Archive for July 14th, 2009

Some strange human capital economics

Australian governments typically offer human capital or ‘equity’ justifications for public investment in higher education. So what should we make of claims for tuition subsidy that would reduce the value of Australia’s human capital?

In a follow-up Age story to the weekend article about full fees for TAFE students who already have higher qualifications, the paper reports that:

Malcolm King, who directed the program from 2000 to 2004, said most degree-educated students could not afford to pay another $8000 a year to study at TAFE.

Many of the students who enrolled in the creative programs formed part of Melbourne’s “cultural milieu”, fuelling the writing, film, media and advertising industries, he said.

“RMIT is freaky in that it always attracted high-calibre students like ex-doctors and lawyers who produced very fine work and have had a huge impact on cultural life in Melbourne,” Mr King said. [emphasis added]

So what Mr King is arguing is that we should offer public subsidy to divert people from an occupation of serious shortage (doctors) to an occupation (creative writing) in which supply always vastly exceeds demand – in the process wasting the $150K plus that taxpayers will already have spent training a doctor.

King has unwittingly highlighted another argument in favour of the Victorian government’s reforms.