What's wrong with private universities?
A.C. Grayling’s plan for a New College of the Humanities has provoked some stupid protests. But it raises a question: what exactly is wrong with private universities?Many critics of the NCH have focused on the fact that the £18,000pa fees will exclude all but the very wealthy. But if the NCH is to succeed, this cannot remain the case.I say so for a simple reason. When you buy a university education you are, to a very large extent, buying a signal. But the signal sent by an NCH degree is that you weren’t good enough to get into Oxford. No-one will pay £18,000 for this when they could buy the same signal for £9000 at the LSE or Exeter - especially as the quality of teaching at the NCH might be dubious. To overcome this problem, NCH will have to try to attract students away from Oxbridge by offering the brightest ones better subsidies than Oxbridge would.It’s unlikely, therefore, that the NCH will greatly increase our already terrible inequalities of educational opportunities. Hence my question. If we leave equality aside, what’s wrong with private universities?Two objections at least seem misplaced.“The profit motive will drive out the vocational dedication to learning that characterizes true universities - just as it has driven the care motive out of care homes.”This objection fails in two ways. First, state control does not guarantee the protection of high vocational standards either: for every Winterbourne View there is a mid-Staffordshire NHS Trust. And our state-controlled universities have failed to observe basic equality and has warped educational priorities through the RAE.Secondly, it ignores the fact that, as Terence Kealey says in the Times, there are countless successful privately-owned universities around the world - many run for profit, many not. I suspect the Left's instinctive hostility to private universities reflects an excessively rosy view of state ownership and an excessively pessimistic one of private ownership. “For-profit organizations tend to die quickly” - a point correctly made by Kealey. But so what? The death of organizations is a necessary part of any healthy ecosystem - not just because we learn from failure, but also because such deaths release resources which can be better employed elsewhere.Which brings me to a paradox. To see it, consider the objections to privately-owned banks:- they have high capital requirements, and government can raise capital more cheaply than the private sector.- they expose society to the risk of a massive negative externality, namely the danger of financial crisis leading to recession.- private ownership has failed to exercise proper discipline over banks’ bosses and senior employees.- problems of asymmetric information and regulatory capture mean it is not obvious that regulation alone can successfully mitigate these problems. However, it’s not at all clear whether analogous problems would apply to private universities. Hence the paradox - it could be that our traditional thinking is 100% wrong. State ownership of banks is a much better idea that state ownership of universities.Whether you agree with this or not, there is an issue here. Shouldn’t we - and especially the left - think more clearly about the criteria that determine whether an organization should be owned by the state or private sector?