Rethinking Higher Education

This tightly argued paper asks two fundamental questions about the nature of higher education in this country. Does Britain provide too much higher education, and are the current funding mechanisms fair and efficient? Lange's answers to these questions are controversial, but make a timely contribution to this on-going debate.

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Executive Summary

The expansion of higher education in Britain has led to concerns about the undermining of its quality and the sources of the finance for the expansion.

The argument that expansion is necessary because of the demand for highly skilled labour is not obviously supported by the evidence an increasing proportion of graduates ends up in unemployment or underemployment.

A preferred hypothesis is that higher education acts simply to 'screen' job applicants and adds no (or very little) value of its own.

A range of interest groups stand to gain from government funding of higher education, and public choice theory suggests that their contributions to the debate should be viewed cautiously.

These considerations bring in to question the wisdom of the expansion of higher education, suggesting that it may be a misdirection of public resources.

But does higher education need to be funded from public sources? The question is whether social rates of return exceed private rates of returns.

The evidence suggests that private returns to education are in excess of social returns, especially at the university level, thus undermining the case for public funding of higher education.

Even a considerable shift of the cost burden from the state to individuals should not be regarded as a disincentive to investing in higher education, given the high private margin of profitability.

Equitable access to higher education could be ensured by income contingent loans

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