Public universities suffer from a serious disease: what Milton and Rose Friedman called the tyranny of the status quo. Public universities are direct beneficiaries of central government subsidies that cover staff costs and operating expenses. Only a small portion of these subsidies are performance-based; the remaining part simply covers costs and losses. For instance, in Italy these subsidies are called FFOs (“Ordinary Financing Funds”) and the performance-based component of the subsidies amounts to only 20-25%.
These figures alone explain how such institutions, massively funded with public money, have over time developed an instinct for self-preservation that makes them almost impossible to reform. This is not bad faith: it is that the system, left to itself, rewards those who spend “a lot” and rewards those who produce results only “a little”. So why make the effort to excel when you can get by on taxpayers’ money?
The problem is not ideological, it is structural. Debates about universities across Europe, as well as in many other Western countries, typically split along the usual lines: more funding or less funding, more state or more market. It is a meaningful discussion, but it misses the central point: who is accountable for decisions made with the taxpayers’ money?
A manager – often a Professor asked to take on an administrative role for which he has no real competence – who launches a course or program with no real demand pays no personal cost for that mistake. The plan fails quietly, and the following year the cycle starts again. But there is an arguably even more serious problem, the mirror image of the first: that same manager does not personally benefit from the positive returns of a decision that succeeds either. This discourages strategic planning and the saving of resources (which are in fact often spent unproductively by the end of the year because, under absurd accounting rules, they cannot be carried over to the following year) and turns the managerial role in question into a mere exercise of internal power, sterile by definition.
This is not a flaw in the system: it is the system. No reform will produce lasting effects unless it addresses this core issue: whoever makes decisions must bear clear responsibility and must answer for the decisions made.
Universities should be treated as enterprises that produce knowledge. The proposal is not necessarily to privatize the university outright, nor to eliminate public funding for basic research, which remains a public good in the classic sense. The proposal is to introduce the mechanisms that exist in every organization that must survive in the market: courses with no students are closed, not refinanced out of inertia; departments that cannot manage their own finances must be held accountable to a board with external representation, not to colleagues who have every interest in not asking challenging questions, and so on.
This is not merely theory. As I wrote in one of the most reputable national Italian newspapers (ItaliaOggi), some European universities are already moving in this direction: PoliMi Graduate School of Management (Politecnico di Milano’s business school) is a non‑profit consortium joint‑stock company able to attract private capital, and it has climbed international rankings precisely because of this governance form. Another example is given by EM Lyon Business School in France, which was acquired by an investment fund that renewed its governance along managerial lines.
The most common objection is that reforms as the ones proposed here would put academic freedom at risk, turning professors into salespeople and students into customers. It is a rhetorical argument that sounds convincing but does not survive a basic test: today, academic freedom is already constrained by an internal bureaucracy that decides budgets and priorities without ever being accountable for its own mistakes. An autonomous university, one that competes to attract students and funding, is freer to innovate and to select its human capital – whether academic, managerial, or administrative – on a merit basis. Less state does not mean less freedom: it means fewer excuses for those who manage public resources without bearing any personal cost tied to results.
The patient (the public university) does not know it is sick, because the status quo never hurts those who defend it. The Friedmans understood this forty years ago. Perhaps it is time, at last, to prove them right.
