The UK government’s bill on higher education is under fierce examination in the House of Lords. The government argues in its defence that it “will drive up the standard of teaching at universities, deliver greater competition and choice for students, while safeguarding institutional autonomy and academic freedom”. It is more likely to deliver the reverse.

The proposals manage to be both too radical and not radical enough. The explanation for this is the influence of half-baked economics. One example is the idea that, since competition is good, more competition must be better. Another example is the idea that, since graduates earn more than non-graduates, raising their numbers must deliver a matching rise in benefits. The first error is market fundamentalism. The second is the fallacy of composition.

I sought to explain the limits of market competition in guiding higher education in a lecture delivered to the Council for the Defence of British Universities. A market in university education suffers from five defects.