American way: misleading

February 24, 2011

Yet again a distinguished economist betrays his unawareness of the economics of higher education. In "Quit the quotas: only competitive tension will keep fees down" (17 February), Tim Leunig argues that competition for students - with no limits on the prices to be charged or the places to be funded at individual institutions - would produce a more effective and efficient system.

Yet one has only to look at the US, where the tuition fees charged by the most prestigious (mostly private) institutions provide a "pricing umbrella" for the rest of the sector, to see the fallaciousness of this argument.

The market in student education is a positional one, where students and institutions compete for status, and where price is a substitute for quality rather than an indicator of it. The most selective institutions charge "what the market will bear" while limiting their intake to preserve their exclusivity.

The result is spiralling costs without corresponding improvements in quality; it has been described by more than one commentator as an "academic arms race".

If you really want value for money for the huge public and private investment in higher education, price competition should be limited, if not eschewed, with quality carefully controlled by a mixture of self- and independent regulation. The US shows us only too clearly what happens when these principles are ignored.

Roger Brown, Professor of higher education policy, Liverpool Hope University

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