Uses and Abuses of Economics in the Debate on Universities

Report on CDBU Annual Lecture 2017

by Dorothy Bishop

Last night, Martin Wolf, chief economics commentator at the Financial Times, delivered a splendid lecture with the title “Uses and Abuses of Economics in the Debate on Universities”. It is not possible to do this justice in a brief report, but I aim here to give a synopsis of the main arguments, which are highly relevant to our concerns over the Higher Education and Research Bill, currently under discussion in the House of Lords.

Wolf drew a distinction between three aspects of economics relevant to higher education:

  • The ends to be served by higher education
  • The means used to serve these ends
  • The resources that the government should invest in higher education

The principal point he made about the ends concerned the government’s conceptualisation of what higher education is for. A stated goal of the Higher Education and Research Bill is to achieve a successful ‘knowledge-driven economy’. This, said Wolf, is entirely reasonable, insofar as we need highly-skilled citizens to maintain our prosperity. The problem, however, is that the government’s plans appear to see this as the predominant goal of Higher Education. A point that was clearly understood by the CDBU members in the audience, but by few in government, was that higher education also serves the goal of creating enlightened citizens, capable of rational argument and evaluation of evidence, who will influence society not only in the UK but in the wider world. Yes, government as a funder has a right to ensure its money is properly spent, but our universities are threatened if this is taken to mean that the sole criterion for success is an economic one.

The means proposed to achieve the government’s ends is market competition. Wolf noted that the word ‘competition’ occurred in the White Paper introducing the Bill fifty times. Yet he pointed out that the notion of a market for higher education was deeply flawed on several counts: one simply cannot treat universities like businesses selling goods, because what they provide cannot be evaluated in advance. Failure of universities has dire consequences for students, for example, as would encouraging for-profit providers to enter the sector without adequate scrutiny or a substantial track record. Perhaps even more important, a profit-seeking institution cannot be a university in the full meaning of the term: if incentives for providers are solely financial, then we risk losing the very quality that makes our universities so well-respected internationally: the focus on innovative research and intellectual inquiry for its own sake.

Of course, the government is aware of some of these difficulties, but their attempt to deal with them, by creating the Office for Students, creates more problems than it solves. Wolf expressed concern about the sweeping powers proposed for the OfS, in what he termed ‘a fully-fledged government takeover of the UK’s university sector’. He added that ‘Anybody who thinks this will end with more diverse, more innovative, more courageous and more independent institutions is surely a fool.’

Wolf then turned to consider the financial resources available for Higher Education, noting that although the UK spends a slightly higher proportion of GDP on tertiary education than other European countries, a relatively high proportion of this now comes from private sources.  However, UK universities have been remarkably successful producers of high-quality research, and Wolf linked this to the way in which government has funded research. Without this public funding, we would not be able to continue as a global superpower in higher education. Wolf did not discuss student loans in any detail, but he agreed with the view that it was more equitable to rely partly on loans than entirely on tax-funding, although it is certain that a part of this debt, possibly a substantial part, will ultimately be picked up by the taxpayer because not all fees will be repaid.

Given his criticisms of the Higher Education and Research Bill, it is interesting to consider what alternative approach Wolf would like to adopt. Here, he argued, the problem was that the government’s proposals were not radical enough. They persist with the traditional approach of equating higher education with the university sector and ignoring the rest of tertiary education. What about the high proportion of the population for whom university is not a desirable goal? They have long been neglected, both in terms of funding and in terms of post-school educational options. Wolf argued that we should extend the loans system, so that people could access different types of education throughout adult life, and that a much wider range of tertiary education options should be made available.

Wolf started his lecture with a quote from H. L. Mencken “For every complex problem there is an answer that is clear, simple, and wrong”. He made a compelling case that the funding and organisation of our system of higher education system is a complex problem that requires a complex solution. By seeking to frame the issue in terms of simple-minded market economics, the government had got it badly wrong. They need, he concluded, to think again.