Richard Holden

If there is one iron law of economics it is this: people respond to incentives. Offer an “all you can eat” buffet and people eat a lot. Double the demerit points for speeding on a holiday weekend and fewer people speed. And if you make school funding contingent on achieving threshold numeracy and literacy test scores then those thresholds will likely be met.

The trouble is that it might not be because of genuine improvements in skills.

The Business Council of Australia’s recent report on innovation suggested tying federal funding of education to the achievement of threshold NAPLAN literacy and numeracy standards. It argued that a well-educated workforce is crucial for innovation and economic growth.

I couldn’t agree more about the need for an educated workforce. And I’m not one of these metricphobes who thinks that measuring performance is inherently evil, or that all league tables are bad. Far from it. But I do worry a lot about how incentives for teachers and students in schools work. There’s a swath of evidence that incentives in education lead to unintended outcomes – or even outright fraud.

Put yourself in the position of the person who is the boss of all school principals in a state and who is faced with the Business Council’s scheme. Some portion of those principals run schools whose kids are presently below the literacy and numeracy thresholds. What do you do? Faced with the possibility of large losses of funding you probably put pressure on those principals to get better results.

What levers do they have available? They can’t change the selection of kids in their schools – and if they did it would just shift the problem elsewhere.

They can’t change the kids’ parents or their classmates and the important influences they have. They can’t easily change the teachers in their schools.What they can do is have teachers focus on testing outcomes rather than holistic ones. They can “teach to the test”.

Teaching to the test badly misallocates the most precious educational resource: teacher time. It focuses students on how to mechanically perform a small number of tasks.As one illustration of how details matter, consider giving students cash incentives to do more homework. Setting aside the cost, this seems like a no brainer – but in fact it can lead to negative outcomes.

Research I conducted with Roland Fryer of the Harvard University economics department was designed to document this difficulty. We provided incentives to 5th-grade schoolchildren in Houston, Texas, to do mathematics homework problems. They got $2 for each mathematics objective they mastered, using take-home worksheets and in-class computer software to assess performance.

Because we randomised which schools got the software and incentives, and which schools just got the software, we could determine the causal effect of the incentives. Just like a randomised, controlled pharmaceutical trial with a treatment and a control group.

The answer? Kids with incentives did way more maths homework. And they did significantly better on end-of-year standardised tests in mathematics.

Great news? Not so fast. These gains in mathematics were, alas, almost exactly offset by a decline in performance on standardised reading tests.

Interestingly, measures of intrinsic motivation did not drop – financial incentives did not destroy the “joy of learning”. Instead, it was what economists called “effort substitution” – incentives in mathematics shifted effort away from reading and to mathematics.

High-stakes testing for whole school districts or even whole states of Australia raises the disturbing possibility of outright test fraud.

Just last week the trial of 12 former educators accused of fraudulently inflating test scores began in Atlanta, Georgia. The group includes teachers, testing coordinators, principals and administrators.

At least one Atlanta school held pizza parties where they erased incorrect answers on tests and filled in the correct ones to boost kids’ scores. And not just a few. The prosecution claims that across the Atlanta public school system, in 2009 alone, 256,769,000 incorrect answers were “corrected”. Yep: one-quarter of a billion!

But surely that wouldn’t happen here in Australia? Perhaps not, although I’ll bet that’s what folks in the great state of Georgia thought until recently.

Steve Levitt (of Freakonomics fame) has also documented widespread teacher cheating in Chicago public schools: from changing answers, to getting tests ahead of time, to teaching answers to precise questions. Atlanta is not a one-off.Incentives are incredibly powerful – and in many settings carefully crafted explicit incentives can do a lot of good.

But education is a very complex environment, one in which explicit incentives have the potential to do more harm than good. If you pay for better NAPLAN scores then better NAPLAN scores you will get. But they won’t necessarily mean genuinely better literacy and numeracy. And you probably won’t like the side-effects.

Richard Holden is a professor of economics at UNSW Business School. A version of this post appeared on The Conversation.

Geoffrey Garrett

As I prepare to take up the deanship of The Wharton School, I have been reflecting on the differences between business education and higher education more generally in Australia and the US.

