"In the 2006-7 school year ... international students’ net contribution to the United States economy was nearly $14.5 billion," reports the New York Times, citing a just-released study by the Institute of International Education. The IIE report itself states: "International students contribute approximately $14.5 billion dollars to the U.S. economy, through their expenditure on tuition and living expenses." Apparently, two-thirds of this spending is financed by students' own families and their home governments.
As anyone with a modicum of economics training should understand, this number represents a net contribution to the U.S. economy only in the absurd limiting case in which the opportunity cost of resources used in providing U.S. education services to foreign students is ZERO. I bet my Dean at Harvard--which is ranked #9 among top hosts of foreign students--can vouch that he pays me real money.
And I won't even get into the complications raised by the presence of foreign faculty and teaching assistants providing these services...
This kind of confusion--essentially the mercantilist fallacy that takes exports as good in and of themselves--is as common as it is infuriating. Last week a student in my trade course told me that he was going to write a paper that analyzed the impact of some free-trade agreement on the exports of his country. When I asked him why this is an interesting and important question, he replied "exports are good, as they raise income." After a whole year of economics and a half-semester of my trade course, we economics faculty had still not managed to purge this fallacy from the student's mind.
Here are some of the questions an economist would ask in thinking about the net contribution of foreign students to the U.S. economy. Do they allow universities to charge higher prices for their services (a terms of trade benefit)? Do they generate knowledge spillovers for American students? Do they enable the U.S. economy to free ride on the costs of the primary and secondary education these students receive in their home economies?
None of these questions are answered by the $14.5 billion figure.