THE ECONOMICS OF THE OPEN UNIVERSITY

This paper makes cost comparisons between the Open University and conventional universities in order to give some broad indication of the cost differences between the two types of institutions in teaching students and producing graduates. The paper begins by explaining the conceptual and statistical problems that arise in making comparisons of this nature and offers suggestions as to how these can be overcome. After a description of the Open University teaching system and the implications for its cost structure the paper makes four comparisons between the University and conventional universities. These are the average recurrent cost per equivalent undergraduate in which the Open University cost is little more than a quarter of conventional universities; the capital cost per student place where the Open University figure is about 6 percent of the conventional figure; the average recurrent cost per graduate which indicates that the cost at the two types of institutions would be equalised if the Open University had a drop‐out rate of 85 percent; and the resource cost per equivalent undergraduate where the Open University costs are about a sixth of conventional universities. Even when allowances are made for different research proportions the Open University seems to have an advantage. The paper makes a tentative suggestion that it is not the part‐time nature of the students which is important, but the method of teaching at the Open University which gives it the advantage. Because of the conceptual and statistical problems involved the paper does not provide any definite conclusions, but suggests that in a period of increasing pressure on the resources of higher education, the application of the Open University teaching methods to conventional universities should be studied.