Mises Daily Articles
University Guildsmen and Anticapitalism
Libertarians have often been puzzled by the hostility that intellectuals harbor against capitalism. Robert Nozick theorized that intellectuals are conditioned by the "principle of reward in accordance with (intellectual) merit" as children. Intellectuals thus believe that unapplied mental capacity entitles holders of information to rewards that markets do not generally hold out as payment because there is a "shortfall" in intellectual demand.
Hayek seems to have believed much the same. He even went so far as to warn (perhaps half-jokingly, but perhaps not) many wealth-seeking economists away from his own field, noting that intellectual merit in economics does not earn generous rewards in the marketplace — even the marketplace of ideas.
Mises suggested that intellectuals oppose capitalism due to a fundamental misunderstanding. Intellectuals assume that economics is a zero-sum political game while championing the cause of the indigent masses, yet they neglect to see that "the characteristic mark of big business is mass production for the satisfaction of the needs of the masses." Meanwhile, the political means to wealth — taxation and coercion — only strip the masses of their wealth through interference with socially beneficial trade and commerce.
To a certain extent, the above theories of the anticapitalistic mentality are correct. There are certainly other driving factors that one ought to take into consideration — the primary one being the precapitalistic guild structure of the modern university.
Common Sense for Education
The university guild structure, one should note, predated even the teachers' unions in public schools catering to primary and secondary education in the United States. It hardly needs to be said that former university apprentices (bachelor's-degree holders) and masters (master's-degree holders) now people teachers' unions and government bureaucracies like the Department of Education. These educational guildsmen have progressively reordered the US public education industry on labor-union principles since the Morrill Act of 1862. High schools have restructured their regimens in order to imitate universities, but it was never apparent that they needed such a restructuring, or even that such a restructuring was a mark of efficiency.
Former apprentices of the university who cannot find work in public education are often disillusioned critics of teachers' unions. The parental university union is rarely the focus of much attention. Critics of the university simply criticize the content and structure of the curriculum rather than the guild structure itself, which is the university. In a way, this is the same hesitancy erstwhile revolutionaries showed in criticizing monarchical government, preferring instead to blame the king's diabolical ministers.
This reluctance to criticize the university's guild structure no doubt stems from the fact that the public-sponsored university remains one of the only guarantors of a teaching license (a degree) in one of the most highly regulated industries in the free world — the market of education. Criticism of the university is often perceived as an attack on education, and most are not willing to recognize the faults of a system that they first paid into in order to obtain a degree with institutions under state sponsorship. The university is, no doubt, a valuable market of ideas, but questions as to its real costs, inflated prices, and questionable programs remain a source of concern for students, teachers, and taxpayers.
Universities influence public opinion, not only by the quality of intellectuals that they churn out, but also through the manner in which they churn those intellectuals out. We do not necessarily know what public universities would be capable of achieving in the marketplace if they — like any regulatory and interventionist government — simply allowed their industry to be structured from the bottom up in the hands of private management for the sake of consumer (namely, student) sovereignty. If we could cut tax funding and establish an educational price on the market, we might see where the most profitable ideas lie.
More likely than not, tuition prices would drop, efficiency would improve, programs with little demand would be pushed into market niches, and education would expand its market by decentralizing the industry. The decentralization of churches did not abolish Christianity or lead to religious genocides. Rather, the free market of religion opened a completely voluntaristic structure of religious education (tax free), and churches peacefully populate nearly every street corner. A similar market of education might just as easily expand the market base, establish a reasonable pricing structure, and restore freedom, responsibility, and efficiency to education.
The Costs of Apprenticeship
When sitting in a freshman class at a university, students are quite often sitting in a classroom presided over by a graduate assistant or fellowship student who has agreed to teach basic material in exchange for tuition waivers and a partially tax-funded stipend. This teacher-apprentice is an aspiring master of some university department, and the grad student will only receive an okay to teach secondary and tertiary education after completing his or her masterpiece with little or no pay after completing seven years' service.
It is quite difficult in today's educational market to simply walk onto the university scene with a master's degree and expect employment as anything but an instructor with a junior college or as a public-school teacher. Merit — or, intellectual innovation coordinated to reality — has little to do with success, at least initially. Teacher-apprentices are more responsible to their masters than to the students.
Anything less than a bachelor's degree precludes one from employment as a creditable teacher in any field whatsoever, because state licenses are required for entry into the educational market. As far as the system goes, one simply has not paid one's dues within the university structure until one achieves a certain kind of degree, regulated by a committee of guild specialists.
The grad student's masterpiece, which is generally a master's thesis, is a kind of speculative essay on a topic within a given field of specialty. If a committee of chairpersons agrees to give a stamp of approval to the student in question after roughly seven years of education, that student can then claim a master's degree and go to work within his or her field of specialty as a teacher. In other words, that student can then take on apprentices within another university or college. That other college will be similarly built on the very same guild structure, unless it is a privately owned technical institute specializing in an industrial niche.
