Methods of financing universities with special reference to formula finding in South Africa

Melck, Antony Patrick (1982-12)

Thesis (DComm (Economics))--University of Stellenbosch, 1982.


The subject discussed in this dissertation is that of how universities should best be financed. This appears, prima facie, to be a readily solvable question, but is in fact one that contains innumerable disguised difficulties. Casual observation confirms that resources are allocated, which places the subject undeniably in the realm of economics. Needless to say however, much more is ultimately at stake than just the economic: educationalists, sociologists, business leaders, indeed all who come into contact with the products of universities in their many guises justifiably believe that they have a contribution to make. Nevertheless, the arguments marshalled below are unashamedly taken from the economist's arsenal, although some aspects of a wider nature are included. In particular the analysis will proceed as if economic efficiency, growth and welfare are the primary aims of society; which is not, of course, to imply that other considerations are trivial. The institutions referred to in the body of the dissertation are those commonly regarded as being the 'white' South African universities. This was necessitated by the division of the universities for administrative purposes between several government departments and the fact that the South African Post-Secondary Education (SAPSE) information system, which forms the basic structure for the empirical sections of the dissertation, has only been introduced for those universities under the jurisdiction of the Minister of National Education. Section 1.4 is devoted to tracing the historical development of this dichotomy and in Chapter 9 some of its implications are investigated. Other institutions for post-secondary education, the Technikons for example, are not dealt with specifically, although much of the analysis could be applied to them as well. As is emphasized in Section 4.5, the policy implications of this dissertation should ideally be applied to the postsecondary education sector as a whole. The primary hypothesis of this dissertation is that a system of formula financing for universities can be economically efficient without in any way encroaching upon university autonomy. This implies several subsidiary hypotheses: firstly, that a decentralized procedure for planning university education, whereby the decisions to enroll are largely left in the hands of students, can lead to economically efficient configurations; that those decisions should be made by considering the social and private costs of education, and not simply the benefits; that the private coats of (university) education are best reflected in prices, that is tuition fees; and that the structure of university costs can be discerned by observing the universities' internal optimization processes as revealed in their ex post patterns of expenditures.

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