Econ 101 and the Value of Foreign Students
I've always found economic analysis of education intriguing, all the more so when it comes to understanding the global education marketplace. So I was pleased to read a persuasive column in Sunday's New York Times by Harvard economist Greg Mankiw, an influential academic and author of bestselling textbooks who served as chairman of the Council of Economic Advisers during the George W. Bush administration.
Hammering home one of my favorite themes, Mankiw argues against the view — widely held by politicians and businesspeople across the political spectrum, and recently voiced by President Obama in his State of the Union address — that it's crucial for the United States to "win the future" in the fight for international economic preeminence. Mankiw (who blogs at says that kind of rhetoric betrays a misunderstanding of the benefits of economic exchange, including the kind associated with the movement of foreign students to and from the United States.

At the core of Mankiw's analysis is an Econ 101 example: When you hire a neighborhood kid to shovel your driveway, at a price that seems worthwhile to both sides, everybody benefits. So, too, with trading partners such as China: "As a general matter" – he singles out "limited exceptions" such as intellectual property theft — "their prosperity does not come at our expense." Mankiw quotes President Obama's legitimate concern that it is too hard for foreign students who earn degrees in the United States to stay in the United States, noting that we know skilled foreign workers pay more in taxes than they receive in government benefits. (They are also, he might have added, often key players in starting innovative new firms.) But Mankiw says that the president's corollary point – that we should be worried that foreign students are returning home to compete against us – is off-base.

U.S. higher education, he explains, should be seen as a hugely successful service export that creates opportunities for Americans, from professors to campus grounds crews, when large numbers of international students enroll in our universities. Those foreign students who go back to their own countries bring with them human capital that helps them spread the kind of knowledge – whether in technology, business, medicine, or other fields – that fosters economic growth.

Triumphal sports metaphors notwithstanding, rising prosperity in other countries is, of course, good for us, not bad for us. So is the spread of something Mankiw calls "even more fundamental … the values of democracy and individual liberty. Nothing could be better for the United States than these thousands of American-trained ambassadors who have seen first hand the benefits of a free and open society." We know, of course, that not every foreign student who comes to the United States returns home enamored with our people and institutions. But many do. And that's one more reason not to view either economic growth or educational success as a game in which winning is everything.

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