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What is ‘free’ higher education?

28 October 2014

ANU Public Policy Fellow Professor Bruce Chapman on who really pays for a ‘free’ degree.

The most basic, indeed defining, contribution of the craft of economics is known as ‘opportunity cost’. This means that every resource, including the time taken to read a newspaper article, has a cost.

This is why economists find the concept of ‘free’ higher education, as is sometimes advocated, perplexing. Essentially, there is no ‘free’ higher education, since not having charges for students in public sector universities just means that the system is financed by all taxpayers. ‘Free universities’ means free to students, not free generally.

When thought about in this way, the debate concerning who should pay (and in what proportion), government or graduates, takes a very different form. It is a debate that has been around for longer than since the time before HECS was introduced in 1989, and one which was critical to the re-introduction of university charges at that time.

The Labor Cabinet in the late 1980s took the view that having a so-called ‘free’ higher education system, one paid by the taxes of all citizens, is not the best way. This was, and is, because the direct beneficiaries of universities, the graduates, on average do very well in the labour market over their lifetimes compared to non-graduates.

Even so, it is critical that the design of university tuition systems is such as to impose no up-front charges because this would without doubt deter the poor from participating, a point which presumably motivated the changes brought in in 1974. And it is also completely reasonable that those with student debts are only required to pay when they can afford it. This is the basis of the current loan scheme.

It is a major curiosity to the economics profession and well beyond that a so-called ‘free’ higher education is not apparently understood to be essentially inequitable.

Are you interested in the ideas in this opinion piece? Bruce Chapman teaches Case Studies in Economic Policy (POGO8210) and Economic Seminars (IDEC8024).

This piece was published in The Australian:

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