How glorious it is to see a university in financial trouble
The grand thing about markets is not, in fact, that people can profit from doing the right thing well. Rather, it’s the firm thwack in the face people get from doing the wrong thing badly. It’s the manner in which wasteful things get closed down which is really the argument in favour of a market economy.
Which brings us to:
Dundee University has announced plans to cut more than 600 jobs and reduce its teaching by a fifth to help cope with a £35m deficit in its accounts.
The university’s interim principal, Prof Shane O’Neill, said that nearly 200 academic staff and 435 support staff would be made redundant, with every department hit by the cuts.
O’Neill said on Tuesday that draconian measures, described as devastating by opposition parties and as a “hammer blow” by teachers unions, were needed to help Dundee deal with an immediate £35m shortfall in its day-to-day spending and an underlying deficit of more than £60m.
If you are persistently losing money doing the some thing then that’s evidence that you are making us all poorer - subtracting value from the economy - by persistently doing the some thing that badly.
Now it could be that just no one - or not enough - want to go to Dundee University. Why bother when the real thing, St Andrews, is so close by? It could be that the mix and match of courses on offer does not tempt the youth of today. It could even be that government is being ludicrous:
Many critics believe Scottish universities are too reliant on foreign students whose fees are needed to cross-subsidise the costs of teaching Scottish students, who pay no tuition fees.
The Scottish government provides £1,820 per capita for home-domiciled undergraduates, well below the cost of teaching them.
The point about a market, budgets within them, analyses of cashflows and value adds, is not that therefore this or any other university must close. Rather, that absence of the necessary cash is evidence, evidence we cannot ignore, that something is badly wrong here. A solution must be found. It might be a smaller Dundee University. Or even no Dundee University. Or, given government involvement, less ludicrousness from that quarter could be hoped for - tho’ of course that’s a bit of a wild card.
Prices in a market are signals. Here we’ve that great glaring red klaxon on an emergency vehicle insisting that there’s something substantially wrong with the Scottish tertiary education system. Even, that free at the point of use with a trivial contribution to costs from government does not, in fact, work.
Ho well. The point of markets and financial independence and all that being that we see the signal clearly. So that, you know, we stop doing the some thing that badly.
Tim Worstall