This proposal seems focussed on making the product cheaper to produce rather than on improving educational quality.
Western Australia is considering merging the University of Western Australia, Curtin University and Murdoch University into a single mega-institution.
Writing in these pages, Mark Barnaba has made a very plausible case for the proposed merger. A larger university, he suggests, could attract more research funding, compete internationally, improve student outcomes and contribute to the state’s economic prosperity.
Those are seemingly worthy objectives. Yet, the two most important constituencies of any university are missing from the list of beneficiaries: graduates and potential employers.
Students choose universities for many reasons – available courses, reputation, teaching quality, admission requirements, location and employment opportunities. Some choose the university closest to their home, while others want practical training, strong industry connections or a particular learning environment.
Employers also make choices. They recruit graduates from different universities because those institutions offer different qualifications, training, reputations and relationships.
Employers form expectations about what graduates know and can do. Those expectations influence recruitment decisions and, ultimately, the value of university qualifications.
All those choices give rise to a lot of heterogeneity and diversity. It is not obvious that a single mega-institution could cater to all those choice sets.
A university merger changes the options available to both graduates and employers, while erasing the existing options and reputations associated with the existing institutions.
“Under this ‘industrial model’ universities resemble factories.”
The problem with the merger proposal is that it profoundly misunderstands what a university is. Universities are often misunderstood as being industrial organisations. And increasingly, they are being governed so.
Under this “industrial model”, universities resemble factories. They combine buildings, academics, research facilities, and administrative resources to produce graduates and research. Managers and regulators imagine that homogeneous inputs produce homogeneous outputs.
In that world, larger institutions may benefit from economies of scale, lower average costs, shared facilities and greater production capacity.
On that understanding, the merger proposal has an obvious attraction. Combining three universities will eliminate duplication, pool resources, and create a larger, more competitive institution … and yet, that is not how economists or regulators would normally approach this issue.
Where could savings be made?
Sure, there are some back-office operations that could be rationalised and universities could share some facilities. Doing that properly, however, is likely to be very expensive upfront.
Similarly, rationalising the senior management of three universities will reduce the salary cost at the top while expanding the salary cost of middle management.
Huge mega-institutions require armies of middle-management type administrators who add to cost bloat while neither teaching nor researching. Bureaucracy, in turn, drives homogenisation that ultimately results in mediocrity.
This merger proposal seems focused on making the product cheaper to produce rather than on improving educational quality.
So where could savings be made, if there are savings to be made?
Well, instead of merging three universities into one, why not break up the institutions into their constituent parts?
Most universities can be thought of as being conglomerates – an arts college, a business college, a STEM college, and maybe a medical school. Like real conglomerates, they tend to over-invest and inefficiently cross-subsidise.
Those are the savings to be made – those parts of the university that cannot cover their costs would have to contract or lift their game, while those parts of the university that were more than covering their costs would and could expand or, perhaps even, lower fees or improve their quality.
The point being that if we think of universities as being industrial enterprises, then breaking up conglomerates adds more value than merging conglomerates into ever larger conglomerates.
The difficulty is that universities are not factories. They are platforms.
A university brings together students, academics, researchers, employers, industry partners, professional associations, alumni, donors, and governments. Each group participates for different reasons, while each benefits from the participation of others.
The greater the heterogeneity, the better.
Lazy policy
Students want education, qualifications and access to employment opportunities. In short, rewarding careers.
Employers want capable graduates and access to research expertise. Academics want students, research opportunities, and professional recognition. Governments want the production of homogeneous human capital that contributes to long-term productivity growth.
Nobody else wants a bland, homogeneous product delivered on the cheap.
Merging universities to achieve scale is lazy policy. Excellence does not scale. Each of these universities occupies a unique location in the education market.
UWA is an elite institution – why would its students and graduates want to compromise on that reputation? Curtin has a strong applied focus, while Murdoch is a more generalist institution but with specialisation in veterinary medicine.
Three different universities offer students and employers three different sets of choices. Those differences have value. Eliminating them is a cost, not a saving.
