Thursday, 9 December 2010

The Student Revolt Against Tuition Fees and the Limits of Public Choice Theory

For what seems like decades the Right has claimed that markets or quasi markets in social goods and services protect the interests of consumers, and that public services are inherently subject to being run in the interests of the producers rather than the people who use them unless they are subject to such external discipline. These assumptions have been hard-wired into policy debate to such an extent that they have become all but invisible. In other words, they've become hegemonic.

The problem is defined as the constant danger of 'rent seeking' by public sector providers - exploitation of a monopoly position to rip off or under serve 'consumers'*. The implication is that we need 'contestability'.

Much of the middle level policy debate that takes place around 'public sector reform' in either its New Labour or Coalition manifestations can be boiled down to an argument about which services should be subject to which different kinds of such contestability; how immediate or regular such threats should be; and the degree to which the boundaries between third sector not for profit alternatives and the private sector itself can be blurred in defining potential alternative managers of public services.

Political and policy 'creativity' gets defined as thinking up new ways in which this basic underlying default assumption can be packaged as empowering consumers. Hence the change of emphasis from direct efforts at privatising state services such as we saw in the 1980s to more nuanced emphases on consumer choice of services, as evident in the drift of schools policy over the last decade or the shift to user controlled (a misnomer) budgets in social care. This social care development has the added 'advantage' of blurring another key boundary: between what the state should pay for and what each individual should pay for.

The Browne report is shot through with this kind of thinking, as Stefan Collini so tellingly analyses in the LRB,

"Browne proposes to scrap most of this. In its place, he wants to see a system in which the universities are providers of services, students are the (rational) consumers of those services, and the state plays the role of the regulator. His premise is that ‘students are best placed to make the judgment about what they want to get from participating in higher education.’ His frequently repeated mantra is ‘student choice will drive up quality,’ and the measure of quality is ‘student satisfaction’.....even in its own wildly optimistic terms, this report proposes a hefty cut in funding. In suggesting that the standard fee should initially be set at £6000 (which particular institutions might choose to exceed, though there will be various disincentives, including a ‘levy’ which would claw some of it back), Browne acknowledges that this would not fully replace the value of the block grant even for the most successful institutions. .....‘The purpose of starting the levy at a lower point is to instil a focus on efficiency throughout the system.’ Lots of courses may have to be closed and lots of people sacked, but that must mean, by definition, that they weren’t offering a product the consumer wanted, so good riddance."

This is, of course, manifest nonsense: ask the students. They seem to have a fairly good grasp of the fact that it is the providers - especially the Russell Group - not themselves, the putative 'customers', who benefit from the tuition fee rises. In fact the whole tuition fees plan arising from the Browne report could be seen as a form of provider capture: but one based on introducing quasi markets and 'consumer choice' - the very mechanisms which so called Public Choice theory tends to recommend as antidotes to provider capture. So here we a have an apparent case of the empirical/practical dog eating its own theoretical tail as it were: the whole approach collapses into incomprehensibility, at least when applied in this particular circumstance.

All theories have limits to their applicability. It may yet prove to be the Coalition's regret that public choice theory in Britain reaches its' limits just at a time when they're committed to slashing the state. But then that would leave them 'ideologically naked' as it were, simply cutting for cutting's sake. & that's not a good place for any government to be.

*Does this ever actually happen? Yes. I have direct personal experience of it happening. But does it happen often enough to be thought of as a structural problem which demands wholesale 'public sector reform'? No, I don't think this is proven in any sense, despite various Public Choice theorists having won the Nobel Prize for Economics. So I suspect we dealing with one of those 'true but trivial' issues which have engaged Chris Dillow in recent weeks - but one which is being used, systematically, for directly political ends.


  1. I don't think its right to present the idea of "choice", or the idea of competition v Monopoly as being a Right v Left issue. It tends to be seen that way, because for the last 100 years the Left has adopted the statist notions of Lassalle and the Fabians, and that thereby leads to apologising for the biggest Monopoly of them all - the Capitalist State.

