Emeritus Professor Steven Schwartz argued in these pages that universities must be run like businesses. It is an appealing soundbite, but very misleading. Australian universities are incorporated as not-for-profit institutions. That is not a minor technicality – it is a deliberate choice. Universities are meant to break even, perhaps generate modest surpluses, and reinvest in teaching and research. They are not meant to make the same kinds of profit-driven decisions as corporations.

When non-profit organisations are managed as if they were for-profit firms, problems emerge. Economists have long warned of this. Robin Marris and William Baumol, writing in the 1960s, showed that managers in the absence of shareholder oversight often prioritise revenue maximisation or growth maximisation over profit. Similarly, Oliver Williamson explained how managers would pursue “perquisite maximisation” – in plain terms, bigger offices, larger staffs, and more prestige projects – even if these undermine efficiency. Without the disciplining force of owners demanding returns, bureaucracies take on a life of their own.