Who should receive university economic rents?

In the Higher Education Supplement this morning, Griffith University economist Ross Guest considers what should be done with ‘economic rents’ that prestigious universities can extract by charging high fees. Rather than imposing price control as the Bradley committee suggests, Guest says that:

The efficient way of dealing with economic rents is to tax them; this is how we deal with resource rents earned by mining companies, for example. So why not tax any excessive economic rents earned by institutions and use the tax revenue to offer means-tested subsidies to students?

I think it is pretty clear that some universities charge fees for full-fee students that are well in excess of the cost of delivering the course. In my submission to the Bradley review (table 6) I showed that sandstone universities charge international students $6,000 to $10,000 a year more than Dawkins universities for similar courses. Some of that is probably genuine quality differences – better academics and facilities. But I think we can assume that there is some ‘economic rent’ here.

There seem to be three broad options:
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