Peter Mandelson wants to revamp British universities to make them more inclusive and have them focus more on job-relevant courses. Proponents of liberal arts schools are predictably outraged. I agree with them that they shouldn’t be discriminated against. A fair system would make people pay for the benefit they receive from their education, and have the government subsidise to the value of any positive externalities from education.
To draw an analogy to university staff pay, the quality of university staff depends in part upon the difference between their university salary and their outside options. As Daniel Hamermesh puts it:
If a university went ahead and paid equally, lowering economists’ pay and raising French professors’ pay, it would have a great French staff and a dreadful bunch of economists.
Of course, Hamermesh is talking from the perspective of a US academic. In the US they pay different salaries for different disciplines. In NZ we do pay all university staff equally and the research bears out the truth of Hamermesh’s conjecture. So paying people with different market values equally is essentially a subsidy on those with low market value.
To come back to the issue of students’ fees, subsidising all students equally is a subsidy on students whose degrees have only private value. Surely, in order to be fair to all departments and all students, the subsidy on education should pay for only the social benefit. The entire private benefit to the student should be paid for by the student. At the very least the subsidy should be proportionate to the social benefit and differ across disciplines.
So who would be the winners and who would be the losers? Speculate away!