Labor productivity is fundamental to economic growth, as modeled formally in the literature on endogenous growth. Indeed, with global capital markets and rapid transmission of technology, it can be argued that human capital is more important than ever as a determinant of national economic performance and individual well-being.

Fifty years ago higher education was largely a consumption good for a middle-class elite. In most countries, 5 per cent (or less) of 18-year olds went to university. With technological advance, the demand for highly skilled workers has increased sharply: student and employer demand for tertiary education and training is larger and more diverse than previously, and is repeated, in the sense that people require retraining. As a result, countries today increasingly have mass systems of higher education. A central question, therefore, is how to finance these systems so as to facilitate economic growth and equitable access to higher education. In poorer countries, fiscal capacity is limited; and even in richer countries, public spending is constrained by international competition, which imposes limits to taxation in any one country, and by parallel pressures such as population ageing. Public funding thus needs to be supplemented by private sources.

In principle, private finance could come from family resources, from a student's earnings while a student, from a student's future earnings, from employers, from entrepreneurial activities by universities, and/or from gifts and donations. But many of these sources are less lucrative than they appear at first sight.