1. Planning, Regulation, and Markets: Achieving the Proper Balance in Higher Education Prepared by Arthur Hauptman for the senior hefce staff 31 Jan 2005

2. There would be three parts to this report on planning, regulation and markets A theoretical description of regulatory and market- based systems and the role of planning in deciding which elements of each approach to use An assessment of the degree to which England, the U.S., NZ, and Australia have relied on public and private funds for support of higher education A discussion of how the mix of public and private funding might help to determine the relative emphasis on regulatory and market mechanisms

3. I. Regulation, markets, and the role of planning This report flows from a comment Howard Newby made at Ditchley conference in May 2004 –“Is higher education around the world overregulated or underplanned? But the tradeoff between regulation and planning is really only one leg of a triangular relationship –The other angle of the triangle is the growing reliance on market-based strategies in many countries around the world

4. The relationship between planning, regulation, and markets is shown on the following chart Regulation and markets are the two poles on a continuum of how higher education policies can be organized One important role of planners is to make reasonable policy determinations about where on the regulatory and market continuum a country should be and how to get there

6. A continuum of regulatory and market approaches to finance and governance is shown in greater detail on the following chart Regulatory approaches and market mechanisms can be defined in terms of how institutions are funded, how fees are set and retained, the nature of student aid policies, and institutional governance structures Few if any higher education systems are either totally regulatory or entirely market Defining a country’s approach can be based on where on the regulatory/market continuum a country is on each of these variables and collectively, as indicated on the following chart

7. Regulatory and Market Approaches to Financing and Governance

8. Regulatory and market-based distinctions can also be made in how accountability is achieved The following chart indicates a continuum of accountability approaches that range from heavily regulatory to more market-based structures –Centralized systems in which government or its agents micromanage institutional activities are an example of a traditional regulatory approach –Private institutions that make their own spending, fee, and aid decisions and are subject to market forces represent a market-based approach to accountability

10. II. The Public/Private Mix of Funding Another way to define a country’s higher education system is how much it relies on public and private resources to pay for higher education The mix of public and private financing is a reasonable way to characterize a country’s higher education system The trend internationally has been for countries to rely more on private resources, as it has become apparent that public resources are inadequate to keep up with bulging demand for higher education

11. The chart on the following page shows trends in public and private funds for U.S., New Zealand and Australia in the 1980s and 1990s Clearly NZ and Australia have increased their reliance on private resources over time, mostly through the introduction of tuition fees in the 1990s –But the type of fee structure in each country is quite different. Australia’s HECS is a system of govt funded fees, while NZ relies on a more traditional fee structure The US also has increased its reliance on private resources over time, although often in ways other than raising fees at public institutions

12. Trends in Private Resources in NZ, Australia, and U.S.

13. III. A primary question for discussion is whether financing and accountability structures should reflect the public/private mix of financing and in which direction should this work As reliance on private resources for higher education increase, should countries rely more on regulatory structures to enforce their policies and prevent market abuses? Or should greater reliance on private resources over time mean that countries should become more market oriented in their policies to encourage greater innovation?