I grew up in a small university town and I can say definitively it was a great environment. There were plays and concerts and speakers. When I started writing fiction as a high school sophomore, I got to sit in on a class taught by a well-established novelist. When I was a senior there was a program where I could take my remaining high school requirements in the morning and take college classes in the afternoon.
I am, as you might imagine, a great supporter of colleges and college towns as is Joseph, my co-blogger. This puts us in an odd position. We are always looking for an excuse to promote higher education but the current line of argument about the economic benefits of universities at the local level is so weak and ignores so many counter-examples that it may do more harm than good.
The focus on local benefits is almost fatally flawed from the beginning by the fact that most of the benefits accrue at the state or more often national level. Both innovations and people tend to flow with the market. When we fund research and produce skilled workers, the chances of a big long-term pay-off are very good but predicting the exact form and location of that pay-off is all but impossible.
Keeping in mind that we are leaving out the majority of the return we expect on our investment, what benefits do we expect a university to provide to its host?
First there are the soft benefits such as enriching an area's intellectual and cultural life, providing role models, enhancing reputation. Viewed from a high enough level, the soft benefits may turn out to be the far most important, but they are difficult to measure and plan around. For now let's focus on the hard benefits.
University as employer
Universities are often seen as an almost ideal industry -- pollution-free, creating a number of stable, middle-class jobs and generating charming, highly liveable neighborhoods.
The problem here is that, if the suburban model takes hold and the town doesn't have a lot to recommend it outside of the school, the results can be really ugly, leaving the area with no tax base, an economy based on delivering pizzas and thousands of poor, badly-behaved students who get loud and drunk on Thursday night then head back to their parents' houses on Friday.
How do you avoid this fate?
One way is simply to stay small enough to maintain that Mayberry quality where it is possible for a professor to afford a decent little house within three or four miles from the school. I could give you some examples but while they may be charming, they aren't relevant to this discussion.
Another solution is to have a university in a large, economically diverse town where the economy and quality of life won't be completely overwhelmed by the ebb and flow of the academic calendar. Unfortunately, even very large universities only have twenty or thirty thousand employees (academic and administrative). College Station can build an economy around a university. Seattle really can't.
University as incubator
Call this the SAS model. Entrepreneurs who began as students and faculty decide to start some innovative new business just down the street. It's great when these things happen, but they don't seem to happen frequently enough, particularly not on the scale we'll need if we want to count on them to revitalize a stagnating city.
To further complicate matters, this desire to start a business in the vicinity of a school is directly related to the appeal of the area (students who hate to leave a town are more likely to find a way to stay). The vibrant urban areas that are likely to attract these small businesses are the very areas that don't need them.
University as labor supplier
This is probably the most commonly cited effect and it's certainly true that many of the more attractive industries require highly educated workers. It is not, however, so clear that these workers have to be in the area before the jobs are there or that the advantages of being able to recruit from an area college are that great. With only one very small nationally ranked school, Houston can't hope to supply itself with the first string academic talent it needs but that hasn't stopped its phenomenal growth (plenty of Ivy League grads are willing to move south), nor have the advantages of a local school caused Microsoft to focus its attention on UW instead of Waterloo.
Universities are vitally important to our intellectual, cultural and economic future and they have paid for themselves many times over. They do not, however, have that great a record of revitalizing urban areas. It would appear that you need more than a "build it and they will come" attitude, that certain conditions have to be in place and, even with those conditions, the short-term magnitude of the effects may be less than we hope.
From the comments
3 hours ago