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The purposes and impact of higher education on the economy and the broader society have been transformed through time in various ways. Higher education institutional and policy dynamics differ across time, but also between countries and political regimes and therefore context cannot be neglected. This article reviews the purpose of higher education and its institutional characteristics juxtaposing two, allegedly rival, conceptual frameworks; the instrumental and the intrinsic one. Various pedagogical traditions are critically reviewed and used as examples, which can potentially inform today’s policy making. Since, higher education cannot be seen as detached from all other lower levels of education appropriate conceptual links are offered throughout this article. Its significance lies on the organic synthesis of literature across social science, suggesting ways of going forward based on the traditions that already exist but seem underutilized so far because of overdependence in market-driven practices. This offers a new insight on how theories can inform policy making, through conceptual “bridging” and reconciliation. The debate on the purpose of higher education is placed under the context of the most recent developments of increasing social inequalities in the western world and its relation to the mass model of higher education and the relevant policy decisions for a continuous increase in participation. This article suggests that the current policy focus on labor market driven policies in higher education have led to an ever growing competition transforming this social institution to an ordinary market-place, where attainment and degrees are seen as a currency that can be converted to a labour market value. Education has become an instrument for economic progress moving away from its original role to provide context for human development. As a result, higher education becomes very expensive and even if policies are directed towards openness, in practice, just a few have the money to afford it. A shift toward a hybrid model, where the intrinsic purpose of higher education is equally acknowledged along with its instrumental purpose should be seen by policy makers as the way forward to create educational systems that are more inclusive and societies that are more knowledgeable and just.

Rethinking higher education and its relationship with social inequalities: past knowledge, present state and future potential