IS there Market Efficiency in our Higher Education system?
IS there Market Efficiency in our Higher Education system?
In a recent article, “Hastings Uni closing: A sad Consequence of marketing education and higher fees”, we argued that the increased marketization of education wasn’t working as education was not compatible with market structures due to a number of reasons. Here we test those claims by taking a case study of political science type degree and testing if prices are in any way related to the stated quality of the politics department and institution they belong to. If marketization is efficient and working we should see prices relating to performance in some consistent way that can be measured and understood by consumers. Also information should be easy to access and easy to process when understanding if this relationship exists. If it does not do this then the average consumer will not be able to make rational decisions, and therefore the market will likely not be efficient and likely will not work for the avenge consumer, otherwise known as the average student.
Our method to carry out this study is to select one type of level of study, in this case a 1 year masters postgraduate degree, specialising in a political science degree. Political science in this article is defined as a mathematical and numbers based approach to political research, where both qualitative and quantitative methods can be focused upon. Such qualifications as this usually focus upon, opinions polls, surveys, public policy scrutiny and large N surveys/ quantitative analysis. These are the courses we mainly seek to focus on, so we can compare like for like, and therefore make comparisons between quality of the same courses and price of the same courses. The study then selects the top rated political department that will most specialise in these types of masters qualifications, defined by the Research Excellent Framework (REF) which rates quality, qualifications and education potential of courses, and their staff, by department. This makes it possible to compare different department’s quality and what prices they should be able to charge as a result. We then look at what the typical political science course is offered at each institution and record key details in a table, ordered according to the REF rankings. The table names the institution (in order of ranking), the name of the course, the web address it can be found at and finally list the yearly fee of the course, which is the most recent fee listed on the website.
After we do this we get the following tables and results:
When we change the order of the list to put the university courses in order of price, from the Highest to the lowest price for one years study, we find that prices do not correspond to ranking of quality that much (see Table below this text). In other words the best rated courses by professionals are not the most expensive ones, suggesting that people are being overcharged for courses that are not the best, suggesting that value for money is not being offered to most students who take these courses. In fact most do not feature where you would expect them to in the table, according to the professional quality given to each course. Out of the Top ten courses only four courses feature in the most expensive courses, suggesting there are six courses that are overcharging. Furthermore, out of the Top ten the most rated course does not feature anywhere close to the top ten in expensive courses, suggesting that a lot of courses are overcharging to what the experience give each student. When the bottom ten, the cheapest courses, are taken into account we can see that perhaps the most expensive courses are overcharging by a lot more than first thought. For example Essex and York have a lot cheaper prices, but are both ranked very high, suggesting that the majority of the table is overcharging to what the experience is offering, such as new learning and job opportunities.
Looking at the middle of the table we can see that this table has mixed rankings in terms of quality of research, suggesting that there is a lot of variability in terms of prices when paying some of the slightly above average prices. Some places offer a lot better value for money than other places in this part of the table. In some cases places ranked a lot lower in the table charge well over some of the higher ranked places, in some cases over +£2,000. This would suggest that even when paying the more average prices it is a lottery if you can get value for money, suggesting that the average student is paying above the market prices for more average courses, when compared to some of the better courses, that can offer students better outcomes, and therefore better value for money. Overall on brief comparisons between quality assessments to fee charges there does not appear to be that not much correlation, questioning if a market based higher education systems can deliver the best outcomes and value for the average student.
The problems with a market approach in general.
So far we have analysed the idea of a market being efficient under the assumption that the market works under all the rules it is suppose to. We have analysed the table produced under the assumption that there should be a clear standard of quality and a clear order pricing to reflect a market order. However, not only does the market appear inefficient under normal market structures, but also it looks to be inefficient at even creating adequate market structures, that enables efficient consumer behaviour, which would allow markets to function for the average student. In other words when taking a detailed look we see that there are four reasons to why education may not ben able to function within a market at all, let alone being efficient within a market. The four points include a lack of standards on over quality, problems of making like for like comparisons, Information problems and access to markets is too restrictive and not competitive.
The problems outlined above can be seen and understood in more detail below:
One problem is that these types of education courses are very hard to standardise, by this we mean these courses do not have a single measure of quality and it is highly debatable over what institutions and courses are the best, and therefore what prices certain institutions and courses can charge. As education is not a tangible product and is not easy to assess its quality before consumption, as a result league tables have become highly important in creating standards, helping people to understand what is best for their education choices. It is here where we focus on the problem of a lack of standards which creates a clear sense of quality and best value for money. Above we created our standard league table through using the REF system, which some argue is the most complete ranking system, one where research, teaching and learning quality is taken into account. However, others would argue that it is the most recent student satisfaction ratings that is important, as this indicated the performance based from the consumer, last years set of students. Others argue that league tables that take an overall ranking approach, usually published on online newspaper sites. Some people argue this is the best approach as it is simpler, better known and easier to access. The truth is that a good case could be made for all the three systems, with more systems that others could also equally argue for. The debate is not necessarily the problem; the greater problem is the wide varying results between the different systems rankings. If the different ranking system provided similar results, and allowed a set standard which could reflect individuals’ preferences of what they would like to get out of the course, there would not be a problem, but the exact opposite occurs. For example in some cases different ranking systems flip the table we showed above the other way round. For example student satisfaction scores can cause much variation when compared to the REF system. For example Keele and Essex University courses are flipped around in the table, meaning that one system ranks one institution at the very top, whilst the other ranks it a lot lower. On top of this when comparing this to overall rankings found on websites, like the guardian and the complete university guide, we find that again there is a lot of variation, which can go up or down ten places depending on the site and year you are looking at. Overall understanding the level of quality is extremely difficult, if impossible, which creates a lack of standardisation and therefore a lack of ability to understand the exact quality of a product, resulting in it being hard to understand how process and performances relate. This in turn makes it harder to understand what is the best value for money choice for the average student.. This also hurts competition as a lack of understanding can lead to price inflation as institutions can charge more than they are worth As money and performance appears not to be related anyway this only complicates this understanding further, creating a scenario where market based structures largely do not work for he average consumer, otherwise known as the average student. The problem of information is not just based upon standards, there are also other problems with information, which we will now go onto explore.
