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“EXCELLENCE THROUGH KNOWLEDGE” P A G E 36 In contrast, others believe that equality is better achieved through state intervention as markets are inefficient and inequitable since knowledge, power and capital markets access are correlated with socio-economic status. Impure competition, incomplete markets, market failure and imperfect information justify state intervention through regulation, financing, production and income transfers (Barr 2004b). Inequity may result from fear of efficiency losses of high taxation; from the rich having more power; and from the poor favouring some inequality in the hope of benefiting if they too become rich (Barr 2004a). Harrison (1997), for example, identifies four bases for state financing: Externalities: HE benefits society as knowledge transfers improve production techniques and increase outputs. Social returns: Graduates pay higher taxes as a result of higher earnings. Equality of opportunity: Social justice demands that government ensures equal opportunities. State funding ensures that no one is excluded by an inability to pay. Equity: Equality requires redistribution of income from rich to poor. By managing returns from labour the state is able to redirect resources to the poor. Others argue that better educated societies produce more effectively and efficiently. Eicher and Chevailler (2002) identify that education is a ‘pure public good.’ But, as demand for HE increases and budget constraints have grown, egalitarian arguments diminish and universal support is felt unsustainable, and instead of engendering equality, it causes inequity. Vawda (2003) argues that public expenditure generally favours the more fortunate, while Gradstein (2003) shows that public spending on education is skewed towards the rich. The outcome of these opposing views tend, in most countries, to result in mixed financing of HE from private and public funds. Editor’s Note: The full article was published in European Journal of Higher Education, pp 1-19 (2011). ISSN 2156-8235/2156-8243.