We've long been aware of a brain drain from Europe and the problems that stem from the flight of the talented. Now there are reports of a policy remedy being introduced but it seems to me that they've put the cart before the horse.

The brain drain problem has been endlessly reported and this Time Magazine report aptly defines the issues at stake.

All over the U.S., such research facilities are teeming with bright, young Europeans, lured by America's generous funding, better facilities and meritocratic culture. "In Italy," says Dorrello, "I'd be earning maybe €900 a month." At N.Y.U., he gets nearly three times that. "The U.S. is a place where you can do very good science, and if you're a scientist, you try to go to the best place," says Pagano, who likens researcher migration to football transfers. "In soccer, if you're great, another team can buy you." Science is the same, and the big buyer is the U.S.: in 2000, the U.S. spent €287 billion on research and development, €121 billion more than the E.U. No wonder the U.S. has 78% more high-tech patents per capita than Europe, which is especially weak in the IT and biotech sectors. (emphasis added)

Some 400,000 European science and technology graduates now live in the U.S. and thousands more leave each year. A survey released in November by the European Commission found that only 13% of European science professionals working abroad currently intend to return home.

Europe's bureaucracies, rigid hierarchies and frustrating scientific fragmentation also pushed people away — as they still do to this day. "Europe is a mess," thunders Christopher Evans, a biotechnology professor at four British universities and chairman of the venture-capital firm Merlin Biosciences, "a haze of overregulated and overcomplicated bureaucracies smothering the rare flames of true entrepreneurial brilliance."

The telling quote is from German Chancellor Gerhard Schröder who notes "Only if we manage to keep our innovation at the top will we be able to reach a level of prosperity that will allow us to keep our welfare system in today's changing conditions." It is precisely the behavior modifying welfare system that is at the root of the problem.

European research Commissioner Philippe Busquin points to the root cause when he notes "It's easier during an election year to build an extra kilometer of highway than it is to build a new lab," he says. "Americans have made better long-term strategic choices."

The state has finite resources and the allocation of those resources to generous welfare systems for the everyman are politically popular and deliver immediate political support but the opportunity costs of such programs have longer range implications. What is shortchanged are human capital investments and the incentives to keep the talented people within the nation and capitalizing on their productivity and innovation.

It's not only the star researchers who are leaving Germany, as this report notes.

Besides the young professionals and academics who leave Germany for work, young Germans who have completed vocational training also have good chances of finding a job abroad. Eva-Elisabeth Weber, a job counselor at the central employment agency in Bonn, noted that hoteliers, chefs, managers and mechanical engineers, in particular, have good career opportunities beyond Germany.

Each year the agency locates jobs for some 6,000 skilled laborers, professionals and managers outside of the country. It also tries to coax them back home when Germany needs them. "There are many doctors who we have found jobs for abroad, and now we have a shortage of qualified doctors here in Germany. We are now trying to encourage those German doctors and nurses spread across the European Union to come back," Weber said.

So what is the baby step that Germany is taking to address the problem? Why they're offering free university education to lure American university students to Germany.

Now, Germany is determined to regain its preeminent role in higher education by offering an international degree program taught in English. Students are encouraged to learn German as a second language.

All three-year Bachelor degrees and the majority of Masters and PhDs are offered at public universities, which are free of charge.

International students can choose from more than 600 courses covering a wide spectrum of topics, including art, chemistry, computer science, economics, engineering, and psychology. Supplemental German courses are also offered, but knowledge of the language is not a prerequisite for admission.

“We hope that students from today will be our partners tomorrow,” Lemmens said.

“If they go back (to their home countries) and go into business, Germany will still be there first port of call for their careers,” she said.

This certainly is an innovative solution to the brain drain problem, just like putting a band-aid on an amputation is an innovative solution, unfortunately the solution doesn't seem to address the source of the hemorrhaging. The brain drain is occuring for structural reasons, not from lack of educational opportunities. Inviting more students into the German higher education system doesn't address the question of how those students will contribute to the economy upon graduation. If they are faced with the same structural constraints as presently exist, they'll actually have an easier time leaving Germany and individually enriching themselves in America where the underlying political & economic structure are more rewarding to initiative and the welfare policies are more aligned with personal economic decision-making. Now, I'm not saying that welfare policies are all bad. I favor policies that channel state resources into human capital investment opportunities, do not serve as disincentives to work and do not grossly distort economic behavior.

Quite frankly, as I've noted before, I'm opposed to lifetime welfare for the elderly (once they begin collecting Social Security their contributions are repaid after only a few years and then the welfare begins for the remainder of the person's life, so too with Medicare and drug benefits) while we're squeezing today's kids and tomorrows taxpayers with the higher burdens of education costs and at the margin preventing some students from continuing their educations. With education being an investment in human capital (unless of course it's some of the fluff studies and the soft disciplines) it is likely to have a positive return to the individual and society, while Social Security is a drain on society.

Fortunately, Germany has made international education arbitrage a likely strategy for some American students.

Meantime, university fees in the United States have skyrocketed in recent years. The cost of tuition, room and board for the 2003-2004 scholastic year averaged $10,636 for public universities, and $26,854 for private universities, according to the College Board, a nonprofit association that runs college programs and services.

With Ivy League universities and elite liberal arts colleges flying off the scale, and public universities increasing prices by nearly 10 percent a year, young Americans are racking up tens of thousands of dollars in debt.

If students opt for a German university, they should plan to spend between $600 and $800 a month on living expenses, according to the DAAD.

Deutsches Studentenwerk, the German student affairs association, offers a value-for-money service package for foreign students that includes a dorm room, health insurance, midday meals, and guidance counseling for around $400 a month.

The more one compares prices the more appealing three years of sauerkraut, bratwurst, and beer sound. And to sweeten the deal, scholarships are also available to the most qualified applicants.

Until Germany addresses the reasons for the brain drain, and state resource allocation and personal opportunity are at the heart of this issue, simply attracting American and British students to German universities will only accomplish instituting another cost on the state without offering any offsetting potential income. Reform, unfortunately, is often painful and unpopular, because if attacks vested interests and redeploys resources to other more productive sectors. Market forces, much more than political decisions, are better at making these allocative trade-offs because the decisions are price-signaled and instituted by diverse actors. The diffusion of market principles to the electorate and the curtailment of central planning is what will stem the brain drain, not gimmicks.