I’ve written about the difficult challenges that America’s public research universities are facing before, here and here. Tyler Cowen and I began a conversation over lunch last week that extended to email about what’s really going on with this phenomenon. His viewpoint (and Tyler jump in if I’ve got you wrong on this) is that the growth of income inequality combined with the hollowing out of the middle class has seriously eroded the potential tuition base for these institutions. I agreed, noting that the explosive growth in these flagship publics coincided with the GI Bill and the growth of the middle class following  the Second World War.

What’s odd is that the conventional wisdom on this matter is quite different: that the enormous growth in federal R&D (Vannevar Bush’s legacy) fueled the golden age following the War. This viewpoint holds that the economic engine for the public research institutions was embodied in the growth of the National Institutes of Health and the National Science Foundation as they created first “Individual-PI science” and second big program science (like the polar programs and the big telescopes).

What is certainly true for the flagships is they are being squeezed from both ends–their tuition base is eroding while the Federal R&D bonanza has gone into a slow macro-decline. Add to that, the race to the bottom in state support and the student debt crisis and you have a recipe for bad times ahead.

So what to do?

I think many research publics are looking for their IP portfolios to save them (as in the Wisconsin WARF model), but the recent revisions to US patent law are creating challenges for patent defensive maneuvers. In any case, such strategies present real public relations difficulties for universities.

Others that are land-rich (as UC Irvine was in the 1960’s) may rightly attempt to generate long term new revenue streams from real estate. Stanford’s famous shopping center was an early successful example of this strategy.

Or…the public flagships may simply slowly decline, ceding the cutting-edge research space to the privates like Harvard, Stanford and Caltech, while they lower tuition to $10K/year and use MOOCS to reach out ever more to new pools of students. This may indeed happen (first in Texas). I hope it doesn’t. To me the integral linkage between research and teaching is absolutely central to national competitiveness.

So let’s find some creative ways to save the public research universities and implement them quickly.