The structural forces shaping universities are the same as those changing business. The combination of globalisation and technological change represents a brave new world, but with dislocations too. But there are at least four key differences between Australia and the US when it comes to the on-the-ground realities of higher education.

First, while the growth of Asian enrolments in Australian universities has slowed in recent years, Asian students are flocking to the US. Australian universities largely had Asia, particularly China, to themselves for much of the past decade. Now the high dollar and better Asian universities seem to have capped Australia’s (large) market share.

Elite US private institutions such as Wharton have long recruited students globally. But they are more concerned with quality than revenue, using big scholarships to attract the best talent.

In contrast, US public universities have jumped into Asia to compensate for reduced public support following the financial crisis, becoming very Australian, very quickly.

UNSW and its Australian peers offer quality education. But we don’t have the global brand power of Berkeley or Michigan, a problem in hyper-brand-conscious Asia. If Australia wants to defend its place in the global higher education market, it will have to think about new ways to attract Asian students.

Australian universities are already using dual degrees with Asian universities. They are also improving residential facilities and student services. But innovative uses of technology and more opportunities for “doing” rather than just studying must be added.

The second difference concerns philanthropy, with private giving to US universities at least an order of magnitude greater than here. The University of Pennsylvania, of which Wharton is a part, recently completed a five-year philanthropy campaign that raised more than $4.5 billion.

In a vanguard campaign, the University of Sydney attracted gifts worth about $300 million during the same period. With a few outstanding exceptions — Frank Lowy at UNSW, then John Grill at the University of Sydney and, most recently, Andrew Forrest at the University of Western Australia — we simply do not have a strong and deep philanthropic culture of giving to universities.

Westpac’s $100m fund to provide 200 university scholarships a year is a fillip that should not be used to justify federal funding cuts. With tight government budgets likely for a decade or more, growing philanthropy is a critical priority for Australian higher education.

My third observation concerns research. The Group of Eight has shown that the funding available to our best researchers falls far short of the US and Europe. But there is another, crucial, piece of the puzzle where Australia lags well behind the US — supporting the full costs of research. In addition to the direct costs (research time and equipment), research requires lots of indirect support (from buildings and laboratories to accounting and custodial services).

According to the Association of American Universities, the “indirect cost rate” US universities receive from government funding agencies is about 50%. That is, for every dollar in support a research team receives, the university employing the team gets an additional 50c to defray the costs that make the research possible. The comparable indirect cost rate for Australian universities is about 20%.

If we assume US research is realistically funded, that means Australian universities have to add 30c for every dollar in support they win from the Australian Research Council and National Health and Medical Research Council. The better a university does in attracting research grants, the more money it has to find to make this research possible.

This is where business schools enter the story. Australia has the largest business schools in the world in terms of student numbers, and they have the largest proportion of full-fee paying students in Australia. Teaching revenues support research in our universities and much of the funding burden falls on our business schools.

This puts Australian universities in an invidious position. Focusing more tuition revenue on teaching would damage research. But cross-subsidising research leaves less money to focus on imperatives like smaller class sizes. The only way out of this double bind is for ARC and NHMRC competitive grants to include the appropriate indirect cost recovery rates.

My final observation concerns the funding of university courses in Australia. One way to free up government money to fully fund research would be to reduce direct government support for teaching — by deregulating the fees our students pay.

This would be a double win. The cost of teaching born by government would be reduced. But the revenues available to universities to improve teaching would increase. The focus here should be on degrees that have large private benefits — that is, which substantially add to a student’s lifetime earnings.

Business schools are largely “private benefit” educators. Yet we charge Australian students nothing like the market price for our undergraduate business degrees. The Australian government gives the Australian School of Business a little more than $12,000 a year for each (full-time) Australian undergraduate student. Of this, students pay about $10,000. Only about $2000 of a “Commonwealth-supported place” is actually paid by government. At the same time, our international students pay more than $30,000 to sit in the same classes. Wharton undergraduates pay about $50,000 irrespective of where they’re from.

A UNSW business degree is “worth” more than $12,000; just ask the very large number of the best Australian students who apply. Deregulation of fees would allow us to charge closer to the market price. Any adverse impact on access would be mitigated by the Higher Education Contribution Scheme.

