Intervention in a Higher Education Market: a Case Study

In many countries today, public higher education operates within some form of market framework, typically a government‐regulated quasi‐market. However, having created a market environment, how should the government agencies involved act when they wish to use higher education to achieve a particular policy goal? This paper considers the impact on the English higher education market of an initiative by the national funding agency to expand Chinese studies. It is argued that, in an already competitive market, this intervention led to the misallocation of resources because it encouraged universities to expand provision in ways that they would not otherwise have done. As a result, although some effective new provision resulted, excess capacity was created overall. It can be argued that the collective understanding of the universities about this specific market was more accurate than that of an expert committee advising on national provision. The paper suggests how intervention might have been more effectively arranged.