More voucher confusion

The word ‘voucher’ sure has journalists confused. Last week the SMH took Gillard’s spin at face value. And in today’s Australian we are told this:

The system isn’t a voucher system. Students aren’t being issued with a portable amount of money they can just cash in where they like. For all the talk of empowering students with greater choice, it is the universities, and ultimately their vice-chancellors, that will frame that choice, since it is they that will decide what is on offer.

And while universities can be expected to tailor offerings to attract students, not all universities will seek to expand. Offerings will be influenced not just by what students want, but also by the relative cost of delivery.

There are two confusions here. One is the point I made last week about the technology of delivering the subsidy. This is irrelevant to the concept of a voucher, which is that a consumer’s decision, rather than a bureaucrat’s decision, triggers the payment (under the current system, no payment is made unless a student occupies a place first authorised by the bureaucracy).

The second confusion is about the role of suppliers and prices. In this respect, ‘voucher’ system is preferable to Bradley’s language of a ‘demand-driven’ system, since what is delivered in a market or quasi-market system is not whatever consumers want, but the intersection of supply and demand, mediated by prices. So the actions of suppliers and the role of prices are integral to voucher systems, not features that make a voucher system not a voucher system.