I’ve made a few passing comments in recent weeks about New Zealand universities, mostly in the context of discussions and debates around immigration.  Export education is one of the key emphases of the current government’s economic strategy; they and their MBIE advisers appear to believe that somehow we boost the incomes of New Zealanders by making it relative easy for people who come to study here to gain residence.

I’ve been a bit skeptical about this argument.  If there are economic benefits to New Zealanders from immigration to New Zealand, they probably arise mostly if we are able to attract particularly high-skilled, able and innovative people.  In a US context, people often talk of the benefits of having a top tier university system, which attracts top-flight students to do PhDs in the US and can help encourage some of those people to settle in the US, with possible spillover benefits to the wider economy.  It all sounds good in principle, and there is some evidence of those sorts of gains for the United States.

But what about New Zealand?  Well, I noticed that one set of international rankings of universities (the QS rankings) had been released earlier this month, and I started digging round in their data.  There are a number of different rankings systems, and they all produce slightly different results, emphasizing slightly different things.

On the QS rankings, here are the top 10 world universities

New Zealand universities just aren’t in the same league as these sorts of places.  But how do our universities compare with those of other small advanced economies?

I painstakingly went through both the QS rankings and the Times Higher Education rankings for New Zealand and all the smaller OECD and EU countries, plus Singapore.  “Small” in this context meant fewer than 11 million people (Greece, Belgium and the Czech Republic are all just below that population).  There is quite a gap to the next smallest country, the Netherlands, with almost 17 million people.  New Zealand’s population is around that of the median country.

I took the average ranking for each of the universities in each of these countries, for both the QS and Times rankings.  Across the two sets of rankings, New Zealand’s universities turn out to be right on the median among these small advanced economies. The really lowly ranked systems are those of the former Eastern bloc Communist countries (notably Bulgaria, Croatia, Hungary, Latvia, Lithuania and Slovakia).

But New Zealand’s economic performance is also less impressive than most of these advanced economies.    There is a reasonable correlation between the two.  Here I’ve shown the average university ranking for each of these small advanced countries against real GDP per hour worked for 2014, taken from the Conference Board’s database.  New Zealand is highlighted in red.

New Zealand doesn’t seem to do too badly, but we don’t stand out.  (The outliers on the right are Luxembourg and Norway).

If we don’t stand out, it is a little hard to see why top-tier foreign students would be keen to come and do PhD (and subsequent post-doc) study in New Zealand.   We will always attract some people –  and being an English language country helps us attract more foreign students than one might expect given our size and distance –  but not many of them will be from the top tier of potential students. It is those top tier students from whom the strongest contributions are later made –  and usually only from a relative handful of them.  And for almost all of those people, the top universities in the US or the UK (and a handful of others, in Switzerland, Singapore, or perhaps even Australia) will overwhelmingly be the destination of choice.

Perhaps for some these sorts of numbers suggest a strategy: “lets make our universities great, and then we’ll attract top tier students, who in turn might stay and help lift New Zealand’s economic performance”.  I suspect that if there are any causal relationships here, they are mostly the other way round.   Top universities are as much consumption goods as production ones, and luxury products tend to be found in the richest and most successful countries.  The United Kingdom and the United States have long been the richest and most successful countries and they have university systems that reflect that (the UK isn’t that large a country but has around 15 universities in the top 100).  Among the smaller countries, Switzerland and the Netherlands  have  also long been among the most prosperous countries, and also stand out with relatively high-performing universities.

No doubt, causation runs both ways –  top universities are a magnet for talent and in some cases that talent can be part of the process of innovation and economic advancement –  but it seems most unlikely that one can first  create the top tier university and then see the prosperity follow. That is perhaps especially so in somewhere as small and remote as New Zealand.   What would make top tier foreign academics, in large numbers, want to come and stay in New Zealand?  Perhaps money might do it for some, but even if governments were to make the money available, backing this as some new “growth strategy”, I rather doubt it could be a sustainable strategy.  Distance is simply too formidable an obstacle.

As I was playing around with this material, I was thinking of the New Zealanders who had worked at the Reserve Bank in my time there who had gained PhDs.  A few have pursued them at New Zealand universities –  several are at present – because it enables part-time study and fits with family commitments etc.  But I jotted down a list of 14 people I could recall who had done PhDs overseas, mostly after leaving the Bank.  Most went to the US or UK, and all of those went to top tier universities (LSE, Cambridge, Berkeley, Stanford, Chicago, Yale, Princeton, Harvard, NYU).  Even the two who did PhD study in Australia did so at universities rated materially higher (overall, and in economics) than any of New Zealand’s universities.  These were all very able people, and the revealed preference in their choices suggests that universities of the quality of those in New Zealand (middling by international standards) are most unlikely ever to attract any material number of the sort of exceptionally talented creative people from abroad around whom one might reasonable begin to build an immigration policy.

PhDs aren’t everything, and lots of highly creative people have no interest in that particular sort of field of endeavor, but it just helps illustrate the point about how difficult it is more generally for a small remote country, with mediocre incomes, to attract the world’s best.  In my view, we are much better focusing on building a prosperous and successful society around our own people, as capable and hardworking as any in the world.

But, by all means, put in place a facility akin to the US one for people of ” extraordinary ability”. Here are the requirements for one set of fields:

Proving extraordinary ability in science, education, business or athletics:

The applicant can submit evidence of receipt of a major international award such as the Nobel Prize, Olympic Gold Medal or at least 3 of the following:

• Receipt of nationally or internationally recognized award
• Membership in organization that requires outstanding achievement
• Published materials about the applicant in professional or major trade publication
• Judgment of the work of others
• Original scientific or scholarly work of major significance in the applicant’s field
• Evidence of authorship of scholarly work
• Evidence that he or she has been employed in a critical or essential capacity at an organization with a distinguished reputation
• Has commanded or will command a high salary in relation to others in the field
• Other comparable evidence

If we can attract these sorts of people, New Zealanders might well benefit.  We probably wouldn’t get many, but who knows.  And large numbers aren’t really the path to prosperity; mass moderately-skilled immigration hasn’t been any sort of successful economic lever in New Zealand in the last 25 (or 70 ) years.