Social Demand Versus Political Economy in Higher Education at the Turn of the Century Higher Education Financing: Policy Options

Abstract

This article gives a broad outline of policy issues in the financing of higher education given the major quantitative expansion of higher education in recent years, its diversification, financial constraints, internationalization, democratization, globalization, regionalization, polarization, marginalization, and fragmentation. Policy options bearing these trends in mind should be judged in terms of efficiency and equity, bearing in mind such basic sources of funding as taxpayers, students, parents, and higher education institutions. Regardless of the source of funding, the single most important policy issue facing those concerned with overall policy responsibility for the operation of higher education systems is the proper formulation of the rules and mechanisms used to allocate resources from governments to institutions. The various financial mechanisms are classed according to four principal dimensions: institutional/student finance, full/partial finance, budget/formula finance, and input/output finance. Choosing the right funding formula is a complex process that is always beset with the need for trade‐offs for various reasons.