Aug. 17, 2004

LETTER TO THE EDITOR
Knowledge Machine Drives DC

Recently I read the story about GW’s economic effects on DC (“Measuring GW’s Economic Impact on the Metro Area,” ByGeorge! v16, n16) that is linked to the GW NewsCenter (www.gwu.edu/~newsctr/). This discussion takes a “follow the money” approach to GW effects. While I understand that this may have some simple popular appeal, as an urban economist, I must tell you that it misses the point. Note that if GW were not here, other activity would be building at least as intensively in Foggy Bottom as we are. So our net effect on the amount of building may be negative (because we tend to preserve some open space for the students).
The unique effect of a great university on the economic development of a large city is through the externalities created by the preservation, dissemination and enhancement of research and technological development. The University faculty have organized themselves as a unique “knowledge machine” that is open to the public in ways that other research institutions cannot duplicate. Through establishment of curriculum, research centers and teaching programs, the University organizes knowledge and answers questions. Knowledge-based industries rely on universities to perform these functions and feed off them — known as positive urbanization externalities in economics. The GW faculty attracts economic activity because these businesses can rely on us for teaching and research. Quite frankly, we also give away most of our research results. This justifies our tax exempt status and also provides a substantial economic development to DC compared to other activity that might locate in Foggy Bottom if we were not here.

— Anthony M. Yezer, professor of economics, CCAS

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