Making “like for like” comparisons: Even if a standardised ranking system could be achieved, and this ranking system could reflect quality with fair pricing there would still be a problem of specialisation causing a lack of direct comparisons. If you wanted to buy a specific type of bread you would be able to do so and compare quality and prices with other places fairly easily, but with these courses this is far harder to do so. This is because these courses offer a variety of different experiences and learning outcomes that are tailored to different job opportunities, to put is simply they are not all comparable and will be better suited to different types of students, seeking different things. For example Essex university courses specialised in public opinion and polling research is a very specialised course that helps students learn polling skills and get into these types of jobs, where as the Oxbridge courses specialised in public policy, which instead focuses on scrutinising polices that government use, which can gain access to civil service type jobs. These are both political science based degrees, yet clearly offer distinctive things, that will suit different students differently. Both these courses are much specialised and can offer great access into different jobs, yet vary a lot in ranking and prices. Straightforwardly, students seeking specialised experiences, learning outcomes and job opportunities can experience pot luck when applying for degrees in terms of costing and value for money. Job opportunities may be similar in terms of wages and careers gained, but prices vary dramatically, for example Essex’s political behaviour course being one of the cheaper courses, where Oxbridge’s public policy courses being some of the most expensive, again reinforcing the pot luck feeling. So even in a standardised market structure, where information flows freely, comparisons and rational based decisions are tough, again suggesting that these types of courses do not work within a market based structure. Also with these courses being so specialised monopolies, and a lack of competition, can occur creating price distortions and lack of market efficiency, suggesting the a lack of like to like comparisons do not help efficiency within the education market. This level of control over the market can create information problems. This typically occurs displays signs of a lack of information, which can also be compiled with too much irrelevant information. We move onto focusing onto this third information problem.
Problems with information access and clarity over information: When conducting this study the information that was required to make this simple table was not always easy to find, in fact in many instances it was very difficult. This is only the basic information, like the course overview of the course we were interested in, the price and the website location. When looking at more detailed information about the course structure, module options, teachers and other aspects about the courses some of this information was not available. Furthermore, there was also a lot of information that was not relevant to the course or how to apply, with sometimes fees being hidden away and very hard to find. This complexity and lack of information in some cases makes it very hard to understand the options available to the average student, making it hard to make rational based decisions markets thrive upon. This makes it hard to create an adequate market structure where information empowers individual consumers, driving up competition, producing the best outcomes for consumers. Furthermore, there is a problem of too many intervening variables, such as branding of courses through the name and promotion of institutions. Institutions that do not rank highly in individual departments can charge higher fees through use of the university brand that overall is well received and ranks high in other league tables. This can inflate prices and produce price distortions that do not necessarily reflect the best value for money outcome students can have. Finally, due to this level of power in the market if services received are not to a customers liking they can not claim a refund, they still incur costs and they lose time they could use spending there money elsewhere. This information again is not there for most students, this results in a lack of information and a market structure that does not benefit the consumer, only the creditor. Therefore, this study again highlights an example of how the postgraduate course market does not create an adequate market structure, let alone making it an efficient market. This again suggests that perhaps education courses like this are best not marketised. This has arisen from a lack of competition and access to the market, which is now what we go onto explore.
A Lack of competition and far too many restrictions within the market has resulted in many unfair distortions against the consumer. As there are large restrictions against other companies and institutions from entering the market, as there are large sums of money that need to be raised to create institutions that can offer competitive courses and also a lack of history that results in a lack of presence in the market. All this means that there are very few places that are offering a political science degrees, especially a competitive ones, resulting in prices rising year on year due to a lack of competition, which over time will result in very high fee costings, hurting the consumer and favouring the creditors, the universities. Also there are a lot of restrictions for consumers to fairly enter into the market, such as fees becoming an entry requirement. On websites that explain what entry requirements are needed for a particular political science course fees are often not listed. So students who get the highest grades can be restricted from entering the market due to prices. This restriction limits the market for many poorer students, resulting in greater control for universities who can offer scholarships and courses to a select few. All this results in unfair competition, unfair control and generally a poor structure for a market based system to operate. This does not achieve the best outcome for the best students, but rather limits choice to what people can afford, again hurting competition and choice, again limiting the ability for a market based system to effectively work in the postgraduate education system.
This is of course is only one case study and more work will need to be done researching other courses before final conclusions can be made. However, for all the reason above, based on the study we did on researching political science based postgraduate masters degree, we again reinforce the claim we made in our original article “Hastings Uni closing: A sad Consequence of marketing education and higher fees?”, that marketization of higher education has resulted in inefficiencies and not the best value for money and outcomes for students, otherwise know now as the consumers.
This article has not gone into the economic consequences of these policies, nor does seek to do so. It was intended to be an independent case study looking at if education markets could work efficiently and in favour of the consumer, otherwise known as the students. For other further understanding of the economic, social and poetical consequences of marketization of education services please look at Joseph Stiglitz: The price of Inequality and Joseph Stiglitz: The great divide and other relevant works listed in his books and elsewhere.
Kind Regards, James Prentice - CoastalAction Director.