The guild system propagates itself through self-interest, not necessarily through a distinct class consciousness or a welfare principle. Those who have crawled out of lifelong debt in order to pay educational expenses have no incentive to decrease costs for the ensuing generation, especially if that means lower wages to pay off those accrued debts, or even increased competition for jobs. Hence, regulation and speculation tend to raise the price of college.
The guild propagates the guild, not a market of free radicals. If the system were self-regulating, rather than government regulated, we would know the true cost of a university education. Tuition would not be as high as it now is in many cases, but there is little likelihood that learning institutes would thus disappear from the market altogether. Schools might shift some of their burdens into literacy training programs with corporations, as an adjunct to training regimens, or even place higher pressure on smaller institutes charged with primary education. Certainly, privatization would slough off the market of "undeclared" students who waste their money on the "college experience" of drinking, gaming, and casual sex, which can certainly be found outside of the university without the burden of purchasing unopened textbooks.
Guilds were the feudal equivalents of labor unions, and they required apprentices to work for a master smith of some trade for a period of seven years. These unions or guilds were termed "universities," and so it is not uncommon to read of things like "the university of smiths" or the "university of tailors" in bygone eras. Like apprentice blacksmiths, undergraduate and graduate students alike must now apprentice themselves to the university — or some specific college within the university — in order to earn an official degree. The trade "colleges" within the overarching university are presided over by the regulators of the respective trades. These regulators fashion themselves as the most informed personages in a given intellectual or commercial trade, and at times they live up to their titles. Just as often, if not more, they do not. Whatever the case, they are not always the best practical instructors of material.
Within the guild system, a master guildsman was expected to refrain from purchasing his factors of production from middlemen and journeymen (those who engaged in free trade without completing an apprenticeship), and thus were set against the progress of the market. Journeymen undersold the guilds, and the guilds turned to the government in order to regulate the progress of the journeymen who ruined the regulatory guilds. The entrepreneurial journeyman was always a threat to those who had worked seven years with little or no pay under a master.
The precapitalistic guild mentality is, as far as history has provided examples, the anticapitalistic mentality par excellence. The world has rarely seen another, and there is likely no other anticapitalistic mentality imaginable.
The entire setup of the university presupposes that its partisans would also oppose the market. If the university is a guild, then why should we expect university intellectuals to ever espouse a free-market philosophy? The progress of pro-market theories will nearly always be against the ideological current of university intellectuals, even though they may find a small niche within the university.
The university proper vacillates between a "guild" mentality, which is innately mercantilist, and a socialist mentality. "The guild view," one chronicler of university ideologies writes, "is elitist toward the external environment, conservative toward internal change, conformist in relation to the opinion of colleagues. The socialist view is democratic toward society, radical toward change, and nonconformist."
In other words, the left-right dichotomy mimics the socialist-fascist dichotomy at play in most Western democracies. Libertarian free marketers continue to push a radical agenda that denies both and urges the decentralization of power and regulation — both in ideas and the market. It is difficult to see how an economic temper can triumph in the university setting, given how the latter is to excessive self-regulation and the suppression of a market of ideas that are inimical to "consensus" bipartisan solutions. These universal solutions nearly always presuppose the suppression of third-party ideas that urge free competition.
Whatever one might say about medieval guilds, their partisans were not fools. By restricting the supply of creditable teachers through guild tenure, usually achieved by means of a government subsidy and an apology for coercion (subverting journeymen by force), university intellectuals secure their place within society and boost the price of a university education. They are free to charge more than their services are, perhaps, worth, and they may simultaneously use their status as a protected industry to pass various teaching regulations in the form of licenses, tests, and quotas to suppress the journeymen.
Both private and public institutions fall under the watchful eye of some licenser or regulator. Religious schools might very well escape the trap, but secular intellectuals (atheists, agnostics, latitudinarians, and freethinkers) are not likely to find employment in those private colleges. And while universities are churning out primary and secondary educators in droves, primary and secondary institutions restrict the supply of teachers through state unions.
Classroom sizes continue to grow, tax subsidies skyrocket, and more and more educators find employment as laborers, clerks, and middle managers. The entire chain of regulation needlessly props up the price of education when it was never needed at such cost. Malinvestment results, but it is a malinvestment for which humans are prone to apologize because education is valuable independent of the clunky delivery system that plagues us today.
In bygone eras, university graduates found employment as public servants and bureaucrats, or else as clerks and chaplains of the church. Where the separation of church and state is in place in a democracy or a republic, the university churns out intellectuals who will only find profitable employment as middle managers and clerks in the market. Or, they will naturally turn to public service and take up la religion de la souffrance humaine — universal regulation.
The anticapitalistic mentality is vital to keeping the market of education in its nearly eternal boom, artificial though it may be. Adam Smith argued that learning a trade within the marketplace — or, in market-based colleges — without serving a four-to-seven year apprenticeship would enable a true journeyman education "to be more effectual, and always less tedious and expensive." These market institutes would earn their reputations or lose them, and would naturally be restrictive, voluntaristic, and cost-effective. The point isn't that every institute would be perfect, egalitarian, and efficient, but instead that each one would be pressured to provide cheap services with higher efficiency than competitors, and even then to keep the curriculums attuned to market conditions.
