My good friend Senator James Paterson (Liberal, Victoria) is a really smart guy. But … he is also a graduate of the University of Melbourne, and so we have to temper our expectations somewhat.
Today he is quoted in the Weekend Australian:
Liberal senator James Paterson said he was “pretty sceptical about the value to taxpayers of government-funded, not-for-profit universities spending up big on marketing to attract students’’.
He said this was “particularly so when many of those marketing activities were not about the substance of what the universities offered but resembled gimmicks and irrelevant sponsorships’’.
Given his miseducation at the hands of neoclassical economists I’m not surprised that he makes this elementary error. The notion that advertising and marketing is wasteful expenditure is obvious when you assume away information costs and transactions costs. (I could also quibble about the government funded and not-for-profit aspects of his statement but let’s just focus on the bigger picture.)
Non-price competition includes rivalry between firms based upon advertising, product differentiation and product and process innovation.
Given the existence of price controls universities cannot really compete on price. Given excessive regulation and TEQSA Australian universities cannot really compete on product differentiation, or product and process innovation. That leaves advertising and marketing.
I would have thought that competition between universities would be a “good thing”. Given the nature and structure of government regulation that competition and rivalry needs to be communicated to the market in some or other fashion. In the absence of price signals, universities engage in non-price rivalry. The absence of advertising and marketing would result in Soviet style customer service. Is that really what the federal government would like to see? I suspect not.
If in the meantime the government would like to see the university sector generate even more than the current $22 billion in service exports it should relax price controls and abolish TEQSA.