DEJA VU ALL OVER AGAIN Atlantic Blog has been following the possible introduction of "top-up" fees, which sound like premium prices for premium services. He raises two points about subsidies: "Subsidized higher education is a subsidy to the wealthier in two ways. First, the users typically come from higher income families. Second, the users end up with higher incomes than the ones who did not go to a university." I have found an article by W. Lee Hansen, this is "Income Distribution Effects of Higher Education," in the May 1970 American Economic Review. The opening paragraph is eerie; "The vast enrollment growth of the early and middle 1960's, combined with sharp price increases since then, have produced a large and continuing demand for educational resources. At the same time the revenue-generating abilities of institutions of higher education appear not to have kept pace, likely because of other rapidly growing demands for public funds. The result has been a gradually tightening financial squeeze, accentuated by recent federal cutbacks in funds and by reduced generosity on the part of state legislators responding to campus turmoil."

But it is not to that point I wish to speak. Rather, I want to look at some analysis for the state of Wisconsin. "Despite differences in the apparent 'quality' of the University of Wisconsin (UW) system and the Wisconsin state university (WSU) system, the full instructional costs in 1964-65 were approximately equal, at $1,200 per academic year. Since tuition amounted to $300 at the UW and to $190 at the WSU, net-per student institutional costs -- or the subsidies per student -- amounted to $900 and $1,010, respectively. The effect of this tuition differential is to provide larger net subsidies to WSU students and their families than to UW students and their families." Because Wisconsin's income tax has increasing marginal rates, and richer families were more likely to send students to the UW system (in those days, only Madison and Milwaukee: inter alia La Crosse, Platteville, and Whitewater were in the WSU sustem), the Wisconsin subsidy was lower on average for better-off families.

. So what's the problem in the UK?

First, the Francis Beckett commentary Atlantic Blog is referring to has a point of view:"It's something we should be trying to change. Instead, we have a Labour government which is trying to make this more marked. The more prestigious your son's or daughter's university, the more you will pay.

According to an NUS survey, nearly half of all full-time students take part-time paid work during term time. More than a third miss lectures for this reason and one in five fail to submit coursework. If you have the money, you can make sure your family has sufficient time to study."

Depends on your perspective. There's nothing wrong with working your way through college. People do it all the time. Claiming work responsibilities is a bit more respectable than owning up to sleeping off a Thursday kegger. And the more prestigious the university, the better your son or daughter expects to do. I have yet to hear of The New Republic or The Washington Monthly or Reason or any of the other Big Media hiring interns from Northern Illinois University, for example.

The more substantive part of Beckett's essay is here:"A few months ago, education minister Margaret Hodge explained why she no longer believed students were poor. At a demonstration about tuition fees, she said she could not help noticing that one of the women students was wearing a Tiffany necklace worth (so Ms Hodge said, and I trust her on such matters) £300.

I do not know (and neither does Ms Hodge) how this student came to be the possessor of such a splendid necklace. It may have been an heirloom, or a present from a monied and besotted boyfriend. It certainly does not prove that free higher education, from which Ms Hodge herself benefited in the 1960s, is what she called 'a massive subsidy to the middle classes'."

No, an example is not a proof, but accumulated research offers evidence for Ms Hodge's assertion.

"That's the New Labour way of looking at the world. This benefit is not reaching the poorest who need it most, so we should withdraw it. The other solution, which is to make sure it does reach the people who need it most, never seems to occur to them."

There's another Guardian report suggesting, to the contrary, that that solution is one of several that has occurred to New Labor.

"Speaking at his regular televised press conference, Mr Blair said there was agreement across the board about four key aims - but no options were off-limits in meeting them.

"One, that the status quo cannot continue because the universities are not well enough funded.

"Secondly that universities require more freedom and independence from government.

"Thirdly, however, that we have to improve the access of poorer students to university.

"And fourthly we mustn't do anything whereby we effectively put a financial barrier in between people and their desire to go to university.

"Beyond that there are no predispositions whatsoever. We have just got to get the best system."

He said the problem was being tackled across the world as universities increasingly competed against each other."

There are, in fact, several possible solutions here. First, the rewards to university education are at historic highs. Therefore, lending money for college might well be attractive compared, say, to lending money for long-distance capacity. Perhaps removing the financial barrier means more commercial freedom for banks and other lenders to make college loans. Second, competition among universities might well mean discovery of, if not the "best," a system of higher education that allocates resources efficiently. Third, is the use of the term "poorer" referring to ability to pay, or to ability to perform? That makes a difference to the objectives.

The folks at the Guardian will probably not be pleased with that. Here's Polly Curtis quoting an official with the lecturers' union: "Top-up fees for prestigious universities will accentuate the gap between have and have-not institutions and between have and have-not students. If you create a premier league which attracts most of the funds and charges a higher entrance fee, you impoverish the rest of the institutions and condemn poor students to go to poor institutions. It is a class-ridden recipe for a second-class national system."

A couple of observations. First, sometimes a separating equilibrium is useful. Given that resources are scarce, distinguishing the most able from less-able minds will confer benefits. Second, it does not follow that the premier league will attract most of the funds. Nothing in any of the Guardian's coverage has ruled out somebody doing for mass university education what Ford did for automobiles or Walton for retailing. Presuming that some of the students taking part-time work and neglecting their studies are acting rationally, is there anything inherently wrong with responding efficiently to their wishes?