Free Education? Why not user pays?

The truth is there is no such thing as ‘free education’. There is always a cost so someone must pay, and the question is “who pays?”.  The choice is between ‘society pays’ (free?) and ‘user pays’. At first, the economic rationalist argument  “why should society pay for the university education of the elite?” appears compelling, but does it really work that way?

  • National Impact: Helicopter view
  • The impact on the individual
  • OK, who really pays?
  • Controlling studies: free market, vs university places
  • In depth, the fabric of the society we live in
  • Conclusion: The beneficiary pays

National Impact: Helicopter view.

“The individual should pay” because otherwise all society will be subsidising those will then have the highest incomes.  In other words, the individual paying will overall be more egalitarian.  But look at the countries where education is “free”.   This more in depth look at the debate in some of the main free education countries, free education is all about equality, and the countries offering free education include those that both value, and achieve, equality of citizens more than other countries.

So either these countries that both value and achieve equality so highly have it all wrong and only manage equality despite their free education systems, or the arguments for paid education representing equality are wrong.  So who has it wrong, those who best achieve equality, or those who have the worse record on equality?  If free education does deliver equality, why, and why would paid education fail?

The impact on the individual

The whole concept of paid education is that education is effectively an asset for the student.  The higher income earned from any asset, the better performing that asset, so the student should seek the asset which gives them personally the best return on their investment.  Each student should choose their degree based on which investment will provide them personally with best return.

The effect is to promote such studies as law and medical practice as opposed to subjects such as medical research or teaching.  Generally, careers which provide the greatest personal satisfaction, which can correlate to the public benefit that career provides, than areas where pay is the only motivator.  This means careers with a public benefit may have a higher study to income ratio, and therefore a lower economic yield as an asset.

Think of the idealised inspirational dreams of young children as in this video putting the case for ‘free’ education ( see 2:00) . End poverty, cure cancer, fix climate change.  All great aspirations, but none delivering the personal wealth required for a strong performing ‘university degree as a personal investment’.

But some noble aspirations do fit with the return on investment model.  Perhaps not merchant banking or even corporate law, but what about doctors?  Perhaps not creating the cures, but certainly administering the cures as a medical practitioner does provide for both: a real need within society and a strong return on investment?

Logically the laws of economics should ensure that the needs of society will be because the pay for needed careers will rise until there is supply.  So if a degree is expensive, then the market will ensure those with that degree earn sufficient to offset the cost. We need doctors, so doctors pay will be sufficient.  We don’t need a to eliminate poverty, fix climate change(at least not this week), or cure cancer.  In fact from an economic perspective, curing cancer could harm that section of the economy.  The problems thus should be restricted to the optional parts of the economy, or those things we need in the longer term.

So it is true not all aspirations are undermined by the user pays education system, as not all aspirations are long term, and surely in these shorter term aspirations and the things we need today, the system becomes more egalitarian?

Well… perhaps not…

OK, who really pays?

The case of a medical practitioner does sound like a strong argument for ‘paid education’ works for todays needs.  Society needs doctors, and paid degrees provides doctors because the pay for doctors increases until there is sufficient supply.  But this is also the problem, the cost of doctors rises to cover the cost of the degree.  If this is real, then doctors will receive highest pay in countries where degrees are most expensive, so doctors can in turn pay of the debt of their education. I did a search for the pay of doctors in the USA vs Scandinavia (where education is ‘free’). This comparison is actually the pay of doctors in a variety of countries, but the clear trend is the higher the cost of education, the greater cost of doctors.  Correlation is not necessarily causation, but the data does seem to confirm the prediction.

All this suggests that with paid education, the cost of doctors university degrees is in the end paid by those who visit doctors.  So ‘free’ education taxpayers pay, which puts the greatest burden on those who earn the most income, in place of the greatest burden of the cost falling to those who suffer ill health. The same rule will apply in each case, prices will flow through intermediaries until they ultimately reach the consumer.

Funding for medical degrees:

  • paid education: funding from those who suffer ill health
  • ‘free; education: funding from taxation revenue across all society according to tax rate

Generally the rules of economics ensuring the cost will ultimately be met by those with the need means the only reduction in society paying will apply only for services that are needed, but also have a strong export focus thus ensuring the cost is partially met from outside the tax base.

Controlling student expense: free market, vs university places

To my knowledge, there is no government in the world that completely eliminates spending on education.  At least some education is considered part of the function of government.  But at the other extreme, no government can be responsible for everything every citizen may have a whim to learn.  Paid education may suggest every citizen must full pay for all education, and ‘free’ education may sound like every student is indulged for whatever they desire, but neither extreme is correct.

‘Free’ education still will limit what courses are provided by state universities, for which citizens and non-citizens and for which courses, and countries with ‘free’ education will still also have fully paid education ranging from industry specific courses through to paid public education providers.

Paid education countries still subsidise courses and have state based universities, it is just that students still must pay.

Overall it is not automatic whether paid education countries spend more or less than free education countries.  Consider per capita spend on education between counties and there is little difference between free and paid education countries.

 

In depth, the fabric of the society we live in

Paid education ultimately forces a purely financial focus to education, and ultimately the choice of what people do in life.  Certainly a nail in the coffin of the sentiment “Ask not what your country can do for you – ask what you can do for your country”.

Conclusion: The beneficiary pays

The answer to the difference is “the beneficiary of the education pays” in each case.  So do we want society to be the beneficiary of education, or each individual for themselves?  Do we want a society where people consider the overall society, or only themselves individually.

 

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