HECS allows Australian citizens and residents to defer all the costs of their undergraduate degrees until they are in full-time employment following graduation. Repaying educational costs is then subject to progressive taxation.

So my take on the future of Australian higher education as I get ready to return to the US: Asia will be tougher; philanthropy will be more important; research should be fully funded; and undergraduate fees should be deregulated.

Everyone knows universities are at the heart of improving society, from educating better citizens to driving job growth to inventing the future.

We sometimes forget that business schools are integral parts of our universities, too.

This Opinion Piece previously appeared in The Australian. Geoffrey Garrett is dean of the Australian School of Business. He joins The Wharton School of the University of Pennsylvania on July 1.

Tim Harcourt | The Airport Economist

The Asian white paper is a great chance for Australia to explore the opportunities our closest neighbours offer us, and education is the key: as it offers great points of engagement with Asia and longer lasting and deeper relationships.

The long-awaited Asian Century white paper was released on Sunday. Ken Henry’s paper covered a broad range of issues including education, language skills, technology and security in the fastest growing region on the planet.

Australia has been earning big dollars through rocks and crops – now we’ve got to do a bit more learning through education and service exports. But I argue that now it is vital for Australia’s trade that the white paper lifts our engagement with Asia, and identifies opportunities for government and business.

Just speaking an Asian language whilst helpful is not sufficient – we need to be Asian business literate, and understand the economies of our Asian partners to succeed in our engagement.

As younger Australians engage with Asia through education and exchange, technological advances and social media, the nature of their relationship with Asia will be different from that of previous generations. Demographic change in Asia will mean more opportunities for Australian services providers in the traditional areas of education and tourism but also in areas focused on wellbeing.

We should be at the forefront of offering financial services to Asia, and Australia could become the dominant financial centre in the region. Australian capability in financial services will be critical in the fourth wave of our economic engagement with Asia, as finance is the fuel that lubricates international trade. Financial services trade volumes picked up substantially in 2011 after four years of stagnation, rising by 22 per cent.

Tim Harcourt is the JW Nevile Fellow in Economics and an adjunct professor in International Business Strategy, at the Australian School of Business, the University of New South Wales (UNSW) & author of The Airport Economist:  www.theairporteconomist.com.

Tim Harcourt | The Airport Economist

Once upon a time when I went to my publisher, he told me adamantly “Economics doesn’t sell.”

I was gobsmacked! “Economics, that tells us all about supply and demand and how to run a business or a household doesn’t make a quid?  How could that be?” I asked the great man of Australian publishing.

“Well, you see, my friend, “it’s the dismal science” explained my publisher.

Not to be deterred I had a look at the origins of this term ‘the dismal science’ and whether it was an albatross around the neck of economics and its popularity. In my historical voyage of intellectual discovery I found out a few interesting things along the way, and some myths and realities about the history of economics and how it has been perceived in past times and in the modern day.

First things first about economics, it’s not dismal it’s gay. When I looked up the term “dismal science” I found a fascinating history of how the label became associated with economics. It was found that the British historian Thomas Carlyle used the term in his debates with the Quakers and Baptists over the emancipation of slavery in the West Indies and his fears about what had occurred in the Irish famine.

Carlyle was debating the ‘Exeter-Hall Philanthropists who called for emancipation of black slaves in the West Indies whom he feared be worse off under the laws of supply and demand as free man, as had happened to free agricultural labourers in Ireland who perished by famine.  Carlye is reported to have said in 1888:

“Truly, my philanthropic friends, Exeter-Hall Philanthropy is wonderful. And the Social Science – not a ‘gay science’, but a rueful – which finds the secret of this Universe in ‘supply and demand’ and reduces the human governors to that of letting men alone is also wonderful. Not a ‘gay science’ I should say, like some we have heard of: no, a dreary, desolate, and indeed quite abject and distressing one, what we might call, by way of eminence, the dismal science.”

