catallaxy files

catallaxy in technical exile

Unbundling universities

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Central Queensland University has been in the news for the all the wrong reasons this week. Like other regional universities unable to sell the attractions of life in an Australian country town to overseas students, they have set up in office buildings in our major cities, where their students can enjoy a metropolitan lifestyle and pick up one of CQU’s bargain basement degrees along the way (and with a bit of luck, an Australian permanent residence visa). But alas CQU’s customers are not happy, melodramatically threatening a hunger strike earlier this week over a high failure rate in an exam and inadequate facilities compared to Monash or RMIT (you get what you pay for, as surely business students should realise).

Enter Monash (and soon to be University of Melbourne) academic Simon Marginson. The radical leftism of his earlier books is rather muted these days, but it still surfaces on occasion, such as in today’s Age, where he criticises so-called franchise campuses. On these campuses, a university lends its name to a course, while leaving the teaching to a private, for-profit company. For example, IBT Education, a listed company, runs Perth-based Curtin University’s Sydney campus and Holmes Institute offers James Cook University courses. According to Marginson:

university campuses jointly owned by universities and private companies could not guarantee the quality of education and teaching standards….”Essentially institutions mortgage their credibility to a partner organisation,” Professor Marginson said. “The problem is the private provider has an intrinsic interest in minimising resources per student because they are trying to make a profit.”

It’s not quite clear whether Marginson was commenting on the CQU situation, but in any case CQU denies that its Melbourne campus is a franchise operation. They’ve stuffed it up all on their own! But is Marginson’s theory likely to be right? Could contracting out teaching actually provide a better incentive structure?

The first argument in favour of this is that while they have an incentive to minimise resources per students they also have an incentive not to lose their contract – which they are likely to do if their clients are so dissatisfied that they are threatening hunger strikes. Every profit-making entity has an incentive to minimise costs, but on the whole private providers do a better job than public providers because they won’t get customers if they don’t. In the US, the for-profit higher education has done very well over the last few years because of its intense customer focus, including such radical innovations as taking incompetent teachers out of the classroom.

The second argument in favour of the private providers having a better incentive structure is that that unlike public sector academics they don’t have a split incentive structure, ie they are not torn between research and teaching. All their rewards come from teaching, and all their time is spent on teaching.

If you think about, the traditional highly bundled university education model – where the same institution devises the courses, accredits them, teaches them, examines the students, and then awards a credential has far more serious potential conflicts of interest than the less bundled model that some Australian universities are moving toward. For example, under the traditional model your colleagues get to decide whether or not your course is any good, rather than asking an independent organisation to do it (unlike the process in research, where external referees are required). More problematically still, the institution with a financial interest in whether students pass or fail also gets to mark their exams. The fact that CQU failed so many of them is actually evidence against it simply using the students as ‘cash cows’, since many of them are unlikely to come back and others are unlikely to ever arrive, because they fear failing. But as is assumed in the countless soft marking allegations concerning overseas students, the temptation is there to keep them enrolled whether they meet academic standards or not.

The most valuable thing many universities sell is their brand; assurance of the quality of what is sold bearing their name. Conflicts of interest would be reduced if they involved themselves only in accrediting courses and assessing students: that the course is worthwhile, and that the students have met minimum standards. They would contract specialist teaching firms to undertake tuition, solving an information asymmetry problem – students won’t necessarily know which teaching firms are good and which not, but higher education quality control specialists will. Knowing that their future income depends on quality teaching, the tuition firms would have powerful incentives to do a good job, and not the minimum necessary before heading off to do some research.

It’s possible that Marginson has things the wrong way around, that it is the lack of franchising that is a problem in Australian higher education.

Written by Admin

March 15, 2006 at 7:29 pm

Posted in Uncategorized

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