From where I sit - State the case for the public good

December 1, 2011

It has grown fashionable recently to pronounce that the distinction between public and private colleges and universities is now anachronistic.

In Australia, as well as in the UK, we understand all too readily the old US joke about colleges once being state funded, then state supported, state assisted and now state located. As many universities establish campuses overseas, perhaps state founded will soon be the new university persona.

This leads to the argument that governments should make no distinction between public and private universities in their funding or regulation. But while public funding is an important aspect, it is not the only distinction between public and private institutions. They are also distinguished by their purpose and control, and private for-profit institutions are differentiated by the allocation of their surplus funds.

Public institutions are established for public purposes, and however broad or amorphous they may be, they at least direct the university against preferring any sectarian, political or other narrow interest.

In contrast, many private universities are established to advance the founder's interest in a religion or political philosophy. While those may be laudable or attract support, society needs institutions that promote social cohesion and ensure that minority interests are not neglected.

Most universities - particularly public ones - fiercely defend their independence. Yet, ultimately, public universities are subject to public control through their instruments of establishment. While the governing bodies of most public UK universities seem to be largely self-perpetuating, public universities in the US, Australia and elsewhere are further subject to public control by having a substantial proportion of their governing bodies appointed by government.

Private for-profit institutions are distinguished by seeking to generate profit and allocating that profit to the interests of their owners. In contrast, any surplus generated by public or private not-for-profit institutions is allocated to the institution's purposes. This is a strong argument against allocating any public subsidy to for-profit bodies.

It is true that public institutions are subject to the principal-agent problem of promoting their interests or those of its members above those of the public, their owners or the governments that founded and may still largely fund them. Thus some universities devote considerable resources to improving their research status, which seems to advance the institution's interest above the public's. And some public institutions provide benefits to staff and senior managers with resources that might more optimally be allocated to supporting students or serving the public.

But most public universities take their public purposes very seriously and use their autonomy to advance the public's interests in ways not contemplated by governments, ministers and civil servants. What is often identified as public institutions' inefficiency is their serving multiple and complex interests that cannot be reduced to a clause in a contract, statute or charter.

It perhaps suits governments to conflate the distinctions between public and private institutions to advance their fiscal interest in cutting public expenditure or to promote their ideological preference of the private over the public. But suppressing the public character and role of public institutions risks damaging long-term and perhaps unforeseen consequences.

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