In an absorbing analysis of the debate by the historian of economic thought, Peter Groenewegan, Caryle’s main contention is that slavery was better than the forces of supply and demand that had impoverished the Irish farm worker. Carlye further thought that slave owner had a mutual obligation to look after black slaves in the West Indies and thought that any move to emancipate them into a free labour market would make the West Indies a ‘Black Ireland’ in terms of economic misery. In fact, the whole debate about the West Indies and Ireland reminds me of Roddy Doyle’s film ‘The Commitments’ when the fledgling band manager Jimmy wants his (lily white) band to say: “We’re from Dublin, we’re black and we’re proud!”

Who would have thought a popular movie about a fledging rock band would have had its historical roots in the history of economic thought?

In any case, as a result of this chequered history, several myths about economics developed. Some are still hanging around today, like a dead cat in the middle of Anzac Parade, stinking to high heaven. Its troublesome origins have made a bit of mud stick.

Myth one: ‘economics is not ethical’. It’s all about profit and welfare maximising, that is how to be selfish and what it means as a result. Hence the term ‘homo economicus’ about rational decision makers individually pursuing their own ends. Or as my grandpa who was a professional punter at the Randwick racecourse used to say: “Always back the horse called ‘self-interest’, it doesn’t always win but you can guarantee that it will be a trier.”

However, the real story is more complicated than that. It needs to be recalled that early political economists were moral philosophers like Adam Smith. Smith’s ‘The Theory of Moral Sentiments’ was in some ways a much more important treatise in the early development of economic thought than the ‘The Wealth of Nations’. Smith was a theologian, and he was interested in ethical behaviour and what was better for society as a whole as well as the individual.

In fact, in Australian economics today, many of our leading thinkers such as UNSW’s own distinguished emeritus professor, John Nevile (whom my fellowship is named after) and the likes of Ross Gittins (the son of a Salvation Army chaplain in Newcastle), Ian Harper and Nevile Norman have a strong ethical and religious roots in how they think about economic issues.

On the other hand, some economists, of the neo-classical variety, take a different tack.  For instance, Milton Friedman, the father of the Chicago School once famously said about ethics and economics that: “The only ethical obligation of a business is to make a profit.” So the debate rages on.

Myth two: ‘economics is not accurate’. Many engineers and members have the natural scientific community have sneered at economics for ‘not getting its forecasts right’ and make the famous jokes about ‘when you get 4 economists in a room you get 5 answers.’ This seems to forget that economics is one of the social sciences, predicting human behaviour, so it’s like psychology, history or sociology rather than a ‘hard’ science. Of course, economists themselves have acted like ‘social science imperialists’ and have tried to make their discipline closer to the hard sciences and more mathematical. The risk they have run here is that distancing economics from the social science and closer to the hard science rather than becoming a rich man’s sociology they will make economics a poor man’s mathematics.

Myth three, ‘economics is dry’. You hear this all the time, that it is a dry subject and/its proponents are dry. Well it’s a difficult subject but dry? Whether it be the economics of being a child, growing up, getting a job, getting married, working out super, economics is about everything that touches our lives. As the Cambridge economist Alfred Marshall says “Economics was the study of mankind in the ordinary business of life.” And its ‘big picture’ too, whether we are talking war and peace, free trade and protection, or global warming all these issues have an economic dimension.

Myth four, ‘economics won’t get you a job’. When I was at University nearly everybody was advised to do accounting as you can always “fall back” on an accounting qualification. Economics was warned to be ‘too risky’. Two decades of full employment on I have found economics to not only be in great demand in the labour market, but also a means to a number of very stimulating and interesting jobs. Furthermore, I have found that many of my colleagues at Austrade, DFAT, the ACTU and in the private sector had ‘secretly’ got economics degrees but didn’t tell people they were economics graduates (at Austrade I was the only one ‘out of the closet’, so to speak, with economist officially in my title). I think this shows that in many profession with a business dimension, whether it be accounting, politics, journalism, marketing, engineering, or general management, economics is a useful discipline to have as a way of thinking. Just as Dr Karl Kruszelnicki, the Julius Sumner Miller at Sydney University (or ‘Dr Karl’ fame on the ABC) says all scientists should have a background in physics as a way of thinking and solving problems, all business professionals need to have economics in the tool kit as they embark into the big wide world.

