All entries for Friday 26 November 2010

November 26, 2010

On university fees

I signed, with a large number of colleagues, an open letter to last Monday's Guardian against the tripling of university fees in the UK (to 9,000 pounds/year - yes, 10,500 euros: ten-thousand-five-hundred-euros):

Just a couple of additional personal thoughts, from a snowy Berlin where university education is free - but not bad at all.

On an economic note. All government calculations that university degrees make you earn fantastillions more, and therefore students should pay for them, are based on past data from times when very few (an elite) got university degrees. Now that university students approach 50% of their age group, by definition their future earnings cannot be, in most cases, much above average.

Anyway, the idea that a degree is worth fantastillions is immediately contradicted by the fact that fees will be payable starting from annual earnings of £19,000 (at today prices), which is well below average.

Even more, education is one of those fields where individual economic behaviour creates suboptimal results; if all is counted on money, all will choose the degrees with the highest expected earning, and as an effect they will overcrowd them and earn less. In addition, it neglects all positive externalities of university education, especially in sciences and humanities. A market of degrees is just a bad idea.

From the above, it follows that overinflating the prices of UK degrees is just a speculative bubble based on the irrational belief that those pieces of papers will make you lots of money. Can't we learn anything from previous speculation bubbles?

On a social note. The idea that working-class students will not be discouraged, to somebody who has interviewed hundreds of workers, is totally ludicrous. The psychological barriers to university access are huge for working-class kids: why should they now opt for a risky university route involving either failure or a £27,000 debt, instead of a safer job route involving no debt and the appreciation of peers/family?

On a comparative note. The much-invoked example of Swedish drastic budget-cutting in the early 1990s actually ring-fenced higher education. And anyway, Sweden had a very large public budget: you can have a more drastic diet if you have large fat reserves. The anomaly of the UK is not that public expenditure is too high, but that taxes are too low (same for Ireland by the way).

Finally, on a positive note. Maybe these mad fees will at least achieve something nothing else has done: raise British kids' interest in foreign languages. So they can then get a good degree on the continent, save 27,000 quid (or nearly that much), get unique life-enriching experience - and in the meanwhile even enjoy some sunshine, beach or skiing.

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