The Economics of why the Adelaide University, Uni Sa Merger Won’t Serve Students
Economists think about the problem of how big something should be in terms of economies and diseconomies of scale. To justify an industry becoming more Concentrated there should be some evident economies of scale. And so, it is with the new super uni merger.
The main selling point of the merger is an investment boost with state and federal governments ponying up more funds. The new super uni will also be able to pool funds to recruit more international students.
The Australian university system is already highly optimised for recruiting international students. International students do bring benefits especially to South Australia’s economy, but most of the criticisms of our university system go to the orthogonal issue that university management is not laser focused on the basic function of higher education — high quality teaching.
To see the downsides of the merger, the diseconomies of scale we need to understand how Universities achieve their purpose of building up the skills of students.
The way universities do this depends on assortment, matching up the right students to the specific educational experience that suits them best. A collegiate environment, networking opportunities and industry links are part of the overall university package. This explains why smaller universities catering to niches, such as Divinity University, Bond University and Edith Cowen University do the best on student satisfaction and other quality metrics.
University of South Australia and The University of Adelaide, which both have about thirty thousand students both do quite well on these surveys. However, the abysmal performance of Australia’s largest and most prestigious universities Melbourne and Sydney show the downsides of education as a one size fits all product.
An industry that epitomises the fascinating conflict between economies and diseconomies of scale is car manufacturing. Consider that Germany and Japan both import and export cars from each other. Given the huge advantages of scale in a manufacturing industry how does this make any sense?
The answer is brand differentiation.
Toyota makes the most reliable cars, Nissan the cheapest to run, Mercedes Benz the most luxurious. With unlimited time Consumers could research each individual model to find their dream car but defaulting to brand reputation is an easier way to accomplish much the same thing.
Brands streamline the process of assortment by communicating highly complex information.
Take a short walk through the Adelaide CBD and its clear an intense brand competition is at play.
University of South Australia is known for its Industry links and student employment outcomes. Do you feel confident that without the competition with The University of Adelaide university leadership will still hustle just as hard to cultivate these vital industry links?
Adelaide is also successful as a research focused university with higher student satisfaction then its peers.
The risk is we replace two institutions that each have a clear identity with one lumbering behemoth.
Until now the intense competition between the two uni’s has given leadership clear metrics of success to focus on and would be students’ clear messages about what they can expect as they make one of the most complex decisions of their lives. That is now being sacrificed for a temporary investment boost that could have happened without the merger. What’s most surprising about all this is that South Australia’s university sector is quite successful while the larger uni’s of Melbourne and Sydney leave a lot to be desired from a student experience viewpoint.
I hope I’m wrong but if not the quality of education at the new Adelaide University will slowly decline. Perhaps South Australia’s smaller educational institutions will be the long-term beneficiaries of the merger.