    But, Marx was very clear that one of the most revolutionary aspects of Capitalism was precisely that Competition, which is inextricable from it, broke down the reactionary Monopolies of feudalism, and the kind of paternalistic relations that went with it. In adopting Statism, the Left has tied itself to the worst aspects of Feudal society, and necessarily that includes the kinds of paternalistic relations and dependency that the Welfare State creates. Whilst I wouldn't advocate privatisation as an alternative to the inadequacies of State Capitalist provision, the reality is that the proof of the pudding is in the eating. In a whole seriers of instances it can be seen that people are not satisfied with what is frequently poor, bureaucratic, and oppressive State provision - let alone uncertain as the current Student Fees issue demonstrates, but we could look at Pensions and other provision similarly - and where they can choose an alternative. That's not just to say State Monopolies suffer this problem. private Monopolies on the railways present the same problem, and so its no wonder that individuals continue to look to private transport as a preferred solution. Marxist economic theory over the last 30 or so years, however, did move away from the Leninist orthodoxy on Monopolies, and recognise that within Monopoly Capitalism competition takes a different form, often competition at a higher level between Oligopolies. In fact, it could be argued that this competition is more likely to take the form of attempting to win market share by providing good quality, than to maximise profits by cheap-skate cost cutting, which is more typical of small firm, free competition as Engels pointed out. There seems quite good evidence that where there is sufficient competition between a number of large companies, it does result in both lower prices (economies of scale) and rising quality. Computers and electronic goods in general are probably the most obvious case of that.

    In actual fact, I would argue that compeition continues to be a revolutionary tool that workers need to use, and will need to continue to use for some time until we are able to both raise production to a sufficiently high enough level, and until we create the kind of tools and social relations to begin to replace it with co-ordinated if not immediately planned production. It is not the market or as marx put it, Distributional relations, which are the problem, but Productive relations i.e. the fact that workers do not own the means of production, which determines the income shares that flow from that, which in turn produces skewed results within the market.

    I was interested to read this guest post Will Public Sector Workers Fit In The Co-operative Movement, on the UK Worker Co-operatives Blog, in that respect.

  2. Boffy,
    Your argument seems very general, but mine is rather more specific. I do not deny that competition can be organised in various ways to benefit various different interest groups depending on the context. I merely suggest that public cohesive theory inspired competition runs into the ground as any kind of guide to deal with (not-yet-proven-to-exist-in-HE) 'provider capture' in our universities.

    If I imply a wider point, it is simply this: yes, anyone from any ideological point of view would agree that where public services are found seriously wanting there must be a point when one sacks the management and starts again. & this would be as true for worker controlled public services as it is now.

    But I don't believe that this situation is so typical of public service as a whole that this threat (which is what 'contestability' means) needs to be the cornerstone of policy towards the welfare state.

    Now, you may disagree: you may feel that existing public services are predominantly crap. But, at minimum, I would ask that those who believe this demonstrate it on a case by case basis, rather than simply assert it from a set of first principles which I was trying to demonstrate do not universally apply, at least in HE.

  3. Charlie,

    Isn't the reality that in HE we already have this contestability, but not enough of it? A look at the US where private Universities run alongside shows that these private Universities like Harvard and Yale, despite charging astronomical fees have no problem attracting students both from within the US and overseas. The reason is that degrees from (or at least just being able to say you went to) these Universities are given much higher value in the market place. Other Universities in the US might be able to offer a similar service if they were free to charge much higher fees, and thereby attract the teaching staff and other resources, and the consequence would be a general raising of standards, and probably reduction in costs, because once the Monopoly of Harvard, Yale and the other Universities was broken they would have to compete on price and quality.

    In reality we have that in the UK too. Oxford and Cambridge have no difficulty attracting students because Oxbridge degrees are also more highly valued in the amrket place. Absent price competition, the competition simply takes other forms - something that happened in the USSR and other post-capitalist regimes. In this case the competition takes the form of "merit". By that token the vast majority of students are excluded from an Oxbridge degree, and also from the possibility of going to another Univesity, which in a free market might actually develop to provide degrees and education of even better quality than do Oxbridge currently, and at a lower cost and price.

    But, as I argued in mjy blogs HE, Why We Shouldn't Advance The Merit Argument, for a socialist rationing education on the basis of "ability" is no more egalitarian than rationing by price. On the contrary, it gives those with an initial natural advantage the benefit of a still greater advantage. Moreover, given that we know that educational qualifications and attainment are highly correlated with the social class and income of parents, the difference between rationing by merit and by price is not as great as would be made out.

    As Marx said Competition gives rise to Monopoly, but Monopoly also gives rise to Competition. At the moment those with money are able to gain access to Oxbridge, and to obtain all of the benefits that entails whilst being subsidised by the working-class. The reality of that can be seen from the tiny minority still who get there from the working-class, let alone its lower ranks. The history of Capitalism as a number of Marxist writers from Hobsbawm to Mandel have stated is that increased production and lower costs - which are both a function of competition - has seen, across a whole swathe of Use Values,what were previoulsy luxury products which were the preserve of the rich, made available to society at large. That "Civilising Mission Of Capitalism", as Marx describes it, is one of the progressive aspects of it, we should welcome, and not try to put back into the box of history.

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