Myth five, ‘economics books don’t sell’. Well we are no Stephen King or JK Rowling but we economics authors have actually done ok. In fact, my own publisher had a change of mind, after he saw the success of Freakonomics and told me to “Hurry up and get that manuscript finished,” and hence The Airport Economist took off thanks to the success of Freakonomics and The Undercover Economist by Tim Harford.  (In fact the British based Tim and I often get confused for each other, which is great for business on both sides of the world!). In addition, there’s Ross Gittins’s The Happy Economist, Zombienomics by John Quiggin, Parentnomics by Joshua Gans, Disconnected by economist turned Labor MP Andrew Leigh and the new contribution by Jessica Irvine titled Zombies, Bananas and Why There are no Economists in Heaven: the Economics of Real Life. In fact, my publisher (Allen & Unwin) has been a publisher of most of these titles in Australia and have now become the ‘true believers’ of the new economics literature.

In conclusion, maybe economics is the gay science rather than the dismal one after all. So in that vein I should conduct some research into the economics of gay marriage and its impact on the economy. If the Tasmanian gay marriage act gets up maybe it will provide some lucrative stimulus to the local economy. And then we can start research on something even more potentially economically lucrative – gay divorce…

Tim Harcourt is the JW Nevile Fellow in Economics and an adjunct professor in International Business Strategy, at the Australian School of Business, the University of New South Wales (UNSW) & author of The Airport Economist:  www.theairporteconomist.com.

From the Knowledge@Wharton today blog.

Deirdre Woods, former associate dean and chief information officer at Wharton, made a point during her years as a senior manager of encouraging other women to advance in their professional careers. One thing has always surprised her, however.

Women who are offered promotions “generally feel they need to know 80% to 90% of their current job before they feel ready to step up into a new role,” she says. But if you are smart and knowledgeable, “probably somewhere closer to 40% to 50%” is all that you need.

Men, on the other hand, feel no such constraints. “Men will start thinking about their next promotion right after they start their new promotion,” says Woods, who is currently interim executive director of the University of Pennsylvania’s open learning initiative and has started her own consulting company. “I’m not sure if men are necessarily more ambitious, but they are much more overt about having a plan and moving forward.” She remembers attending a conference where another woman made the same point, in a different context: In government, the speaker said, “a six-term congresswoman doesn’t feel she is ready for the Senate yet, whereas a first-term congressman does.”

It’s not just a phenomenon in the non-profit sector, according to a report last May in the Wall Street Journal titled “The XX Factor: What’s Holding Women Back?” The article quoted an executive at Google saying that the company “must invest extra effort to persuade women engineers to nominate themselves for promotions…. Men jump at the chance, often before they are ready, and are often turned down.”

But women, the executive noted, “must be prodded.” Indeed, he tells them that by not putting themselves up for promotions, they are holding themselves back. “By the time a woman says she is ready, she was probably ready a year ago,” he said, adding that the company promotes women engineers at about the same rate as men.

Woods agrees. “Women tend to be ridiculously over-prepared for everything. But at a certain point, over-preparedness doesn’t get you moving forward. It doesn’t leave you open to other opportunities.” She suggests that women should be able to clearly define what type of job they want to do next. “They should be thinking about the next step even if it feels overwhelming.”

And “as scary as it seems,” she adds, women who do get promoted “should start signaling, at least to their bosses, that this isn’t the last thing they want to do. They should show they want to do a really good job in their current role, but that they also have ambitions.” In addition, she notes, men know that wandering around the office and chatting with their colleagues qualifies “as work. Talking to the boss, running into him or her at the coffee machine, having interactions – men understand that this is part of their work. Women don’t understand that. They think it’s a distraction from whatever they are supposed to be doing.”

Wharton management professor Matthew Bidwell suggests that there is “some evidence that women are held to a higher standard in the workplace than men, and that because women are stereotyped as less competent than men, any mistakes they make tend to reinforce those kinds of attitudes towards them as individuals. You can imagine that if this is the case, then it’s even riskier for women to take on that promotion.”

The Journal report was based on the comments of a task force set up to study the obstacles that women continue to face in the workplace. According to a McKinsey study quoted in the article, women get 53% of entry level jobs and “make it to ‘the belly of the beast’ in large numbers.” But then “female presence” drops sharply, “to 35% at the director level, 24% among senior vice presidents and 19% in the C-suite.”

