An economic analysis of the formal regulation of higher education

In recent years there has been a great deal of concern expressed by policy makers that not only should access to higher education be expanded but also that academic outcomes for students should be protected by formal government regulatory arrangements. As part of this process one international trend in the provision of higher education has been the growing tendency for governments to promote greater levels of institutional autonomy and exposure to market forces, while at the same time demanding greater formal accountability to government regulators. This has usually involved the creation of formal regimes that aim to regulate levels of internal efficiency, implement quality assurance mechanisms and encourage greater financial accountability on the part of higher education institutions where they are financed from the public purse. In this paper the economic rationale for the regulation of markets more generally in terms of market failure is identified and an attempt is made to match this intervention with the various types of regulation imposed in higher education markets.