A U S T R A L I A N U N I V E R S I T I E S ’ R E V I E W Regulation by markets and the Bradley Review of Australian higher education Benedict Sheehy RMIT University Markets have a number of uses. One increasingly important use of markets by politicians is as a means of regulating the supply and distribution of goods and services formerly supplied and distributed by governments on non-market bases. The use of markets as a regulator of higher education is not novel. However, the increased reliance on markets as a regulator of higher education is an on-going experiment with certain predictable failures. This article explores the uses of the market in the supply and distribution of higher education and weighs it against the stated policy objectives, with particular attention to the application proposed in the Bradley Review. Introduction Market theory and market as regulator Markets in education are not new. Indeed, Adam Smith There are three levels of thinking about markets. At a considered their potential in education. (Pusser 2006) primary level, markets are means of distributing goods The Bradley Review of Australian Higher Education by bringing together sellers and buyers who transact (‘Bradley Review’) (Bradley, Noonan, Nugent, & Scales, for purposes of exchange. The basis for exchange in 2008) recommends regulating the university and ter- markets is mutual benefit; the seller benefits through tiary education providers by markets and in particu- increased wealth, the buyer via possession of the good. lar by way of competition between higher education Markets in a capitalist context are operated for the pur- organisations for student consumers empowered with pose of wealth creation, not for purposes of distribu- vouchers and by way of competition for funding for tion. The mechanism for the distribution is price, that teaching and research. There are serious drawbacks to is the value of the good expressed in monetary terms. the approach which appear not to have been consid- Price does not have an objective basis but rests on per- ered. This article, while focused on the voucher system, ceptions about the relative need and resources of the places it in the larger discussion of markets in higher parties vis-à-vis the good possessed by the other. education. In order to understand how markets may At a secondary level, markets are believed to carry work as regulators, a review of market thinking and another set of innate benefits. These benefits are effi- assumptions is necessary. ciency, innovation, and diversity. These benefits are 60 Regulation by markets and the Bradley Review of Australian higher education, Benedict Sheehy vol. 52, no. 1, 2010 A U S T R A L I A N U N I V E R S I T I E S ’ R E V I E W deemed to occur because improved efficiency leads to Markets in higher education improved profits, innovation leads to new sales, as does diversity. These benefits are believed to be the natural Policy makers have been using certain market mecha- result of the mechanism of competition. The relation- nisms for some time in regulating higher education ship between these secondary goods and competition (Dill 1997a). They do so for a number of reasons: is not at all clear. Nevertheless, it is these secondary 1. To increase resources. benefits of markets that politicians wish to capitalise 2. To increase choice for students by increasing diver- on in their efforts to introduce markets into higher sity in higher education. education. Moving to a third level of thinking about 3. To improve quality (Newman, Courturier & Scurry. markets, the level of the individual and the collec- 2004), and tive, i.e. the production and distribution of goods and 4. To increase both overall participation and partici- resources, the idea is that the market is the most effi- pation of marginalised groups. These objectives are cient and effective means of determining production believed to be a natural result of competition. and distribution by allowing producing and consuming Each of these laudable objectives will be discussed individuals to pursue their own private self-interests. in turn. The first policy objective, increasing resources, This approach it is believed will lead to the optimal dis- can be achieved by increasing efficiency or by find- tribution and ultimately public social good. ing new sources of revenue. Improving efficiency is In a perfect market, every party is able to achieve a standard in policy objective and as noted above, it is optimal personal ends and suitably protected by having believed to be a natural outcome of competition (Goe- complete, correct and timely information, perfect deci- degebuure, de Boer & Meek. 1998). Competition, it is sion making abilities, clear commensurate, stable pref- argued, encourages managers to improve efficiency erences, supported by clear contracting and property by pressuring them seek to provide the same qual- rights. Importantly, as the objective of the overall exer- ity and quantity of service with less input to increase cise, at least according to Adam Smith, is the betterment profits. However, it should be noted that management of society, the aggregate of individual’s private welfare under pressure lack the time and resources necessary is considered the equivalent of the common good – for careful analysis, deliberation and experimentation Nobel prize winning theory to the contrary notwith- to correctly identify efficiencies, or even evaluate standing (Arrow 1963). In other words, there is no need whether or not potential efficiencies exist without for any public accountability for public goods. compromising quality or effectiveness. In a scarce Markets are effective in theory because most parties resources environment under pressure, management are able to get