It is quite plausible that there are public benefits from higher education on top of the private benefits accruing to graduates themselves. And there is an at least theoretically plausible argument that, in some cases, these public (and private) benefits may be under-produced if higher education was simply left to the market. This is a conventional market failure argument used to justify public subsidy of higher education.

But is it the case that taxpayers should fund public benefits even if there is no market failure? That seems to be the claim made in the Universities Australia submission to the higher education funding review. They tell us that:

McMahon [an American academic] concludes that the value of external benefits (excluding equity funding which is separate) to wider society beyond those appropriated privately through education by the former students themselves ranges from a lower bound estimate of public benefit of 37% to an upper bound estimate of 61% as a share of the total returns to education. Fifty per cent is close to the midpoint estimate. Universities Australia believes this can serve as a reasonable benchmark for discussion of the public: private benefit shares of higher education.

Later in the submission they call for this to be the basis for public funding: Continue reading “Dubious ideas submitted to the higher education funding review, part 2” →