The McKinsey study cited by the Journal article also noted that hiring and promoting talented women is important “’to getting the best brains’ and competing in markets where women now make most of the purchasing decisions.”

This blog was previously posted in Knowledge@Wharton today blog: Do Women Shy Away from Promotions?

Peter Shergold| CSI

Many of us in academia still perceive university as a gateway to lifelong learning. We judge the inclusiveness of society by the opportunity that we provide to our citizens to access its manifold benefits.

We extol freedom of thought and speech, see academic learning as their cornerstones and imagine universities as the institutional protectors of such ­liberal values.

Perhaps, though, in a Google world in which crowd-sourced (and often unprovenanced) opinions become the source of wiki-authority, our expectations have become too grand.

Those we teach often make more material assessments. Students routinely work out if it’s worth investing in a university degree. There is a range of websites that allow people to estimate the earnings value of a degree over a working life, apply an algorithm to compute the net present value of both financial and opportunity costs (using an online annuity calculator) and in quick-smart fashion assess the dollar return. “On average”, asserts one such American site, “getting a bachelor’s degree is just like paying $US126,000 for the right to claim extra earnings with a net present value of $US383,000”. (Thankfully in Australia the provision of low-interest loans under HECS-HELP and FEE-HELP shifts the equation decisively in favour of undertaking a university education.)

Education in this brave new world often appears to be just another variety of commercial transaction. The unspoken premise is that the offerings of university have a utilitarian value, based on the acquisition of predominantly vocational skills which, through improving labour force productivity, offer private returns to the individual.

Judged through instrumentalist eyes, one can make an economically rational decision on whether to go to university and, perhaps more importantly, which subjects to study.

Before we despair at the material values of Generation Y, let’s remember that they have learnt what we have taught. Ministers and, indeed, prime ministers, routinely quote figures from the Australian Bureau of Statistics to show the ­earnings advantage of acquiring certification from vocational and higher education institutions. Universities seek to promote their quality in a competitive environment, often on the basis of rankings that reflect the increased salaries that their graduates achieve.

Of course, the private gains are matched by public benefits. Estimating the relative returns to each is a crucial part of the evidence base that informs government higher education policy.

The graduate receives higher post-tax lifetime earnings as a result of increased salaries and lower levels of unemployment. At the same time, the state benefits from larger tax receipts, lower welfare costs, higher labour force participation and greater workplace productivity.

In addition, university-led research makes a major contribution to innovation, with benefits extending far beyond those that accrue to private sector funders.

Lateral Economics has estimated the economic value of Australia’s health and medical research. Using a 50-year simulation analysis they calculated a positive revenue-cost ratio of 1.66 and a health-based benefit-cost ratio of 3.37. One might expect similar returns on research in science and engineering.

Even in the arts and social sciences, where benefits are less quantifiable, it is reasonable to expect a positive turn on public funding.

Australia also gains trade advantages. Opening our universities to ­overseas students earns the nation $15.8 billion a year, making education our third-largest export industry. Governments, which tend to see public support for university education as expenditure rather than investment, need to acknowledge these economic benefits.

The real danger is not so much that students, universities and governments seek to monetise the value of higher education but that the framework of evaluation is generally conceived far too narrowly. A university does create financial value but at the same time it also builds social benefit.

Universities UK recently contracted the New Economics Foundation to assess the social returns on investment in universities. Degrees of Value sets out the individual social outcomes that often accrue to university graduates beyond the financial rewards that they gain. These include being better able to manage finances, feeling healthier, being more tolerant, having greater capacity to form meaningful friendships, showing more political interest and exhibiting stronger independence.

These less quantifiable private benefits also contribute to public good. Social returns are achieved by the creation of a more civic and civil society, with higher levels of citizen participation, stronger interpersonal trust and more social cohesion. If you believe the methodological calculations of the report, the public value generated by these societal values is worth £1.31 billion ($2 billion). Frankly, I find the audit of benefits persuasive but the accounting unconvincing: the value of social mobility, for example, still falls back on measuring the uplift in graduate wages as its key financial proxy.

One profound finding from such studies is that the social benefits of university education are significantly greater to the extent that access to university is sufficiently wide to create a fairer and more meritocratic society.

