An Economist's View on VSU

In Adelaide for to present a seminar yesterday, I stumbled across a demonstration against the federal government’s plans to scrap voluntary student unionism. On the steps of the South Australian parliament were gathered about 100 activists, 20 police, and a man in a chicken suit.* This and other demos across the country garnered a fair bit of publicity in today’s newspapers.

This got me thinking about the economic arguments on VSU. It seems that whether all students should pay union fees depends largely on whether you think that what student unions do is in the nature of public goods creation, or whether they’re merely giving private benefits to students.

One aspect public goods is that they’re non-excludable, meaning that it’s hard to stop those who don’t pay from getting the benefits. This is one reason we fund national defence by taxes. Likewise, things like producing a student paper, subsididising open-air fairs, and campaigning for student interests all seem pretty non-excludable. On the other hand, funding sports clubs and providing food discounts aren’t really non-excludable.

Another feature of public goods is that they have positive externalities (spillovers). Here again, things like university sports, debating and social clubs could well be argued to have a value beyond the private benefits to those who participate in them. Indeed, some of the arguments that university education has a public goods element relates to the stuff that student unions do – eg. making young people more politically aware.

Of course, you could argue that some of what student unions do has no public good element. But this doesn’t seem to me to be true for most of their activities.

* I SMSed about the chicken suit to a friend who used to be active in Adelaide Uni student politics. Yes, she replied, it belongs to the Adelaide Uni Labor Club – must be due for a dry-cleaning by now. Perhaps this undercuts everything I’ve argued above.

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4 Responses to An Economist's View on VSU

  1. Andrew Norton says:

    Though if student unions do produce public goods (which I doubt myself, but leave that to one side) what we have here is the private production of a public good, which the government is attempting to limit. Less a case of government crowding out private do-gooding as kicking it out.

  2. The left wings support of CSU has really amazed me. I think it was Graham Young that first brought it up, the CSU contribution is in effect a tax on uni students. The left ussually want two things in a tax system. Thats a progressive tax system and means testing to reap the benefits of this tax. The CSU tax is neither of these.

    On the whole I believe that VSU will simply make student unions more accountable on the whole. If students see value for money then they will join it.

  3. Sinclair Davidson says:

    Although I don’t believe it for one second, this is the most sensible argument I’ve heard in favour of CSU.

  4. Andrew Leigh says:

    Andrew, the unit doing the public goods production doesn’t seem to me economically important, except insofar as the university community should have an input into it, which they do via student elections.

    Alistair, those of us in the left (and most on the right, for that matter) tend to favour taxes that meet three principles: efficiency, equity and simplicity. Here, the greater equity coming from a progressive contribution would clearly be outweighed by the inefficiency and complexity arising from finding out everyone’s family incomes.

    Sinclair, thanks.

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