Who should set prices for full-fee students?

HECS architect Bruce Chapman has consistently opposed universities being free to set their own fees. An article published in this morning’s Australian Financial Review, co-authored by Chapman and ex-bureaucrat and now-consultant David Phillips, suggested that

there is a case to question whether publicly funded universities should be free to set whatever price they choose for this one group [ie full-fee] of Australian undergraduates.

They noted that it seemed to be ‘highly inequitable’ that full-fee and Commonwealth-supported students pay very different prices for the same course.

Chapman and Phillips go on:

As well, some universities have strong reputations as a result of over 100 years of public sector subsidies, and they don’t pay rent, both factors implying that allowing an uncapped [a reference to the proposed abolition of the 35% limit on Australian full-fee payers] number of full-fee paying students will deliver disproportionate benefits to a minority of universities with no corresponding implications for increased competition.

Chapman has been saying similar things for years. In this 2004 radio interview he remarked:

The basic problems are that the universities don’t pay rent so we don’t have a level playing field to begin with and also some institutions have had 150 years of public sector subsidies for their reputation. We are not starting here in a vacuum. … You basically are allowing, under this particular scheme, universities price discretion or the capacity to charge whatever they like, which has got very little to do with competition. The number of places is still restricted so there won’t be great competition coming from this. What there will be is the delivery of very large profits to some institutions from minority students.

In an article published in the Australian Economic Review in 2001 he elaborated slightly on his objection to ‘unfettered price setting’, noting that as well as not paying rent some universities have prime inner city real estate and that ‘playing field is not level’.

Unfortunately, Chapman has never explained at any length the logic of his position – not even in his recent book, which at US$145 certainly shows that there is no price control in the publishing industry. But let’s try to unpack the various points he seems to be making.
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