Unfortunately, in Australia it is students from higher-income, less disadvantaged families who continue to be the most likely to gain the private benefits of education. The present level of participation by lower socio-economic status (SES) students, about 15 per cent, has remained virtually unchanged through successive governments.

Yet the greatest private, public and social benefits are achieved by increasing participation by lower-SES students. Relative to the outcome if they did not graduate from university, they gain more financially and socially – and so does society. Otherwise, as the Harvard sociologist Christopher Jencks mused back in 1972, the main function of a degree may be to “certify people who were different to begin with”.

It was the explicit social mission to be an open university serving its community which made it so easy for me to accept the position as chancellor of the University of Western Sydney. UWS has about 7500 lower-SES students, the highest number of any Australian university, representing 23 per cent of our domestic intake. Most are first in family to go to university. Better still, and against the trend, they have a higher retention rate than their better-off colleagues. That success has a positive influence on the distributional impact of higher ­education.Providing access to lower-income, disadvantaged students significantly increases social mobility, creating a more productive and cohesive community. Dollars invested in the success of a low-SES student provides a higher rate of private and public return that for their more advantaged colleagues.

I have no doubt that in time it will prove possible to measure more persuasively the dollar value of equal opportunity. Yet many of us recognise that in doing so we risk losing something more powerful.

What inspires, and what many of us seek to convey to students, is the ­importance of fairness and equity to the participatory ethos of a tolerant, open, respectful, engaged and democratic society. We know widening access to university can help ensure that an accident of birth does not determine destiny.

Peter Shergold is chancellor of the University of Western Sydney and Macquarie Group Foundation professor at the Centre for Social Impact UNSW.

This article first appeared in the Australian Financial Review 30 April 2012.

Tim Harcourt | The Airport Economist

When I went to the University of Adelaide, I received a stroke of luck. Under the Colombo plan, which enabled south-east Asian students get scholarships to Australian universities, the grand old man of Singapore,Lee Kuan Yew, sent a number of very bright Singaporean students, who were meant to go to Oxford to study nuclear physics, to Adelaide to do economics with me. As a result, through having very smart classmates, I got good grades in mathematical economics and econometrics, I helped them with their honours essays, and we had noodles every night.

Of course, we know how well students from south-east Asia and the rest of the region do at university and how much life and vitality they have added to our campuses. But we have a new wave of overseas students from a new frontier, South America, with Brazil at the forefront.

This is one reason I was recently recruited to the University of NSW to teach international business strategy in the Australian School of Business. As part of the MBA programs, I will develop an international business strategy course for South America. This follows on from the book on Brazil and Australia I am co-authoring with Mark Thirlwell from the Lowy Institute and a distinguished Brazilian economist and past adviser to the government in Brasilia, Fernando Carvalho, from the Federal University of Rio de Janeiro. The book will focus on Brazilian-Australian economic opportunity and will be published to take advantage of Brazil’s “double header” hosting of the FIFA World Cup and the Olympics in Rio.

So why all the interest in Brazil and South America from Australian universities in general?

Firstly, the numbers are growing. Brazil’s growing middle-class are hungry for education. For Australia, Latin America now makes up just over 5 per cent of total enrolments, with Brazil ahead of the pack with just over 16,000 enrolments (followed by Colombia at 10,000, Peru at 2200, Chile 1700 and Mexico 1500).

Secondly, South America is coming of age economically, and Brazil is leading the pack. In 2002, on my first trip to Brazil, times were tough. Neighbouring Argentina was in the midst of economic crisis, and Brazil was concerned about contagion. It was also facing a presidential election, with the perennial candidate, Lula (Luiz Inacio Lula de Silva) from the Workers’ Party, running for the fourth time.

Lula won in 2002, was re-elected in 2006 and left office at the end of 2010 with a huge 80 per cent-plus approval rating, which is an amazing result for a democratically elected politician at the end of their term anywhere. Even his successor, Dilma Rouseff, has an equally healthy approval rate of 73 per cent.