what they want – whether goods and will compromise quality and/or quantity and the safest services or profit – all other things being equal. The of the two options will most likely be followed. Given problem of course is that the governing condition, ‘all that quantity is much easier to measure than quality, it other things being equal’ seldom if ever occurs. Ine- is clear that in a resource starved environment, manag- qualities in purchasing power stand out, possession of ers are most likely to cut quality. accurate information and access to goods, stand out This quality reduction coordinates with the second among other things. Accordingly, using the market strategy for increasing resources – cutting expenses. as a regulator includes an assumption of acceptance Higher education is a labour intensive activity with of a certain amount of market failure, a questionable more than 70 per cent of operating costs going to assumption as the recent multi-trillion dollar collapse labour costs. Therefore, to reduce labour costs, univer- and recession indicates. Finally, it assumes certain sity management must increase reliance on cheaper beliefs about objectives, goods and accountability. part-time, casual and sessional lecturers, as well as These include that the only objective is satisfaction of making significant investments in information technol- individuals’ private personal aspirations, that individu- ogy in the hope that it will serve as a substitute for als have no public, collective aspiration for Australia, or academic labour. Although some efficiencies may have the world in which they live, that higher education is been achieved by the use of IT, as Bradley reports, the exclusively a private economic good, and that match- efficacy appears to be lacking particularly from the stu- ing of payment, production and distribution is suffi- dents’ perspective as they place a high value on contact cient accountability to all the participants individually with the academics. The third strategy for increasing and as a society. resources by increasing revenue has been implemented vol. 52, no. 1, 2010 Regulation by markets and the Bradley Review of Australian higher education, Benedict Sheehy 61 A U S T R A L I A N U N I V E R S I T I E S ’ R E V I E W by the tactics of bringing in fee paying international Risk taking requires the extra resources that may be and domestic students, and selling higher education needed to recover from an error. It is poor manage- services more broadly. These tactics certainly have ment to risk an enterprise’s survival on a new and increased revenue and follow a competitive model. innovative form of activity when models that are It is unlikely that this will be the only outcome of demonstrably survivable are available in the environ- competition. Competition comes at a cost. As noted, ment. An organisation can afford innovative risk taking quality and efficiency are neither the only nor neces- with its surplus, not with its foundation. Competition sary outcomes of competition. Competition among in an established endeavour like higher education pro- desperate organisations produces a number of out- motes isomorphism as the organisations seek to emu- comes, including collusion, corruption, debasing of late and compete on the standards set by the leading products, and the abuse of trust of workers, suppliers successful organisations (DiMaggio & Powell 1983). In and customers. These negative effects of competition an established area where the standards for the com- have had significant impacts on the university. Among petition have already been set, as in the case of the these negative effects is an increased discontent and university, for more than a thousand years, the primary declining morale among members of the academic question is whether one wishes to participate in that profession, (Anderson, Johnson & Saha 2002; Davis & competition or be outside it all together. Competition Ferreira 2006) reduced quality, and even as the case of in this market does not create diversity (Meek & Wood the University of Newcastle 1997 and Meek 2000). demonstrated, corruption The third policy objec- ...quality and efficiency are neither (Cripps 2005). tive for introducing mar- the only nor necessary outcomes of With respect to the kets into higher education competition. Competition among desperate second policy objective is quality. In order to organisations produces a number of of competition, increasing have a market based on choice and diversity com- outcomes, including collusion, corruption, quality, information on petition the more likely debasing of products, and the abuse of quality must be carefully is just the opposite. The trust of workers, suppliers and customers. collected, complete, cor- choices offered to students rect and timely. Further will be those that are most it requires consumer to profitable to the university – as the federal govern- make decision on the basis of the qualities promoted ment learned when nursing and teacher training pro- by the policy makers. Information in markets is a seri- grammes were closed (Game, 2004) despite chronic ous problem and one of the four basic types of market shortages. Further, choices will be further constrained failure. Nonetheless, it is hoped that markets will pres- to those courses which are currently popular, often a sure universities to improve quality by the publica- reflection of pop culture – whether ‘LA Law’ or video tion of rankings. The impact of markets on quality in game design. Diversity decreases further as only those higher education has been studied by Zemsky (2005). courses that promise immediate entry into lucrative Zemsky observes that competitive markets as found careers which are economically viable with a