). While people complain about all kinds of corporate welfare, what about university welfare? The eight Ivy League Schools, plus Northwestern and Stanford (all private) received $33.1 billion in grants and contracts from the federal government between 2018 and 2022 in data calculated by Open the Books.

Meanwhile, the government has given $1.6 trillion in “loans” to young people to buy the “services” of schools and their academics. Although these loans are sold as a good thing for young people, we think the main effect is to create jobs for and support the wages of academics who get to pocket the money whether their work leads to new inventions and innovation or a disdain for freedom, capitalism, and America itself.