Many Aspects of Actual University Provision Match the Ideal Design, but Many Others Do Not

DESIGNING AN IDEAL UNIVERSITY SYSTEM

The ideal government-funded university system – the one with the best combination of cost effectiveness and fairness and equality of opportunity – concentrates resources on the most efficient universities: they receive more public money, they teach more students and they do more research.

According to research by Gianni De Fraja and Paola Valbonesi, presented at the Royal Economic Society’s 2009 annual conference, this process is stronger for research than for teaching, and indeed in the ideal system there would be ‘teaching only universities’ – good enough to teach some students, but not to carry out research.

Implementation of the ideal system requires universities and government to agree on the aims of the system. In practice, decision-makers in universities (who are typically academics) care more about research relative to teaching than the government.

In this case, the government must compromise, creating fewer universities than in the ideal system, and dispersing research more, to the point that there are no ‘teaching only universities’.

The theoretical research identifies the ideal characteristics that a government funded university system should display to obtain the best combination of cost effectiveness and fairness and equality of opportunity. This is an important exercise, because many important questions in this area do not admit an obvious ready answer.

Take, for example, subsidised university education. The main beneficiaries of public subsidies are the better-off individuals in society: those on whom nature has bestowed her most generous gifts (and often those whose parents are also able to provide generously for them). It does not seem immediately obvious that it makes sense for society to subsidise their tuition costs.

Also, take public funding for basic research: does it make sense for society to pay the salary of (often very bright) individuals so that they can pursue their whims and curiosity, all the while resenting the limited accountability to which they are subject?

But even less provocative questions do not have an immediately obvious answer. Should teaching and research be carried out within each institution, or should universities specialise in one of these two activities? Is the UK dual system of funding research a sensible way to channel the taxpayer's money?

Are qualitative differences among universities a good thing, or would it be better to have most institutions with the same quality, as for example is patently the case for secondary schools? Should they be geographically concentrated or spread out? A large amount of data is available, which can be used to answer these and other questions, but data can only answer if the questions are asked in the appropriate manner: empirical analysis needs to be informed by sound theory.

In this paper, De Fraja and Valbonesi demonstrate that the ideal government funded system concentrates resources towards the most efficient universities: they receive more public money, they teach more students, and do more research. This process is stronger for research than for teaching, and indeed in the ideal system there would be ‘teaching only universities’ – good enough to teach some students, but not to carry out research.

Implementation of the ideal system requires universities and government to agree on the aims of the university system. In practice, it seems clear that decision-makers in universities (who are typically academics) care more about research relative to teaching than the government.

In this case, De Fraja and Valbonesi show that the government must compromise: it creates fewer universities than in the ideal system, and disperses research more, to the point that there are no ‘teaching only universities’.

Gianni De Fraja is at the Universities of Leicester and Roma Tor Vergata. Paola Valbonesi is at the University of Padova.

Contact: Gianni De Fraja William Tyler Professor of Economics Department of Economics University of Leicester Leicester LE1 7RH Tel: (+44) 0116 252 5360 Direct line: (+44) 0116 252 3909 Mobile: (+44) 07825 657654 Skype: giannidefraja Email: [email protected] webpage: http://www.le.ac.uk/economics/gdf4/