EDUCATION:Ireland's 'first-aid kit' approach to education has left third-level graduates with a quality of knowledge that's worth very little. It's time for a more coherent policy

IRELAND'S ABILITY to compete economically over the next decade will depend on the quality of our students. While funding is an evident problem, another issue that affects Irish third-level institutions is the measurement of success.

Universities in this country no longer view their role as being driven by outcomes or the end result of the market. Outcome-driven higher education is about making education fit with the regional socio-economic norms and global educational requirements. Ireland's education system needs to take account of the demand for international comparative advantage, at institutional and individual levels.

What do we mean by comparative advantage? We mean that it is relatively cheaper for Ireland to make, for example, sprockets, as opposed to cogs - and cheaper for the US to make cogs than sprockets. So Ireland exports sprockets and imports cogs, despite the fact it could make both. Every individual has their own comparative advantage; that is why we buy butter in a shop, instead of churning it ourselves.

Ireland's education infrastructure is the country's main impediment to a consistent policy towards an outcome-driven system by comparative advantage because it is based on tweaking pre-existing systems. At no point, even during the 1992 Green Paper process, has an over-arching, underlying education strategy been put in place.

Education functions as an incremental process, where the foundations of knowledge are laid and subsequently built upon by further education. The undergraduate's ability to absorb and manipulate concepts is dependent on their secondary and primary education. This is not an issue of money but of governance.

Despite the fact funding is a major source of controversy when it comes to education, money is not the critical input in the creation of a graduate. However, as in many areas of education, the primary corridor for influence is through funding. Funding has coloured much of the discussion on higher education of late.

The universities are weary of forensic accounting exercises and internal university accounting systems that evaluate funding levels as a proxy output measure.

The crucial input into the undergraduate's education is how the sector is governed. This determines how their courses will be delivered and how the entire higher education sector engages with the wider world and, more importantly, the labour market.

The current system of university governance is dominated by many different voices. The most important organisation is the Higher Education Authority (HEA). It is responsible for advocacy, funding and accountability. AThe stated aims of the HEA are to bring three-quarters of school-leavers into higher education, and the number of PhD graduates to 1,300 per annum - ignoring the fact that, according to the 2007 GradIreland Salary Survey, some 35 per cent of firms said they would not provide a wage premium for postgraduate work. Many complained recent graduate hires showed a lack of numeracy, literacy and ability to deliver presentations. The question does not concern quantity, but quality and the skill needs of the market.

How did we get here? Education is no longer driven by learning outcomes, but by a combination of accountancy and a desire on the part of the higher-education sector to actively avoid diversity. Ireland has many systems - some of which are very effective - but no real strategy about what it wants from education. This problem is further muddied by the country's small open economy.

Ireland looks for global competitiveness on the basis of comparative advantage, but its universities have entered a worldwide academic arms race. The global outlook of Ireland and its students is deeply ingrained following the third-level "brain drain" of the 1970s and 1980s.

The late 1990s removed the need for skilled workers to emigrate as a matter of economic necessity.

The Irish university changed from an export preparation device to a domestically important economic development agency. Comparative advantage remained a key issue, ensuring an Irish graduate is capable of getting a job in any sort of institutional environment - a new, high-growth environment.

The problem with a third-level education race, however, is that it is not the most efficient method of resource allocation. If the American experience is anything to go by, this will have serious financial and social implications for Ireland.

Over the past 20 years in the US, costs have increased twofold, tuition increased by over 400 per cent and the gap between rich and poor universities turned into a chasm - with subsequent social stratification. The main losers have been undergraduate students, as Prof Derek Bok, former president of Harvard University, makes clear in his recent book Our Underachieving Colleges.

An education driven by learning outcome is an education driven by comparative advantage. Graduates are also entrepreneurs by definition; they have purchased - in time and money - their educations for a known price; they are now selling their human capital - knowledge and skills - for an unknown price (wages).

How does this all link into the knowledge/innovation economy? Education and innovation are effectively subject to the same incentives and behavioural responses as other irreversible investments. Decisions to invest in education or an innovative project are cloaked in uncertainty regarding their outcomes.

A knowledge economy needs innovators, but innovation suffers from a problem of unknown outputs and potentially inconsequential inputs. An education system that does not have an overall strategy is more prone to add to this uncertainty, as it embraces measurable targets and accountancy metrics over uncertain outcomes.

Our current model of governance creates too many gates and gatekeepers, giving rise to incentives to exploit weaknesses in the system. This is a function of the distance and layers of veils, writs and reports between the decision maker (the agency) and the funder (the taxpayer/the Dáil).

We can reduce this uncertainty by increasing institutional transparency, reducing the gap between the decision-maker and the funder and creating a third-level strategy which is student-centred, not metric-centred. Such an approach is the key to a successful and innovative knowledge economy.

Education is an investment, as is any process resulting in innovation. To be a knowledge economy, Ireland has to create a strategy for all levels of education and fashion a new set of structures to fund, manage and evaluate that system. The first-aid-kit approach to reforming education has taken uncertainty and relabelled it risk in order make it more manageable, but in the process it destroys fundamental innovation, ignores signals from the labour market and engages in cul-de-sac policies that undermine educational delivery.

The main casualty is the undergraduate student, the current cohort, the guinea pigs who have been taught to work the system, and not their minds.

• The authors are members of the Swan Group and the Department of Economics, Trinity College Dublin. The Swan Group is an interdisciplinary research group funded by the FBD Trust. See swangroup.org.