Abstract The Soviet system of higher education is more specialized than that of the United Kingdom, both in the sense that teaching is separated from research and in the sense that institutions specialize in certain fields. The paper compares, in the light of this difference, the costs of higher education and the qualities of students in the two countries. Also, the social rate of return to higher education in the USSR is examined. The main tentative findings are that the Soviet system is not cheaper; that the “quality” of students is, on the average, lower; and that the social rate of return is close to that of tangible capital. J. Comp. Econ., March 1978, 2(1), pp. 13–23. Hebrew University, Jerusalem, Israel.