Education is a key reason for Lula’s success in Brazil. The success of the macroeconomic and fiscal performance of his administration has been accompanied by a commitment to improving social conditions and human capital – mainly through education. According to Carvalho, there has been “a once in a generation increase in education participation – particularly among the lower classes. Around 32 million people have been added to the middle-class, and education is a key reason”.

To be fair, Carvalho adds, these education measures were part of an expansion of social programs, essentially an extension of the comunidade solidaria started by Lula’s predecessor, President Fernando Cardoso. Carvalho says: “Lula extended the program and made it effective. He also bypassed local and state government and made more use of community organisations and churches for delivery. This policy effectively has doubled the income of the very poor and at the same time has expanded the Brazilian middle-class, adding to the power of Brazilian consumers at the same time. As a result, education retention levels are higher, and the overall standard of living of the average Brazilian has increased.”

Thirdly, education is a key foundation for building stronger economic ties between Brazil and Australia. People ties matter as today’s students are tomorrow’s political, business and community leaders and will be important as Australia forges stronger relationships with Brazil and South America. For example, in Singapore, many of my classmates from the University of Adelaide are now cabinet ministers (even the new President of Singapore, Tony Tan, went to Adelaide), and this pattern has been extensive across south-east Asia as trade and investment ties have followed business and political relationships built at university. Hopefully, we will see similar patterns with South America as more Brazilians and their neighbours study in Australia or participate in MBA courses across Asia, Australia and South America. But there’s work to be done at the Australian end. For as Brazil plays a stronger role in the world economy, and the 2014-2016 World Cup-Olympics double approaches, we will have to do more than just woo the girl from Ipanema; we’ll have to woo the hearts and minds of a globally very strong and popular Brazil.

I am sure many Australian students will now get the positive experience of studying with many students from South America, just as I did from south-east Asia. And with all due respect, there is better dancing in Rio than there is in Singapore but I am sure the intellectual and social benefits will be on par.

Tim Harcourt is the JW Nevile in Economics at the Australian School of Business, UNSW and author of The Airport Economist: www.timharcourt.com

This article first appeared in the Australian Financial Review, 16th April 2012.

Alec Cameron

I recently had the great pleasure to be able to formally welcome students to UNSW for the Indigenous Winter School.  The program involves 165 Indigenous students in years 10-12 selected from around Australia, with the objective of encouraging and supporting these students to pursue tertiary education.

The Winter School has a strong track record over the past decade of seeing a high proportion of its students subsequently gaining access to UNSW and other universities, and succeed with their studies.

It has not been the case, to date, that a significant proportion of Indigenous students who gain access to higher education in Australia have chosen to pursue business degrees.

Given that more Australian and international students at Australian universities are pursing business degrees than any other field of study, it is interesting to contemplate why Indigenous students are under-represented in business programs.

I suspect that there are several factors at play here.  All Australian universities are keen to address the historical under-representation of Indigenous students in Australian universities. Hence, there is a high level of support, and choice, for those Indigenous students who are admitted to university.

In the same manner as may be anticipated for all students with a high degree of choice, they are most attracted to those programs which are seen as the most prestigious, based on the difficulty in gaining access.  Accordingly, programs in medicine and law have been the destination of choice for many Indigenous students.

In addition to law and medicine, social work is another field in which Indigenous students have been better represented.   In all three cases, a sense of addressing social justice for their communities may be a strong personal motivator for students who gain the opportunity to pursue university studies.  Business may not be seen to have such high social value.

On the contrary, I believe that a flow of Indigenous students into business programs will play an important role in addressing historical disadvantage for Indigenous communities.

While raising the living standards of Indigenous communities has been one of the most intractable problems of recent Australian public policy, the opportunity for Indigenous people to gain the full benefits from participation in modern Australian society requires business and employment opportunities.

Indigenous students progressing into successful business careers can be the enablers and catalysts for economic development in Indigenous communities, which provides the sustainable opportunity for our Indigenous people to fully benefit from Australia’s high living standards.

While we should take great pride in seeing Indigenous students graduate to successful careers in medicine and law, I look forward to the day when we will be able to identify Indigenous business leaders creating wealth, for themselves, their businesses, their communities and our nation.

Alec Cameron is dean of the Australian School of Business at the University of NSW.

A version of this opinion piece appeared in the Australian Financial Review 15th August 2011.