Students uninterested in the material provided would naturally take their interests elsewhere — perhaps to a rival institute with a lower cost, a shorter graduation term, and a generalized curriculum. "Bipartisanship" within the university would naturally be shifted to voluntaristic clubs spanning different institutes, rather than government-funded bureaucracies.
The university intellectual has no desire to see this, since in this, "The master, indeed, would be a loser. He would lose all the wages of the apprentice, which he now saves, for seven years together." Even enterprising apprentices (namely, students) might themselves be losers if the market were diversified, since the "same increase of competition would reduce the profits of the masters as well as the wages of the workmen." Since the guild structure is a means to speculate on the value of information and knowledge in order to boost their price, those within the hierarchy have a greater incentive to spurn market ideas than to promote them in the classroom.
Under a journeyman educational system, society would gain by increasing education and decreasing its costs. No more would universities need to cough up superspecialized course requirements in horticultural feminism, vegetable robotics, or mystical "alternative logics." Students could demand the skills that they need, and the superspecialists would be urged to find a market — if one exists — for the rather zany intellectual pursuits that occupy curricula today. Clubs would certainly once more proliferate to suck up the excess.
Is the Guild Socially Beneficial?
Prior to the advent of capitalism, it could not be said that the university guild system had any real success, despite the many claims that have been made to the contrary by university historians.
The Renaissance bore testament to the failure of the university guilds. Intellectuals began trusting to independence in reason, logic, and science, rather than the intellectual bureaucracies of Oxford or Cambridge, which were riddled with religious schisms and politicking. Fraternal organizations like the Freemasons were critical to this kind of intellectual independence. When intellectuals bombarded the universities, they more often than not became the same old crotchety regulators that the radicals had set out to purge in the first place. Many of the most revolutionary minds of the 17th and 18th centuries were autodidacts who learned little in terms of formal education, and universities now pore over their texts as clerics over saintly relics. In fact, the first real literary movement in America — Transcendentalism — was carried on independent of the university, and often much to the university's chagrin.
As long as public esteem for university degrees remains high (and taxes prop them up), university degrees will continue to exert a noticeable influence on one's own utility as a prospective employee. Businesses will encourage the public to espouse universities so that individuals will pay, at their own expense, to learn the tricks of various trades. The cost of training individuals on the job is high enough for employers to hedge their bets and try to speculate on the untested talents of successful university apprentices.
Students incur heavy debts in their own speculative endeavors, vying for entry into highly esteemed universities. They thus emerge from their training with unwieldy debts, dupes of university speculation, with no sure employment prospects and little job experience. As with all other things, the surfeit of university degrees on the labor market decreases the value of each and every individual degree.
Students speculate not only because the inflated tuition costs of certain universities signal that degrees are valuable, thus leading to malinvestment, but also because individuals do require a certain amount of general knowledge to be successful in today's job market. The university promises increased literacy, complex mathematics, and a certain level of cultural sophistication. These are certainly useful studies for salesmen, primary and secondary educators, and engineers, but it still is not true that the university guild system and government regulation are required to promote those studies when the market has a vested interest in them — just at a lower cost.
There has been an Internet hubbub about a building "college bubble," but as Gary North phrased the issue,
This is no bubble. This has been going on since 1636 in Harvard's case.… A pricing structure that works for almost 400 years is not a bubble. It has worked in Europe for 900 years.
The question, then, is not whether the clunky university system should be scrapped or retained, whether the anticapitalistic mentality could be replaced within the university guild structure, or even whether the guild is headed for destruction. Rather, the question is how the system might be overcome.
 Hayek, F.A. "On Being an Economist." In The Trend of Economic Thinking. Ed. W.W. Bartley II and Stephen Kresge. Indianapolis: Liberty Fund, 1991. 35-36.
 Even private corporations have built-in bureaucracies, but consumer sovereignty remains the driving factor as long as the corporation is not subsidized by taxes.
 Cf. Smith, Adam. An Inquiry Into the Nature and Causes of the Wealth of Nations. Chicago: Encyclopedia Britannica, Inc., 1984. (1.10.2) p. 51.
 Contemporary economics departments in top-tier universities are a constant reminder that the regulation of ideas in the university is conducive to promoting guild structures at large in the political establishment.
 Kerr, Clark. The Uses of the University. 5th ed. Harvard UP, 2001. 74.
 As early as 1776, Adam Smith seems to have envisioned a marketplace of universities based on consumer demand, profitability, and consumer sovereignty in the tenth chapter of The Wealth of Nations:
If, in each college, the tutor or teacher, who was to instruct each student in all arts and sciences, should not be voluntarily chosen by the student, but appointed by the head of the college; and if, in case of neglect, inability, or bad usage, the student should not be allowed to change him for another, without leave first asked and obtained; such a regulation would not only tend very much to extinguish all emulation among the different tutors of the same college, but to diminish very much, in all of them, the necessity of diligence and of attention to their respective pupils (Cf. 184.108.40.206, p. 333).
 Smith, (1.10.2) p.53.