ABSTRACT
This chapter discusses a traditional public finance approach, theory of economic organization, and public choice. The branch of economics, as applied to higher education, contains both normative analysis of the relationship between higher education and "equality of opportunity" or "equity" and a separate investigation, using mainly positive analysis of matters concerning efficiency. If higher education provides social benefits to society that individual students cannot capture, then the private demand for education will be less than the social demand, and underproduction of education will result. Efficiency in the public finance of higher education relates to the original purpose of intervention. One major purpose is normally assumed to be the removal of "barriers to access". Typical public universities have conventional bureaucracies that are interested in expanding their own budgets and in enhancing the welfare of administrators and others involved on the supply side.
