In recent years there has been a strong growth in the provision of higher education via the private sector around the world. This phenomenon brings into question the status of public universities, in that it raises the question of whether governments would be able to provide higher education more effectively through the funding of private sector expansion. This paper analyses the issue of whether there is an economic justification for first of all government support of higher education, and secondly government ownership of universities. The economic justification for public ownership (quite separately from public funding) seems to rest on whether public universities are able to create a form of non-contractible quality that governments and consumers are unable to contract or regulate. The real issue, therefore, is one of whether governments can contract private institutions to deliver the quality that they are publicly funded to provide.
Journal of International Education and Business, Vol. 1, no. 1 (Feb 2010), pp. 65-88