No matter where you live or your standing in life, you have likely felt more vulnerable in recent years. The COVID-19 pandemic highlighted this vulnerability by showing us the fragility of our health and health care system. Even as the public health threat wanes, many individuals and regions still feel the economic reverberations from the pandemic. Lately, unexpected and sudden shocks to the economy seemingly come from every direction. Threats from abroad, such as the war in Ukraine and lockdowns in China, have disrupted globally integrated supply chains and led to higher prices at home. The changing climate has put Coloradans at a higher risk of extreme weather events such as the Cameron Peak fire in 2020 and Marshall fire in Boulder County in 2021, which destroyed nearly 1,000 structures. The list goes on.

A street sign with "Wall St" on it

Given the numerous and wide-ranging challenges, it is not surprising that resilience to economic shocks has become a leading concern of policymakers as well as the public. Economic resilience has three capabilities: avoid the unexpected shock; withstand a disruption; and recover quickly.

Colorado State University plays a vital role in prevention and rebound. In fact, CSU has literally become a shock absorber. One way to see this is through the Colorado State University System’s estimated $2.9 billion economic impact, partially based on the added earning power of alumni. The constant flow of funds into the economy can buoy an entire region. Larimer County, for instance, has been less susceptible to downturns, such as the pandemic, than other areas.

But CSU’s contribution to creating a more economically resilient Colorado goes well beyond being a financial anchor for the regional economy. CSU, along with other land-grant universities, are unique institutions that mix expertise in a wide spectrum of fields. In this light, the principal output of the University is information and comes through its convergent missions of teaching, research, and engagement in service to the state. Teaching educates students and increases the talent base. Research generates innovations to both shield and help regions recover from economic shocks. Engagement crucially spreads information, research, and innovations to the entire state, promoting the economic prospects of disadvantaged communities.

As the knowledge economy becomes increasingly important for economic growth and resiliency, CSU is a leader in educating Colorado’s workforce. CSU has the most alumni working in the state, approximately 112,500. As such, it is largely responsible for Colorado’s high talent level, especially since most CSU graduates choose to stay after graduation. That talent helped shield many workers and communities from previous recessions as well as COVID-19’s economic impact, as those with college degrees were the least affected economically.

A woman takes notes with pen and paper during a lecture.
Credit: Joe A. Mendoza, CSU Photography

Furthermore, CSU’s talented faculty and researchers are producing innovations, patents, and startups at a record rate. Through collaboration with CSU STRATA, the information that comes from CSU research provides meaningful jobs that help solve important real-world problems. This includes companies that range from biotech startups such as Validus Cellular Therapeutics to Prieto Battery that manufactures lithium ion batteries based on tiny or nanostructured materials. The culture of growth and innovation at CSU is helping to create a technology and innovation ecosystem in Colorado, which is a key marker for a resilient economy.

In true land-grant style, the lines among teaching, research, and engagement blur to complement each other. Colorado also has one of the highest rates of self-employment in the country. The Institute for Entrepreneurship builds on this foundation and works with all CSU affiliates and community members to harness the state’s talent to create innovative businesses. The range of startups that walks through its doors is wide. It helps diversify regional economies, particularly those recreation- and resource-dependent regions that crisscross the state. Diversification is an important inoculator to avoid economic catastrophe, such as when COVID-19 hit the ski areas in the early stages of the pandemic. As the mountain winter economies depend narrowly on skiing and related hospitality, their economies took the largest employment hit in Colorado immediately at the outset of COVID-19.

Filling the Information Gap

Universities are unique institutions, mixing expertise in a huge spectrum of fields. The land-grant system created by the Morrill Act in 1862 is unique in its three convergent missions: teaching, research, and engagement. And the blurring of those missions is, in fact, a positive contributor to the principal output of universities, namely information from economic analyses to engineering solutions. This wide range of information is especially effective as an inoculator, reducing the pressure on stressed systems, from the economy to places affected by climate change. But they can also help respond to shocks by generating information that can do everything from fighting viruses to assessing where stimulus monies are likely to reach the most disenfranchised populations.

Universities act as shock absorbers by inoculating regional economies with information and assisting economies following an economic shock with the means to recover quickly.

Economies – regional, national, and global – generally run efficiently, making the highest and best use of limited resources. But this efficiency depends vitally on some key assumptions. Perhaps most importantly, all businesses, workers, investors, government officials, and others must have full information on current economic conditions, opportunities, and threats. This scenario is most likely in relatively “thick” informational markets, where transactions between buyers and sellers are plentiful. The Denver housing market is an example of a thick market, where hundreds of transactions and potential transactions take place every day. By observing these multitudes of transactions, one can gain an understanding of the market and ultimately pursue the best options given that full information exists in this marketplace.

Unfortunately, not all markets are informationally “thick.” “Thin” markets exist as well, such as business investment in rural areas. Because of their isolation, there are relatively few business investments on a small range of projects, even on a per capita basis. This lack of information about the track record of a potentially promising investment project leads to higher uncertainty and perceived risk, deterring investors or bankers considering small business loans. These crucial economic actors will either demure on the project or demand a premium for their investment – which in turn may deter the project’s leader entirely. But not investing leads to a continued situation of lack of market information, evolving into a pernicious cycle of thin information and underinvestment.

Illustration depicting blocks of different heights with icons on them representing the economy (fish, trees, snow, microscope, plants) against a blue mountain background
Credit: Wendy Brookshire, CSU Marketing & Brand Management

Yet, universities can help level the informational playing field by doing what they do best: research with the help of mentored students, then engage the community to make clear the potential economic benefits of the investment. More generally, universities can provide baseline information on the business economy, such as REDI@CSU has done with its economic indicator reports for all 64 counties. Disadvantaged communities are likely to benefit the most, as they have the least information. Helping these marginalized areas can promote equity while the extra information increases market efficiency, with both creating a more resilient Colorado.

This information imbalance between regions is one of the key rationales and research topics for REDI@CSU and is based on the 2001 Nobel Prize-winning work of George Akerlof. As highlighted above, CSU as the land-grant university for the state is a good example of such information rebalancing, but other universities across the country strive to do the same. In this way, universities act as shock absorbers by inoculating regional economies with information and assisting economies following an economic shock with the means to recover quickly.

Stephan Weiler is a professor of economics and co-director of the Regional Economic Development Institute at Colorado State University. Tim Komarek is an associate professor of economics at CSU.