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RIP: Mourning Our Losses, Celebrating Our Inheritance

August 26, 2008 By Lee Egerstrom, Economic Development Fellow

The past few weeks and months have been terrible for the intellectual family that makes up the University of Minnesota and higher education in Minnesota. By extension, it has been terrible for all of us who live, work, play, study or otherwise try to coexist in a global society from a base in Minnesota.

On the same day (Aug. 18) we learned of the deaths of globally recognized economics scholar Vernon Ruttan and former Humphrey Institute of Public Affairs dean John Brandl. Their passing follows that of Nobel Laureate Leo Hurwicz, international exchange rate expert and former Humphrey Institute dean G. Edward Schuh, and former economics professor and administrator James Simler.

Minnesota is at a crossroads. We must decide how we are to mourn their deaths and the loss of what they've done for us. An option is to celebrate their accomplishments, rejoice in how their research has spilled out to strengthen our homes, farms and factories, and dedicate our tax dollars to keep Minnesota a national center of pure research - for current social, scientific and economic needs and for future generations.

The latter legacy is not secure. Philip Pardey, an applied economist and technology expert, teamed with two graduate students in 2007 to prepare a report that chronicled the decline of research investments at the University of Minnesota. That report, entitled "Long Gone Lake Wobegon," showed Minnesota's slippage in research investments over recent decades. (1)

The report compared research and development spending among 14 peer universities from 1972 through 2004. Among the group, research spending at the University of Minnesota grew the slowest of these peer institutions, and the funding slowdown was across the board from federal, state and local government, and industry sources.

Nationally, Minnesota ranked 19th in total academic research in 1972; and it ranked 26th in 2004. Academic R&D went from 20th in 1972 to 40th in 2004, and academic R&D per dollar of gross state product slipped from 20th to 43rd in that time span.

Those trend lines should trouble all of us. And it hasn't gotten any better since 2004, warns Ed Lotterman, who formerly studied under the recently departed giants and now teaches at Augsburg College and writes a syndicated newspaper column "Real World Economics."

Data on public investment in research aren't available from 2004 on. But state investment in education from kindergarten through post-doctoral research has taken huge hits most years since 2003.

Lotterman likens the research component at the University of Minnesota to watching a tree grow on the prairie in his native southwestern Minnesota. "It takes years to grow tall and strong. But if a prolonged drought hits it, you can't revive it to its past vigor by going out and throwing a bucket of water on it. It takes years of nurturing," he said.

Turn back the clock a half century to see the nurturing that went on for research in Minnesota. "It goes to the bipartisan support for education and research we had during the times of (Governors) Elmer L. Andersen and Orville Freeman - in that era," he said.

Brian Buhr, who took over as head of the University's Department of Applied Economics in July, said that earlier support made the University a major research institution, attracting the researchers we now mourn, and they in turn attracted brilliant scholars to the faculty and gifted students to the University in recent decades.

To use an applied economics lesson learned long before the University of Minnesota was founded: "Ye shall reap what ye sow."

As if to prove the point, Pardey and colleagues found that 70 to 75 percent of University research dollars from 1972 onwards went into Minnesota's huge health and medical sectors and the food and agriculture sectors. Look at the state's economic strengths. We have reaped.

The importance of this research isn't always that obvious. The structure of education in Minnesota is partitioned and isn't as easy to connect.

Research is centered at the University of Minnesota and its various campuses. Delivery of higher education, however, is primarily carried out by the Minnesota State Colleges and Universities (MnSCU) system and its campuses throughout the state. One such campus, St. Cloud State University, is among the nation's 10 largest universities preparing educators. Research and education are not divisible regardless on institutional structures.

Interactions apply to private colleges and universities as well even though they have smaller research components in Minnesota. Public policy expert John Brandl spent part of his teaching career at St. John's University when not at the Humphrey Institute or serving in the Minnesota Legislature. Simler closed out an illustrative career after public service and the classical economics department at the University by teaching at Macalester College.

Lotterman, the gifted economics writer and educator, is a product of the University and an example of the interconnectedness of Minnesota higher education. He went from graduate studies at the St. Paul campus to teaching at Metropolitan State University (a MnSCU campus) to teaching at Augsburg, a private college.    

Of the recently departed, we at Minnesota 2020 had most contact with Ruttan and Schuh.       

As is the case with most Minnesotans involved with public policies and global markets, we turned to Schuh to understand the interdependence of business transactions and development in Minnesota with events in global markets and the public sector in Washington, D.C. From him, we learned how the U.S. dollar and hard world currencies transformed in 1971 from being a communications tool for exchanging value and became a commodity like all other raw materials in world commerce.

Thanks to Ed, we know today that the price of corn, for instance, is directly tied to the price of oil; prices for both oil and corn, meanwhile, are directly tied to the exchange value of the U.S. dollar. Up and down the supply chain, the same relationships exist with ore and currency values in northern Minnesota, prices of medical technology devices made in the Twin Cities, and the economic feasibility of manufacturing development throughout southern and western Minnesota.

In the case of Ruttan, we learned of the factors that induce technological invention and adaptation. Minnesota 2020 used the Ruttan-Hayami Induced Innovation model, developed with Japanese economist Yujiro Hayami, as a guide last year to focus a five-part series on Minnesota's ghost towns. It was not a stretch to do so.

Within the past year, Ruttan expressed frustration to us that Ruttan-Hayami has proven successful in explaining why technological change occurs, but not why it is resisted. He welcomed the cross-disciplinary work using the model now underway by sociologists, geographers and anthropologists at various research centers in Europe, Japan and around the United States.

Looking back, it should be noted that one of the four pillars of the Ruttan-Hayami model involves institutional economics. Acceptance of institutions as an integral factor can be traced back to the research work of Nobel Laureate Hurwicz.

In other words, Ruttan either built on or did compatible and contemporary work aided by Hurwicz. Hurwicz built on and changed earlier institutional economic theories developed by Noble Laureates Paul Samuelson and Frederick Hayek. The thread that connects such thinkers is now extending out to other academic disciplines and younger researchers, offering hope for a more peaceful world coping with change in the 21 Century and for a more prosperous Minnesota.

The task of keeping that thread from unraveling partly falls into the hands of Buhr, the new head of the applied economics department, and to researchers like Pardey - already a worldwide recognized scholar on the economics of technology.

Neither they nor their colleagues across all disciplines at the University can do their jobs without taxpayer support and public acceptance that pure research is an investment in Minnesota's future. We cannot reap if we do not sow.

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