student in university ranking, which students and their par- base of 15 to 20 are maintained. Law professor Cass ents use for decision making, fails to stimulate quality Sunstein argues that public interest requires gov- improvements for a number of reasons. Perhaps most ernments to take into consideration non-economic significantly, students and their parents are not particu- interests, and among other things the importance of larly interested in making decisions based on quality preference formation where commercial markets indicators (Zemsky 2005). While a small cohort of par- dominate society and threaten public space. In such ticularly keen students will make their decision based instances, Sunstein observes, there is a prima facie on that information, so-called ‘zoomers’, who use pres- case for not relying on markets but re-organising sys- tigious universities to fast track prestigious careers, tems to advance the more widely conceived notions of the rest of the students are ‘amblers’ and ‘bloomers’ public good and social welfare (Sunstein 1990, cited in who develop as a result of their university experience Morgan & Yeung 2007). and decide which university to attend on other bases. Diversity will further decline as organisations under These include proximity to home, security of person pressure cannot afford to take entrepreneurial risks. for international students (Nyland & Smith 2009), 62 Regulation by markets and the Bradley Review of Australian higher education, Benedict Sheehy vol. 52, no. 1, 2010 A U S T R A L I A N U N I V E R S I T I E S ’ R E V I E W where friends are planning to study, and location of top students are given the greatest subsidy that can be programmes of interest (Zemsky 2005; Burke 2005). afforded by the wealthiest university organisations fur- Further, Zemsky (2005) notes that the information ther entrenching a winner-takes-all market (Newman used as quality indicators often fails to do so. Grad- et al. 2004). uation rates, for example, show as much or more Turning to the fourth policy objective, increasing about student preparedness, career motivation, stu- overall participation, one would think that this to be dent resources and alternatives available to them, a function of marketing, the economic environment than about the quality of university courses. Further, and prestige and other social goods attached to higher universities have an incentive to create or rely on education. Accordingly, it will require an investment irrelevant indicators, such as athletics in the USA or in marketing by university organisations and govern- ‘globalisation’ i.e. number of nationalities represented ments to have greater increase in participation. And, in the student body. with respect to marginalised groups it will depend Further, rankings themselves are far from the objec- on the removal of barriers to participation in the first tive indicators they first appear to be. The creators of place faced by those groups. Further, it would appear the highly cited Shanghai Jiao Tong University ranking, that policy advisors have misconstrued the nature of for example, recently commented on the difficulties. competition in the higher education market, the issue Professor Liu wrote: ‘Methodological problems involve to which we turn next. the balance of research with teaching and service in ranking indicators and weights – inclusion of non- Competition, markets and the university English publications, the selection of awards, and the experience of award winners. Technical problems While policy makers are correct in identifying the exist in the definition and name given to institutions, existence of competition between university organisa- data searching and cleanup of databases, and attribu- tions, that competition is quite unlike competition in a tion of publications to institutions and broad subject market for private economic goods. Indeed, university fields’ (Liu 2009). competition is not at all like a competitive market in Finally, in order for a market to function in a way that a commonly understood sense. Universities, for exam- will improve quality, Zemsky notes that the nature of ple, do not compete for all students or market share – the competition would have to change. The academic in fact they pride themselves on excluding those with profession would need to be engaged. He writes that lower entrance scores. Further, as Dill observes, where once quality has appeared at the top of the agenda, conceptualising the competition as a market, there is ‘then and only then will the faculty [i.e. academic not one market and one competition in which higher staff] make the commitment that they… and no one education organisations compete, but several. These else who can deliver the quality that is being sought.’ include the market for education, for research, for aca- (Zemsky 2005, p. 294) There has been a great reluc- demic labour (Dill 1997b), as well as for finance, pres- tance on the part of policy makers to give such power tige and reputation. and voice to academics. It is prestige and reputation that are the major pri- On the issue of quality and competition, it should vate benefits of higher education. That is, while higher be noted that one of the beliefs driving the markets education is often criticised for not providing practi- in higher education policy is that where students are cal work training (a debate which reflects fundamen- paying more and university organisations are compet- tal disagreement about the nature of the educational ing for those students, university organisations will be project of higher education itself), higher education’s driven to improve quality to attract students. The evi- role includes credentialing which in turn creates broad dence is just the opposite (Zemsky 2005; Burke 2005). social benefits as well as private benefits to individu- University organisations use money from student als. With respect to individuals, the private benefit fees to invest in prestige-enhancing research (Meek is referred to as ‘positional goods.’ That is, receiving & Wood 1997). Further, university organisations will a higher education award places the recipient in an be forced to spend more on marketing to attract stu- advantageous social position vis-à-vis those without. dents. In other words, diverting funds from productive Further, the more prestigious the awarding institution activities of teaching and research to marketing. Finally, the greater the social value of the award. The competi- fees have started an odd type of price war in which tion for social position is not the competition the gov- vol. 52, no. 1, 2010 Regulation by markets and the Bradley Review of Australian higher education, Benedict Sheehy 63 A U S T R A L I A N U N I V E R S I T I E S ’ R E V I E W ernment wishes to take account of, nor fund. Yet it is an notes Newman, is unlikely to be well aligned with intrinsic part of the competition in higher education. public interests in the university’s teaching mission Finally, for the analysis to make sense, it must be (Newman, et al. 2004). noted that substantial goods that are neither economic Further, given the nature of the competition, it nor private are produced by higher education. That amounts to what is referred to as a ‘winner-takes-all’ is, there are substantial public social goods being pro- market. A ‘winner-takes-all’ market is a market in which duced by higher education. These goods are produced a feedback loop is created, benefiting the winner and as much by cooperation as by competition. Accord- increasingly punishing the loser. That is, rather than ingly, a narrowly conceived competitive market in creating a range of university organisations with a higher education modelled as if it were producing and varying degree of quality, programs, teaching, and distributing merely private economic goods miscon- research strengths, is that this type of competition strues the much more complex, actual state of affairs. creates a few strong winners and a mass of impov- Consider that to a large degree, the competition erished, marginal organisations. This predictable and among universities is tangential to the market the inevitable outcome, if history is any indicator, provides government wishes to fund. The competition among the basis for a way of public policy thinking. That is, universities is a competition for prestige and reputa- rather than penalising and adding pressure to failing tion (Brewer, Gates & Goldman. 2002) that has little organisations and rewarding winners, failing organisa- demonstrable relation to the quality of education pro- tions should be recipients of disproportionately higher vided. Prestige is associated with the fixed assets of an levels of funding to allow them to improve and deliver organisation and requires significant investment. This the services for which they were designed in the first investment offers no direct improvement in quality of instance (Sunstein 1990 in Morgan & Yeung 2007). education (Brewer, et al. 2002). The main elements in Losers under pressure are certain to make even worse the competition for prestige are attractive buildings, decisions rather than experiment with innovations doctoral programs, and researchers with international intended and needed to create the desired diversity. reputations. It is not a competition for quality that the The winners will continue to take care of themselves. government wishes to fund. Reputation, by way of con- Finally, as noted above, the benefits of competition trast, is associated with the quality of education that an as a driver of innovation, efficiency and education organisation is able to deliver. It is less stable, requires are highly questionable (Kohn 1986 ). From an insti- more effort and resources on the part of and put into tutional perspective, cooperation between university staff, more difficult to measure and more difficult to organisations and members of the academic profession maintain (Brewer, et al. 2002). It takes a different form are not only an important norm, but have produced of investment, in the academic professionals, in order substantial benefits to the institution, its organisations, to achieve this outcome. to academic staff and students as exchange programs Newman notes that the creation of competition fun- indicate, and to society. damentally changed the balance of priorities within In one sense, this difference between university university organisations in the USA. He observes that organisations and profit-driven businesses in competi- prior to 1940 teaching was the top role of academic tive markets should be obvious. Participants in eco- staff. This role has been displaced by research as com- nomic markets compete for market share and profit petition increased. Further, as rankings become more margin, and seldom compete on the basis of quality, ubiquitous, pressure increases and university organi- particularly when it is difficult to measure, as in the sations create irrelevant competitive indicators, and case of services. Universities, by way of contrast, have abandon original missions when put under pressure no interest in increasing market share or profits and to report even false or misleading metrics (Bevan & are interested in quality only as it enhances prestige. Hood 2006). Other organisations, including companies Accordingly, importing a mechanism for private eco- listed on stock exchanges or government agencies nomic goods into an institution which provides sig- operating hospitals or public utilities, also behave