Monday, 10 October 2011

We don't need no education!

What information failures are there in the market for higher education places?

Students, while choosing their future university, have imperfect information about their choices available and differences between them. As written in the Browne’s report, ‘stundent choice will drive up quality’, but how can they make rational decisions if they do not have access (and possibilities) to get the accurate information about the universities. The main information failures in the market for higher education places are:

1. The quality of teachers (their engagement, experience, skills and teaching abilities). Students do not choose their tutors, they do not even know them (their names) before deciding which university to apply to.

2. The way of teaching. Every university, every college, every tutor has a different approach to the teaching methods and every student prefers a different method of learning. They have no influence on that.

3. The choice of subject. Many students choose their subjects by coincidence (advice, lottery). They do not know what they are going to learn before their classes start. Every university has a different set of subject taught in a course and most students are not aware of that while choosing their school.

There are many more information failures concerning higher education places, including accommodation, teaching and learning resources and extra-curricular activities, but I have decided to describe only the main problems and dillemas.

What externalities are involved in higher education and will this lead to an over or underprovision of higher education in a pure market system?
Positive externalities:

def: the external benefits that may result from a course of action. Sometimes they are called spillover effects because they bring some benefit to a third party, someone who is neither a producer nor a consumer of the product.

1. Better qualified labour force

2. Lower unemployment

3. Higher future incomes à higher spending…

4. Social benefits (less crime, poverty and homelessness)

Negative externalities:

def: occur when an economic activity affects third parties, i.e. people other than the producers or the consumers, in some way which reduces their quality of life.

1. Higher costs for the government (and indirectly the citizens)

2. Bigger social inequalities

The externalities involved in higher education could lead to overprovison in a pure market system.

Apart from externalities and information asymmetries, what other market failures apply to the market for student places in HE?
def: Market failure – occurs when market imperfections lead to an allocation of which is less efficient than it might be:

· public goods

· externalities

· labour immobility

· lack of information

· poverty

· imperfect competition

Apart from externalities and lack of information (information asymmetries) there is also imperfect competition between universities (e.g. some of them are thought to be more prestigious), and students. Additionally, poverty is also an important issue. Poor students are not able to afford higher education are, therefore, locked in a poverty trap.

What are the arguments for subsidising non-STEM subjects (as well as STEM ones)? Should these subsidies vary from course to course and from university to university?

+ The chosen does not determine the future job. Many people after graduation work in another area of interest/knowledge.

+They also improve people’s knowledge and there is a possibility of a development.

+ They are needed. People are becoming more and more ‘social’.

+There should be equality between STEM and non-STEM students. Poorer students would have bigger incentive to choose STEM even if they prefer other courses. That could lead to lower efficiency.

+Poorer students would not go to university if their course is not subsidised.

In my opinion, the state should subsidy the courses that prepare students for most-wanted (and needed) jobs. For example, in Poland, there are subsidies (students even get high scholarships) for science and engineering courses (basically STEM but more specific aim). The subsidies should be based on number of students attending the course, but should not vary from university to university.

What is the best way of tackling the problem of unequal access to higher education?

I believe that everybody should have access to higher education without the distinction between student with rich and poor parents. There should be more subsidies for gifted students, because, as written in the report: ‘Higher education matters because it drives innovation and economic transformation. Higher education helps to produce economic growth, which in turn contributes to national prosperity.’ Moreover, the possibility of taking a loan and paying it back after finding a well-paid job would also allow more people to go to university and decrease inequalities in access to higher education among people. 

“This report displays no real interest in universities as places of education; they are conceived of simply as engines of economic prosperity and as agencies for equipping future employees to earn higher salaries.”

That’s what I think,


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