Government rejects higher ed funding review’s main recommendations

To nobody’s surprise, the federal government has rejected the 2011 base funding review panel’s main recommendations (media release here).

The biggest policy change suggested by the BFR panel was that every student should pay 40% of the Commonwealth-supported funding rate, with taxpayers paying the other 60%. With students currently paying between 28% and 83% of their course’s funding rates (details at p. 52 of Mapping Australian higher education), that would have meant some students paying less (eg law, business) and many others paying more (eg medicine, nursing, engineering, science, education).

Logically and empirically, 40/60 was always dubious. It was based on the idea that government should pay the anticipated future value of higher education’s public benefits. Graduate Winners argued against that idea, proposing a framework in which the public aims to profit from its higher education investment.

The flat 40/60 was based on the idea that public benefits were similar between disciplines. As one of the main public benefits was increased tax revenue, that assumption is clearly false (data also in Graduate Winners, but easily inferred from the BFR background paper on private financial returns). And even if this was true, it logically leads to a flat rate subsidy and not a proportion of total funding rates, which have nothing to do with subsequent benefits.Read More »

Is the university experience worse than 40 years ago?

”I don’t think the university experience is nearly as good for students as it was 40 years ago. There are a number of changes, but most important is teaching is taken much less seriously than it used to be.”

– Robert Manne, The Age, 19 January 2013

I suspect he’s right that senior academics spend less time talking to and mentoring the most intellectually engaged and able undergraduate students than they did 30 or 40 years ago. But for the average student academics generally probably do a better job of organising and presenting their course materials, and this is showing in increased student satisfaction with teaching.

The data is from the Course Experience Questionnaire, run by Graduate Careers Australia. The figure appears in the 2013 edition of Mapping Australian higher education, to be released tomorrow night. (Update: out now.)

Do higher education subsidies produce public benefits?, 1985 version

I spent the last day of 2012 tidying up my chapter in a book I am co-editing on the Dawkins higher education reforms (the aim is to publish in mid-2013 to coincide with the 25th anniversary of the government white paper). The subject of my chapter is the Liberal response to the Dawkins reforms, which turned into a story about the Liberal role in the long, convoluted path from the state-dominated higher education system created in 1974 to a more privately-funded, market-based system.

Mid-1980s Cabinet papers released today provide a bit more of the background. At this point, Labor was still committed to free education for domestic students. But the Department of Finance thought that this was a bad idea, and wrote a memorandum explaining why.

It has the usual material about free higher education not changing the socio-economic profile of students. But it also contains a version of the key argument in my Graduate Winners report:

While these external benefits [better organised and functing political and social systems, potentially lower crime, sickness, disease, application of research undertaken in conjunction with education] are of course very difficult to measure they are widely believed to exist. To acknowledge their existence however is not to make a case on efficiency grounds for the full public subsidisation of higher education: full susbidies would only be warranted if there were no private benefits at all which is not likely to be the case; most people would expect extra income, status, and work satisfaction as a result of tertiary education…

It goes on to note that there is no public benefit from hobby or recreational study, and there is a risk of over-investment – ie, there could be greater economic and social well-being from investing the same money elsewhere.

I don’t think Finance’s document quite describes the underlying logic of its argument, which 1) are there public benefits from a course? (if no, just leave it to the market); 2) If yes, are the private benefits large enough to attract students? (if yes to this question, just leave it to the market); 3) If the private benefits are not large enough, will public subsidies lead to enough public benefit to justify intervention?

But they are certainly right that a public benefit argument can’t possibly justify full public funding of higher education, as susbequent events showed.