in nificant public social goods seems an ill-considered this way. Newman notes that universities follow that proposal at best. In their earlier, extensive study of the pattern as competition on agreed measures increases, use of markets in Australian higher education under and put more resources into research. This shift by the Hawke and Howard governments, Meek and Wood university organisations towards research prestige, concluded with a sharp but sombre note. Market poli- 64 Regulation by markets and the Bradley Review of Australian higher education, Benedict Sheehy vol. 52, no. 1, 2010 A U S T R A L I A N U N I V E R S I T I E S ’ R E V I E W cies, they wrote, ‘are but fiscal measures and are not The first basic assumption is that creating a voucher set within the context of a well articulated philoso- system will be sufficient to cause the creation of a phy and rationale for higher education.’ (Meek & Wood competitive market in which universities will compete 1997, p. 270) The Bradley model does not address this on the basis of quality. The market will have complete, fundamental error. We turn next to the specifics of Bra- correct and timely information and students will not dley’s market strengthening mechanism of vouchers. only be able to use that information, but will make their decisions based on that information. Evidently, Voucher as regulator in the student market this assumption is a large one. The basis for university competition and student decision-making are unlikely The Bradley Review proposes a voucher system. A to change as the result of the introduction of vouchers. voucher system is a form of market regulation that Further, it is unlikely that information asymmetries will works by making students a type of consumer, shop- suddenly become insignificant as a result – a matter ping for the desired good in a market composed of to be addressed through a newly created agency dis- a variety of higher education providers. The regula- cussed below. tory aspect of voucher systems is that they work like The second basic assumption is that supply of money in the market for goods. The market for goods higher education by public non-profit universities constrains or regulates pro- (instead of mere public ducers of goods in that pro- subsidy) is unnecessary. There are basic and significant reasons ducers will only produce That is, that the ownership that higher education has been provided those goods for which con- and economic status of by non-profit organisations. Non- sumers are willing to pay the provider is irrelevant. profit organisations not only address and so not waste resources This premise is errone- crucial problems in the interactions on unsaleable goods. The ous. There are basic and idea of vouchers is that uni- between potential students and higher significant reasons that versities will be regulated to education institutions such as information higher education has been offer only those courses that asymmetries, but also are the only provided by non-profit have a sufficient number of organisations that have a purely public organisations. Non-profit students demanding them mandate—that is, a mandate to deliver organisations not only to be viable and so not address crucial problems in public goods (which by definition do not waste resources on unvi- the interactions between flow from markets). able courses. potential students and A voucher system alone higher education institu- does not create a complete market. Rather they form tions such as information asymmetries (Hansmann a partial market, or ‘quasi-market’ (Niklasson 1996). 1986), but also are the only organisations that have a Whereas a complete market in higher education purely public mandate – that is, a mandate to deliver would allow providers to set fees, negotiate wages and public goods (which by definition do not flow from other inputs without government support or interven- markets). tion, vouchers create a university system regulated or Further, non-profit organisations specifically reject driven by the demands or preferences of voucher hold- market distributions in order to achieve other objec- ers. That is, the market regulatory device of demand, tives, including some forms of market failure such as rather than an alternative such as government alloca- public goods (Auteri & Wagner 2007). In the higher tions, is used to create a demand-driven quasi-market. education context, nonprofit organisations have The voucher system is premised on a number of played a dominant role for important reasons. As assumptions, some of which have already been dis- noted American higher education scholar, Professor cussed. Accordingly, they need not be repeated here Pusser puts it: ‘the nonprofit degree granting institu- except as a refresher and as they have particular bear- tion ...has become dominant in a large measure to ing on a voucher system. This section identifies the protect against moral hazard and underinvestment three basic assumptions and pitfalls underlying this but also to ensure that the contributions of higher particular aspect of market-based regulation for higher education to the public good will be widely dissemi- education. nated’ (Pusser 2006). That is, the things we as a soci- vol. 52, no. 1, 2010 Regulation by markets and the Bradley Review of Australian higher education, Benedict Sheehy 65 A U S T R A L I A N U N I V E R S I T I E S ’ R E V I E W ety seek from higher education are best protected by Problematically, Bradley’s market voucher system use of the non-profit form. ignores the evidence. Student vouchers have not pro- Some in Australia have confused ‘private’ with ‘non- duced efficiency and quality in a six decade test. The profit’. Indeed, the former Vice-Chancellor of Mel- American system