Higher Education in the United States: Laissez-Faire, Differentiation, and Research

The U.S. higher education system stands out in three dimensions. First, it has the highest number of leading research universities. Second, it displays significant differentiation: multiple types of institutions offer services that differ in cost, prestige, etc. Third, it has a laissez-faire/free-market orientation: private and public entities are free to open schools and compete; essentially all schools enjoy substantial autonomy. This paper makes the case that these features are systematically related. The development of the American higher education market-which allowed market forces to operate and lacked centralized planning-contributed to the emergence of differentiation and a set of leading research universities.