Reactions to Arnold Schwarzenegger's victory have been entertaining, even if Iain Duncan Smith's ill-judged attempt to set himself up as the "Terminator" of the Labour project was more sad than funny. The New York Times , in particular, can't make up its mind whether it is shocked by the folly of the Californians or blissfully happy to have its prejudices about the West Coast confirmed.

If you happen to be halfway numerate and either a student or a faculty member on a California campus, however, you might be wondering how Arnie will cure a huge budget deficit on the basis of no tax increases, rolling back a $4 billion (?2.4 billion) hike in car licensing fees and at the same time protecting every penny of the state's education budget - though seeing that there's been a 10 per cent cut in the ÖйúAƬ budget in the past few months, that's a matter of protecting what's left.

Faculty would be glad of no more cuts in the ÖйúAƬ budget, and students would be glad of no more hikes in fees. This academic year, tuition fees have risen 30 per cent - to $6,000 a year for in-state students and $20,000 a year for out-of-state students at Berkeley and the other eight research universities in the California system, and to $2,500 and $11,000 respectively at the 23 state universities. Even students in community colleges will see their tuition bills rise to about $400 - and roughly $3,300 if they are not a California resident.

Still, if Schwarzeneggeronomics is not a portent of things to come in British politics, the Californian ÖйúAƬ system remains a great improvement on ours, even when it's undergoing turmoil and cutbacks. Not least of the reasons is that it has cracked the puzzles about diversity of mission and openness of access that drive the British mad. If you look at the undergraduate numbers at Berkeley or its peers, you will notice that there seem to be almost twice as many students in the final two years of the undergraduate degree as there are in the first two years. Given that US students drop out in substantial numbers, the numbers look odd.

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They aren't. The UC system reserves 40 per cent of its places in the two final years for students who can migrate out of community colleges (and to a lesser extent the state universities) with the right courses and the right scores from their two-year associate degrees. It is a multiply clever system. From the point of view of students, it means that the cost of the first two years of a four-year degree has been cut from $12,000 in tuition fees to $800. Of course, students have to live, and even a home-state student can need $7,500 a year for room and board, books and supplies, transport and entertainment at a Silicon Valley school such as DeAnza College in Cupertino.

But that is all the more reason to economise on the cost of the general education that the first two years of US universities insist on. It also has advantages from the faculty's point of view that Californians are less embarrassed to mention than we tend to be. The research universities have 180,000 students, the state universities some 414,000 and the community colleges serve 2.9 million students - most of whom are not doing degree coursework at all, but a host of things for career advancement and general self-improvement.

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Professors paid upwards of $120,000 a year to do serious scholarly work are an expensive resource to devote to courses in court procedure aimed at members of the local police force; and although some expensive faculty are wonderful teachers, most of them would rather teach the finer points of Milton or, more probably, discourse analysis and postcolonialism than introductory business English.

Conversely, if you are the state of California, you can spend $3 billion on the 180,000 students of the elite system and a little bit more on the 414,000 students of the state university system without anyone flinching at the disparity, while the 3 million students at the community colleges have about $5 billion spent on them. The expensive faculty get to do research in the right conditions and with sufficient resources; but everyone with a permanent post is decently paid and has enough free time to write a book or two if the urge should overtake them. And it does.

It isn't only California that works this magic; Wisconsin does it as cleverly, but in a much smaller state and with only one flagship university. What stops us doing the same? The usual things - a vanity that stops us learning from others and a lack of the institutional energy needed for radical change.

Alan Ryan is warden of New College, Oxford.