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A Policy Screwup?

Some Italian professors told me about one of the most bizarre incentive systems in the world. The amount of fees that an Italian university can charge to students is linked to the amount of support the university receives from the national government.

Sounds sensible, right? After all, public universities in the U.S. typically try to make up lost state revenue by increasing student fees to maintain budget stability. In Italy, though, the linkage is positive: when the national government cuts back support, the universities must also cut their fees. In a time of budget cutbacks, like right now, this creates a double whammy on university finances (and the opposite in good times).

What a crazy system; and what a good way to build instability into an operation — higher education — that needs stability to function well.