Willetts could kill British higher education

In June 2011, Universities Minister David Willetts published plans to increase market forces in higher education in England. This sounds like a good idea to people who do not know how higher education and markets work. Unfortunately, this idea is going to kill British higher education. This is because education does not just involve money. Students must also pay with their effort. Market force will drive universities to waive effort and give away cheap degrees.

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Willetts proposal

Universities Minister David Willetts has published plans to increase market forces in higher education in England (e.g. see BBC news).

This approach may sound sensible at first sight. Empowering students seems to be a good idea. Having universities compete with each other would keep them on their toes. Competition improves efficiency. Let the well-run universities thrive. Let the failed universities close. What's wrong with that?

The proposal is fine for top universities

Unfortunately, there is a fundamental flaw in this analysis. Willetts should see it had he studied the Nash equilibrium under his policy.

If I were an Oxbridge student, then I will choose between Oxford and Cambridge. That is not much of a competition. The two universities will have no problem recruiting, even if they raise fees or cut costs. Top students would still go there because of their reputation. Market force do not apply to them very much.

Universities below Oxbridge will start to feel the pinch. They will have to define their market positions. The lower they are in the ranking, the more they have to worry about survival. That is what Willetts want to achieve with market force.

Students are investors

If I were a student who cannot get into the top universities, I have plenty of choices. Which university should I invest my money on? I have multiple criteria in picking my university. Does it have a good reputation? Is it cheap (fees plus living expenses)? Is it easy to get high scores from it? Does it have a good environment? Do their graduates get employment easily?

The government sends a clear signal that higher education is an investment by me as a student. As an investment, students are led to pay attention to return. With payback in mind, they may not pay as much attention to education.

Cut-throat competition

From a university's point of view, it wants students. Reputation can't be built overnight, building reputation is not cost-free anyway. So if a university struggles to get students, the rational strategy would be to give high scores, better honour degrees. These may cost them in the long run (it may not, as explained later), but they don't cost anything immediately. If jobs are at risk, I know what the market would drive academics to do. Conscience doesn't pay the mortgage, I am afraid. Maintaining academic standard would get the sack, because you are not helping the institute to survive.

Inflating grades and degree classes may not cost a university's reputation. This is true if all universities of they same level of reputation do the same. In a cut-throat competition, I bet they all do. In fact, they would all try to out-do other universities. As a result, the reputation of British degrees will be sent down the drain.

Market force do not reflect student effort

The flaw in Willett's theory is that money is the only commodity in this market as far as the students concerned. In reality, students should pay with their *effort* if they want to get a degrees. Competition, and pressure on universities, takes this factor out of the equation.

Can we put student effort into the equation then? To do so, we have to define the minimum standard of a degree. Students must reach those standards. Unfortunately, it is not easy to define education quality. Besides, universities will always have ways to get round government measures. They will do so if survival is under threat. Lecturers can do the projects for the students, for example, if their jobs are at risk.

Where are we heading?

So where does this policy lead to? The second tier universities will enter cut-throat competitions in order to survive. The reputation of British higher education will go down the drain. The good universities may have no problem recruiting students. But as the overall standard goes down, they are free to lower their standard (e.g. to cut cost) should they want to.

Run as a business, universities will inevitably have life cycles. Under market forces, universities will be set up and closed from time to time. Unfortunately, degrees obtained from a university that has been closed will worth very little. Under Willetts' plan, students (as investors) are therefore going to take on higher risk. This risk is very hard to assess. Perhaps students should be made aware of this.