Stuart McCutcheon: Higher education must come at a price

Professor Stuart McCutcheon says universities should be able to charge more for a better product. Photo / David White

I was very surprised to be castigated by Brian Rudman for suggesting that New Zealand should have a great university. Even more surprising is his claim that such a university would not benefit "ordinary folk"!

Other commentators have expressed a similar view. How curious to live in a country that aspires to - and celebrates - great authors, artists, surgeons, entrepreneurs and elite athletes, but seems to have no such ambition for its universities.

Yet universities are crucial to the advancement of our society. Each year, some 10,000 ordinary, mostly young people leave the University of Auckland armed with a new degree or diploma. Their qualifications will lead to them having lower unemployment rates, higher salaries and better health outcomes than those whose education terminated at school. The lifetime salary benefit of a degree is estimated to be in the range $250,000 to $500,000. This explains why, despite the introduction of tuition fees and the highest entry standards in the country, the number of students at Auckland is now three times what it was just 30 years ago.

The knowledge created by universities provides many social, cultural and environmental benefits for society but since Mr Rudman is particularly concerned with cost, let's talk about economic benefits. As Keith Smith of the then Ministry of Economic Development observed several years ago, "All theories of economic growth are in agreement: growth rests ultimately on technological change." In other words, if we want our economy to prosper, we need to create and sell new products and processes. These arise from research, and the bulk of a society's research is conducted in universities or by people who graduated from universities.

Consider one of the world's great universities, the Massachusetts Institute of Technology (MIT). By 2006, living MIT alumni had created 26,000 companies that employed 3.3 million people and generated annual global revenues of nearly $2 trillion, about the size of the entire Italian, Mexican or South Korean economies. Some 7000 of those firms were headquartered in Massachusetts alone - in other words, they stayed close to the university that spawned them.

Now of course, we can never be MIT. But isn't it reasonable to at least ask how we might secure for Auckland and New Zealand some of those advantages? And to ask why another great university, Harvard, has had 30 Nobel laureates on its staff whereas, in its entire history,New Zealand has had just three Nobel laureates, not one of them working in this country at the time they won the Prize?

The problem with this discussion is that quality comes at a price. The leading Australian universities operate on about twice the income per student of the New Zealand universities while for MIT the figure is about seven-fold.

In New Zealand, all universities are constrained to identical government tuition subsidies and domestic tuition fees. Students do not, therefore, have the choice of paying a higher price to enter a higher quality New Zealand university. They do have that choice if they go to Australia or the United States and we are seeing increasing numbers of our students taking up that option. We might ask whether that is to the benefit of New Zealand.

Another problem often raised is that if some universities were to charge a higher price for a quality product, students from disadvantaged backgrounds would be less able to attend those universities.

However, such issues can be dealt with: for example, the leading US universities use their high fees and extensive philanthropic support to ensure that students of ability can attend irrespective of their personal financial circumstances.

As part of its major fundraising campaign, Melbourne University, arguably the top university in Australia, has asserted that "Australia deserves a university equal to the best in the world". Why do we damn those who want to be similarly ambitious for New Zealand?

• Professor Stuart McCutcheon is the vice-chancellor of the University of Auckland.