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Boycotting tuition fees will not make costs go down, cheaper alternatives will

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Classical economists including the most popular of them, Adam Smith came up with a theory hundred of years ago about the relative price of goods, which can be extended to service today. As our society and governments have placed the economy at the centre of our life, by for instance making education a purchasable good, the economic theory of value comes once again in the spotlight after criticism of higher tuition fees in the United Kingdom.

Adam Smith had a complex view on value. In summary, he thought that value, and thus the price for early economists are determined differently in the short-run and the long-run. In the short-run price will depend upon supply and demand, whereas in the long-run prices are only determined by costs of production. Moreover, in the short-run demand is itself based on the value someone derived in using the good.

 

Adam Smith via Wikimedia Commons

 

While other major economists have looked into the value of goods, it is in the recent decades that price has become an important factor of value. Indeed, price wars in specific retail industries and airlines revenue management have shown that perceive price is as important as real price for customers to derive value and gain an advantage over direct competitors.

While economists would assume that price is set naturally or in order for customers to maximize their values and that some economists believe that prices are determined by consumer perception of their worth, same cannot be told about education.

Indeed, while our governments are trying to place education as a commodity in a competitive market for which students are supposed to be customers, they themselves set the price and thus completely destroyed the theory behind which the economy, and more precisely classical microeconomics, is based. More and more students are upset by UK Higher Education tuition fee, and for good reason, as it is one the highest in Europe. Why are they upset? They do not perceive the price as the real value of education. This is understandable after all most student loans will get scrapped after 30 years and only a low percentage of graduate are able to fully pay back their loan or at least do it in less than 20 years, making their financial situation unstable at the start of their professional life.

As the situation is getting worse due to fees increasing once again last year under the May Government, some students have expressed the idea of boycotting paying tuition fees to force universities to bring them down. Although the idea sounds nice, it wouldn’t change a thing. First, no one can be actually sure everyone will do it and this would undermine this threat set by students to universities, it would not be believable enough. Protests and demonstration would at best lead the government to freeze the tuition fee figure. Nothing more, nothing less.

 

via Wikimedia Commons

This is best shown with prices of master degrees. Indeed, those greatly differ depending on the university and the course. While some argue that it is due to the future graduate salary students will get, a great part of it is also due to the popularity of the course which allows the university to charge those prices, as they know they will still get enough students enrolled come the new academic year. For instance, if no one was prepared to pay more than £15,000 for an economic master, no university would be able to charge above £25,000, they would be no buyers.

Based on the economics theories explained and the concept of competition, the only way universities would choose to lower their fees is if UK and EU students massively desert them for cheaper alternatives. For that, the alternatives really need to be cheaper otherwise universities will only lower their entry requirement. Secondly, it needs to be as massive a desertion that figures of enrolled students seriously decline and lead to a substantial loss of revenue for universities.

Thus, boycotting paying the fees would only be a short-term solution but will not have any important impact. For that, cheaper alternatives need to be created, which would as prescribed by economists, lead to a ‘price war’ beneficial for consumers, and here students. Education should not be an option, it should be a right. And while paying fees helps universities, paying as much only prevent some people to get the chance to have an education and to be set for success in finding a job in countries the work market has never been so hard on young people.

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