demonstrates such. It also ignores bourne University, Allan Gilbert, promoting the now the evidence concerning the role of non-profit organi- defunct for profit Melbourne University Private pro- sations. Further, few students make the decision to claimed ‘[the] best universities in many countries are attend a particular university on the basis of quality. private universities’ (Cain and Hewitt 2004). While it The evidence is that students base their choice on is true that some are private, they are without excep- issues of importance to them: location, job prospects tion non-profit. Provision by non-profit providers is and affordability of living in the preferred location, critical, and in Australia which lacks the philanthropic family and other matters. Next, it ignores the efficacy in traditions of the USA in higher education, the only non- marketing by higher education providers. Marketing profit providers are public. does not only provide accurate timely information. It A third basic assumption, that the market will work equally increases the information asymmetry making it to regulate the university as a producer of educational more difficult for university students to make decisions goods just as it works to regulate producers of other about the use of their vouchers. Further it fails to take private goods, merits consideration. In particular, this account of the fact that marketing while increasing the assumption is itself premised on three further assump- difficulty of measuring and evaluating the quality of tions: that this market will drive efficiency and avoid higher education services (Cooper 2002), reduces the waste, that informed consumers individual choices will already weak role quality plays for making decisions. be based on quality and that in the aggregate those That is, as marketing information induces students to choices will amount to public good. We examine each make decisions on criteria other than quality – after all, in turn. As Pusser notes, portable subsidies (vouch- in a winner-takes-all market, only a few are truly ‘world ers) have been in use in the USA for more than sixty class.’ Thus, rather than a voucher system driving uni- years. He goes on to note however, that ‘there is little versities to improve quality they will produce some empirical research to indicate that the choice provided unintended consequence. by public subsidies has increased efficiency and pro- In sum, Bradley’s objective of using vouchers as ductivity have led to lower costs of production’ (Pusser means to achieve quality ends is unlikely. Neither stu- 2006). As matters of choice, efficiency and productivity dents nor universities compete on the basis of some are priority objectives of the Australian policy proposal, measure of raw quality (Brewer et al. 2002). A voucher the voucher approach seems a poor policy choice. The system that ignores the public and social goods, as well experiments with student vouchers in the USA should as the moral hazards of for-profit provision as seen in lead to a very cautious approach to their adoption in the recent scandals of private higher education provid- Australia. Next, as noted, the majority of students do ers facilitating in immigration fraud indicate. not make decisions based on quality. Finally, the belief that the sum total of private economically conceived The Bradley model and market failure decisions will produce socially and economically opti- mal outcomes as noted above has been demonstrated There are three serious market failures which call for as being incorrect by Kenneth Arrow. comment – two addressed, the other ignored in the A market model, dependent on individual student Bradley Review. Bradley has attempted to address demand fails to deliver anything other than a market information asymmetries, by proposing a new agency replicating the preferences of a cohort of teenagers a proposal accepted in the recently announced ‘Terti- – at least where the majority of students are recent ary Education Quality and Standards Agency’ (TEQSA), high school graduates. That is, the long term conse- a core task of which is the provision of information quences of having universities cater to the interests of about courses. This is certainly a worthwhile objec- teens ignoring the larger social, political and economic tive; however, as noted, it is not clear that the service consequences of those decisions seems to be a poor of providing information will change how people policy choice. It should be expected that the private make decisions. Further, there already is considerable interests of teens may well diverge markedly from information available from the current quality regula- wider long term public social interests. tor Australian Universities Quality Agency. In addition, 66 Regulation by markets and the Bradley Review of Australian higher education, Benedict Sheehy vol. 52, no. 1, 2010 A U S T R A L I A N U N I V E R S I T I E S ’ R E V I E W there is quality information published on a commercial quality, nor that information on quality is unavailable. basis, for example, The Good Universities Guide. Students are interested in quality: they simply rank it The other market failure, poor distribution to mar- differently. Far from being the exclusive criteria the ginalised groups, has also been addressed in the Bra- government seeks, it ranks lower than others. Further, dley Review. Bradley seeks to correct distributions by there is information available. Even if Bradley’s propos- setting special targets for low socio-economic status als were introduced, research on information asym- and for students from remote rural areas. This pro- metries in higher education markets suggests that they posal is unlikely to be successful for reasons discussed are