Oklahoma’s higher-education officials recently touted a report they commissioned which featured an eye-catching claim: for every $1 the state invests in public colleges and universities, the economy gets $17.48 in return. Well, as Mark Twain once said, there are lies, damn lies, and statistics. 

That $17.48 statistic sounds impressive—until you look at how they calculated it. By counting all higher-ed spending and multiplying it for economic ripple effects, then dividing only by the small slice of funding from the state (instead of total funding), they’ve created a number that misleads by omission. 

Let’s break down the math. 

Higher ed claims that “every dollar in state appropriations resulted in $17.48 in total economic output throughout the State of Oklahoma in fiscal year 2024.” To see how misleading that is, consider this example. Let’s suppose I have $100,000 of income from several sources. But let’s say I decide to only look at one source of income amounting to $10,000. 

Most economic studies analyzing an amount of spending apply a multiplier to that amount. The multiplier might vary a little, depending on the kind of spending, but generally it’s about three. That is, $100,000 spent on me (my income) would result in about $300,000 of economic activity.

That multiplier effect comes from the fact that when someone receives a dollar, they then pass part of it along to someone else through purchases, who then makes purchases, and so on. On average, only part of a dollar of income is spent within Oklahoma. Part is saved, part is spent outside the state, and part might be hoarded. These “leakages” mean a dollar of income can’t be passed around indefinitely to create mounds of new economic activity. Eventually, the passing around peters out, and we generally get relatively modest multipliers like three—not 100, 50, 20, or 17.48. 

Now, back to my example. I get $100,000 in income, which boosts total economic activity by $300,000. However, I’m only interested in $10,000 of my income. Perhaps I’m trying to prove that if it weren’t for that $10,000, my community would really lose out if I moved somewhere else. Therefore, that $10,000 alone preserves the entire $300,000 economic impact of my total income. Thus—abracadabra—every dollar of my income results in $30 of total economic output throughout the State of Oklahoma.

Clearly, this is absurd. It ignores the other $90,000 of my income. 

And that’s what the higher ed’s economic report has done. It took a calculation of total spending on higher education—including students’ spending on tuition, fees, and books, as well as out-of-state students’ spending on everything it takes to live, as well as state appropriations—and applied multipliers to all that spending to come up with a total of $14.6 billion in economic activity. Then, it divided only by the state’s appropriation amount of $836 million to come up with the $17.48 return on each dollar the state spent.

When I worked as a researcher in the Texas Comptroller’s office, I had a supervisor who had researched the economic return on higher education. He was offended by an academic study I had found that claimed a jaw-dropping return on road spending of some $30 for every dollar spent on roads. Meanwhile, the highest return on higher education he’d found was $4 for every dollar spent.

Try this for a thought experiment. What if all our roads disappeared overnight? Obviously, the bulk of economic activity would immediately cease. What if all of Oklahoma’s state universities and colleges disappeared overnight? The economy would keep on grinding. That doesn’t mean there wouldn’t be losers. We’d see dollars go to other states as well as to Oklahoma’s higher-priced private higher education schools. But there would not be an economic meltdown.

The thought experiment exposes another sleight of hand common in economic analyses, whether commissioned by someone wanting to build a new stadium, spend more on health care, spend more on preschool, or spend more on higher education. They generally presume there are no alternative ways to spend money that might produce as much or more economic activity, perhaps by spending on more efficient economic actors or spending on much more productive endeavors. 

The economist Richard Vedder, for example, told Oklahoma Watchdog in 2013 that econometric analysis he has done “suggests that the relationship between state appropriations for higher education and economic growth is actually negative; resources are taken from competitive private enterprise driven by market discipline and given to an inefficient sector sheltered from such discipline.”

It’s an important conversation to have. But when you see an eye-popping ROI number, just make sure you check the math.