The Utility of Tuition Fees

By Richard Vedder

Eating dinner in Astana, Kazakhstan last night with a number of rectors (presidents) of European universities was fun and illuminating (I am attending the fourth meeting of the International Rankings Expert Group, along with Americans Bob Morse of US NEWS and Dewayne Matthews of the Lumina Foundation).

One of my dinner partners, I believe one from Germany or Slovenia, noted that surveys show greater satisfaction with studies from students who pay tuition, compared with those who pay no fees. His interpretation -- not mine -- is that the incremental revenues from fees lead to a better education for students, hence more satisfied students. He noted that at some schools, students have a say in the allocation of student revenues (tuition fees are relatively new to European universities).

There is an alternative interpretation. When universities are dependent on students directly for a good share of their income, and where admission standards are not extremely selective, universities go out of their way to make the customers happy rather than lose the tuition revenue. At tuition free selective universities, students provide no revenue, so universities concentrate on research, which is important in university rankings (even more so in Europe and Asia than in the United States). All nations are trying to catch up with the U.S. in higher education, and it is interesting that they see the path to that is mainly through research.

Higher education outside the U.S. tends to be rather centralized, and it is interesting whether the Bologna Process is making that more so. The 27 EU nations have been joined by 18 other countries (e.g., non-EU Norway, Switzerland, Iceland, aspiring EU nations like Turkey, Moldava, etc.) in agreeing on certain common matters, including the famous three year degree. My European friends say the jury is still out on Bologna, and its impact. I would agree. While I like the concept of a shorter degree, I worry about attempts to over-coordinate and regulate, reducing diversity, competition, intellectual vitality, and, who knows, efficiency.

This concern echoes my feelings generally about the EU. When the Common Market began and grew, I was all for it --reducing trade barriers enhances economic welfare. But the move to build a super nation in Europe means more bureacracy, less democratic input (Brussels administrators making decisions --no directly elected all-European president), etc. I hope that the Europeans don't do the same thing with universities they are generally doing with their government.