extensive and intractable. Further, before casting among others. the student onto a mound of information, considera- The most fundamental failure, however, is in the pro- tion should be given to the nature of the purchase. vision of public goods. The market model fails because An undergraduate education is a once in a lifetime it neither acknowledges the collective nature of the purchase which cannot be corrected (Dill 1997b). educational endeavour of the higher education com- Accordingly, more than distribution of information to munity, nor the collective aspirations of the nation. uninterested prospects is required from government. That is, the nation desires and requires people to work The growth in markets in general and as a form of together to create society with a capacity to respond regulation are part of the demise of the welfare state, to national and global issues beyond the narrow scope and the rise of neoliberalism (Henkel, 1991 cited in of individual private economic self-interest (Krygier Meek 2000). Regardless of one’s position on the poli- 2005). tics of the issue, the conception of higher education as exclusively, or even primarily private economic goods Conclusion is highly contestable indeed if not wrong. Regulation of higher education needs to start with a clearer per- There are at least three problems with the market spective starting from first principles of higher educa- model: first, from the perspective of the university tion including its public purpose. If markets are to be organisations, even if one accepts the questionable used, they must be designed carefully to push institu- premise that university organisations are currently suf- tions to constant improvement in teaching and public fering from inefficiencies after a decade of increased service (Newman, et al. 2004) rather than pursuit of efficiencies in response to declining funding, it is far narrowly conceived self interest. from clear that competitive markets are certain to pro- The market model is problematic because the sim- mote further efficiencies. Further, as demonstrated, plistic private economic model on which it operates competition among universities does not motivate blinds one to the more difficult problem of social coor- improvement in quality of service. Indeed, it would dination and control, as well as the issues surround- appear that competition increases the likelihood of the ing public social goods. These significant non-market previously identified unintended consequences. These features of higher education militate against the use of include poorer decision making in turn resulting in the market model and market mechanisms. It requires decreased efficiency, increased fraud, declining stand- open political debate, and courageous political deci- ards, and a decline in the critical academic profession. sions instead of a blind faith in markets as guiding Second, from a system-wide perspective, competi- higher education policy. tion is most unlikely to increase diversity. Rather, it is As Newman et al. wrote: likely to exacerbate the copying of a few successful ‘policy makers and academic leaders [must] engage leaders. Further, the system needs to be accountable in ... substantive discussion with each other about to society and the nation as a whole not simply the pri- the nature of higher education [as a private eco- vate preferences of some. The characterisation of the nomic good training for the workforce, or a public good contributing to the well being of society as mission of the university as satisfying the private eco- a whole]. In the absence of such debate and of nomic aspirations of individuals is a failure to identify conscious planning, the system of higher educa- the goals of the nation and the objects of social living. tion will likely drift into some new market-oriented Third from the students’ perspective, the proposed format without adequate restraints and with an on- market neither accords with their interests in prestige going erosion of its fundamental purposes, a form difficult to change once established. The result nor more pedestrian preferences of studying close is likely to be the loss to society of some of the to home. It is not that students are uninterested in vol. 52, no. 1, 2010 Regulation by markets and the Bradley Review of Australian higher education, Benedict Sheehy 67 A U S T R A L I A N U N I V E R S I T I E S ’ R E V I E W attributes of higher education that are essential of professional dilemmas of environmental educators undertaking research with/ a free and effective society.’ (Newman, et al. 2004, for private corporations,’ Australian Journal of Environmental Education p. 46) 22(1): 39-47. Dill, D 1997a, ‘Higher education markets and public policy’, Higher Education In other words, although the Bradley Review has Policy 10: 167-185. gone some distance engaging and challenging politi- Dill, D 1997b, ‘Markets and higher education: an introduction’, Higher Educa- cians on the crucial issue of Howard’s underfunding, it tion Policy 10(3/4): 163-166 fails on the equally crucial matter of regulating higher DiMaggio, PJ & Powell, WW 1983, ‘The Iron Cage Revisited: Institutional education in accord with its most important contribu- Isomorphism and Collective Rationality in Organizational Fields’, American Sociological Review 48(2): 147-160. tion – the public and social goods it uniquely delivers. Game, C 2004, ‘Potential Collapse of the Australian Health Care System’, Front- line, vol. 12, pp. 20-21, September. ISSN: 1322-2945. 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Davis, JM & Ferreira, J-A 2006, ‘Higher Education Inc.: The personal and 68 Regulation by markets and the Bradley Review of Australian higher education, Benedict Sheehy vol. 52, no. 1, 2010