Friday, March 23, 2007

Australia's higher education - an example of regulatory failure

Over at the CIS, Andrew Norton has yet another great paper on higher education, and how the current regulatory framework is training far too many students in unneeded disciplines, whilst massive shortages exist for other disciplines.

If you have the patience, read the entire paper. It will certainly cast many doubts over the current scheme and for those student unionists and strident activists who protest and demand for greater government control and funding of the universities, it should serve as a bit of a reality shock.

Central planning of any industry is a failure. I do not see any merit in the "education is a public good" argument which is the justification of heavy regulation and government funding of the industry.

Technical institutions and private operators would allocate courses on a much more efficient basis. In fact, so long as a student was both capable and willing to pay, there is no reason why an established and mature private tertiary education industry wouldn't be willing to offer a position to them.

Many people over-react at the mere mention of students actually paying for the years of tuition they receive, and they demand that deferred HECS debts and government subsidies remain. Well, perhaps a voucher scheme for tertiary education is an option. Its better than the status quo. But the main point is that students should be faced with pricing information for a course.

It provides all the good incentives under the rainbow.

* Students will actually have to sacrifice something (besides time) to study, and therefore will be more cautious in doing so.
* Students will be forced to make rational decisions (gasp !) and actually decide if the cost of study is worth the expected benefits.
* Faced with the costs, students have no incentive to over-educate themselves and spend too many years studying pursuits with little or no economic value in the marketplace.
* Tertiary institutes, just like supermarkets, will compete for students. You see more choice, higher standards and price competition between different institutions.

Ultimately, the number of courses in each field will be driven by the marketplace demand for graduates with those skills. You won't have an oversupply of arts students, nor a shortage of doctors.

Currently, we have bureaucrats and ministers trying (in vain) to guess and plan how many courses in every single faculty should be offered, and writing these second-rate estimates into inflexible long term plans for the industry.

We've had a decade of the Liberal Party doing nothing to carry out Liberal principles. It has left the tertiary sector in a regulatory mess, when privatisation was long overdue.

Scrap the system, privatise all institutions, and the only role of government should be to assist in funding, loans, scholarships and support payments for students.