Opinion & Commentary
Can't beat the market so just plunge in, fees first
Some years ago I had a left-wing acquaintance whose stock response to all my market-based policy suggestions was 'it's no panacea'.
On that, at least, I could agree with her. I agreed not because it rebutted my arguments effectively but because it was a truism about policy. Nothing is ever a panacea. The aim is policies that are better than the available alternatives, not cure-alls.
I was reminded of her stance by Clive Hamilton's article on higher education market utopianism in last week's HES, which he believes drives misguided attempts to make universities more market-oriented. What Hamilton misses is that markets can have faults but still be better than other options. That, I believe, is the case in higher education.
Hamilton offers several reasons why markets won't allocate higher education resources optimally—that 18-year-olds don't know what's in their interests, that there must be good information about the services on offer and that spillovers won't be taken into account by students. From this he concludes that academics, not student choices, should drive the university system.
All these problems, Hamilton seems to believe, are overlooked by market utopians who have absorbed only the bastard version of economic liberalism popularised by right-wing think tanks. (Not me, surely?)
Although 18-year-olds aren't always brilliant judges of their own interests, they are not children either. Many have developed interests that guide the types of courses they choose. They know their course choice affects future employment opportunities. What they really lack is informed, impartial advice about the relative merits of the various universities and courses on offer.
Hamilton offers no practical proposals to provide prospective university students with this advice. Instead, he requires us to have faith that academics will do things they have, historically, rarely or never done.
He wants us to believe that academics will inform themselves about individual prospective students so as to offer the best advice, even though most 18-year-olds are selected for university by computers using their Year 12 scores.
He expects academics to give informed and honest advice about other universities, confident that they will diligently research other universities' courses and never be motivated by self-interest or malice.
Just who is utopian here?
Information asymmetries, as economists call our 18-year-olds' predicament, are hardly unusual. In a large share of market transactions, one side will know more than the other. In most situations this doesn't matter because the cost of getting it wrong is low enough to make trial and error an efficient learning device.
Where this isn't the case, other markets use brokers to guide people to the right decision. In vocational education, brokers are already at work, helping would-be students choose the right course. One study of these brokers found that they informed themselves by sitting in on classes and talking to participants and employers. Unlike universities, they make the effort to find out about their prospective students as well.
Hamilton's proposal entrenches a conflict of interest, while the education broker proposal fixes it and evens up the information asymmetry. Brokers won't always get it right and fickle teenagers will still change their minds, but it would be better than what we have now and better than what Hamilton suggests.
Would education brokers take into account the spillovers that Hamilton sees as important? Committed to their students' interests rather than the public interest, perhaps not. Will the inexorable shift to vocational education Hamilton fears mean that spillover-producing disciplines die out?
Hamilton's mistake is taking the assumptions of bastard economic liberalism too seriously. Simply because some economic models assume people are motivated by material self-interest doesn't mean they are, out there in the real world.
IF we examine what courses students apply for, we don't find an inexorable shift to vocational education. The various disciplines receive fairly consistent shares of total applications. Arts dropped by only 0.4 per cent from 1992 to 1999. Given the absolute rise in numbers doing arts, we've seen a shift away from vocational pursuits, not towards, because people are delaying work-force entry to study arts first.
This should not be surprising. It matters more to most people to do a course, then a job, that they find interesting and enjoyable than it does to maximise income. This protects the spillover-producing disciplines. Even among full-fee-paying domestic undergraduates, 25 per cent do arts or science degrees, busy producing spillovers without any help from government.
What really undermines spillover production is our one-size-fits-all funding system. The US liberal-arts colleges, or that nation's great scientific and technical institutions, are near impossible here because our universities can't charge fees. Getting rid of the fee prohibition would improve things enormously. Is it utopian thinking to believe this is possible?
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About the Author:
Andrew Norton is a Research Fellow at the Centre of Independent Studies and author of the upcoming book, The Unchained University.
