



But by the end of the century, it had five of the most cutting-edge universities in Europe, one of the world’s best medical schools, and a booming professional class from which its southerly neighbor and occupier frequently drew its doctors, lawyers, and professors. It had pioneered the study of English literature as a subject, having perceived that for many of its students, raised speaking Scots or Gaelic, English actually was a foreign language. It offered up world-class Enlightenment philosophes such as David Hume, Adam Ferguson, and Adam Smith, all of whom were at least partially educated in its universities.

Having studied in Glasgow for several years before attending Oxford, Smith, writing near the end of the 18th century, was in an excellent position to evaluate the relative merits of different ways to fund a university education. Despite the lingering need for the most elite of aspiring Scottish academics to seek the imprimatur of the storied, Ivy-covered universities abroad, Smith vastly preferred his home country’s university system. It had prepared him for Oxford, and he groused eloquently and at length about the main difference: In Scotland, students exercised complete consumer control over with whom they studied and which subjects they deemed relevant. Oxford—and in fact most other European universities—employed a system similar to the way that American universities handle tuition payments today: One tuition payment was made directly to the university, and the university decided how to distribute what came in.

Oxford’s system had a lot going for it. Talented poor- and middle-class students who passed the entrance examinations with especially high marks (like Smith) were eligible for full, residential fellowships: tuition, living costs in quaint if miserable dorms, books, and even small stipends for travel fully covered. Scottish universities, on the other hand, rarely offered living facilities at all. Most students lodged with families in town.

Oxford sounds idyllic, but Smith points out how it often fell short of the Scottish system, where direct payment of fees served as motivation for faculty responsibility. “The endowments of [British] schools and colleges have necessarily diminished more or less the necessity of application in the teachers,” Smith writes in his opening sally against bundling the costs of education. “In the university of Oxford, the greater part of the publick professors have, for these many years, given up altogether even the pretence of teaching.”

In the the Scottish system, “the salary makes but a part, and frequently but a small part of the emoluments of the teacher, of which the greater part arises from the honoraries or fees of his pupils,” he explains. It is not hard to see why the founder of modern economics might prefer such a clear system of incentives, but his reasons are also not easy to dismiss, even if they’re built on a cynical view of human nature: “It is the interest of every man to live as much at his ease as he can; and if his emoluments are to be precisely the same, whether he does, or does not perform some very laborious duty, it is certainly his interest…either to neglect it altogether, or…to perform it in as careless and slovenly manner as the authority will permit.”

Incentives matter, as the rest of The Wealth of Nations might as well be summarized. And although he spends much of his time on the educational disparities between Scotland’s universities and Oxford focused on the question of teacher quality—it was notoriously terrible at Oxford—buried in the middle of Smith’s analysis is the more contemporarily relevant question of producing a better alignment between value obtained and cost willingly paid.

Prices are information about what people need and want, so the trouble with bundling together a large number of services on a single bill is that it becomes difficult to tell exactly what one is paying for, or for the people sending out that bill to determine what students in fact want to pay for. In the current American system, such decisions are based on fluctuation in enrollment—a very high-level piece of data that can encompass any number of students’ preferences—but not on the micro-level of whether the students of Texas Tech University, for instance, really wanted a water park instead of more or better Spanish-language instructors.

There are of course reasons why it could be very problematic to unbundle tuition and let students pay their professors directly. Disturbing evidence has recently pointed to the patent unfairness and sexism of student evaluations of their professors. Many an academic has bemoaned the growing “customer” mentality of their students, and with good reason: It can lead to grade inflation and a subsequent lowering of standards.

But as Smith would surely have appreciated, the right incentives could bring 18-year-olds to seek out the highest-quality teachers rather than the most forgiving graders. That’s how it worked in Scotland in the 18th century, where there was a simple way of dealing with the problem that the best professors were not always the easiest fellows: rigorous, frequent, and comprehensive oral and essay examinations, which were administered in lieu of evaluations in individual courses. Students were allowed to select which university services and which university teachers they would pay for, but in the end if they could not pass a university-wide exam, their choice to take the 18th-century equivalent of Rocks for Jocks would have been swiftly punished.

Smith himself was by all accounts the professor whom many students dread to meet on the first day of class: Disheveled and uncharismatic, he wore his frequent absent-mindedness heavily, and the discrepancies in his students’ surviving notes may point to poor delivery. Nevertheless, when he quit his academic post halfway through the year to take up a prestigious tutoring position to the Duke of Buccleuch, his students declined his offer to refund their fees. They had, they said, already learned enough to justify paying for the whole course.

Smith, as many on the left point out, was also a proponent of free or at least subsidized education. To a certain extent, he was. But when it came to universities, he was more in favor of a recognizably modern private-public partnership. He believed that taxes or other levies might be used to pay for physical university facilities—funds were raised for the University of Edinburgh for this purpose in 1768, for instance, to build a more respectable edifice for what was becoming a premier university and a fixture of the city—but that students should continue funding the classes that they deemed valuable directly to ensure continued quality and relevance. It’s possible that students would make poor decisions about this, but would their decisions be any worse than the often incoherent sets of core curricula and mandatory distribution requirements cobbled together by regents’ boards now? Besides, those who feel uncomfortable with the idea of the political class overseeing classrooms to an even greater extent than they already do probably don’t mind it exercising oversight over campuses’ stone lions and gothic arches.

Most significantly for the current student-loan debate, despite the high quality of the Scottish universities, their costs remained lower than Oxford’s or most European institutions’. The reason for this was in part that services had been de-bundled. The non-residential nature of the Scottish universities meant that students had to find their own lodgings and food, and, one assumes, water parks, which separated the question of amenities from that of actual educational value. Administrative overhead remained very low as a result, and although typical complaints about overcrowding and poor facilities persisted throughout the century, the students still came. Apparently, they valued good lecturers over sparkling spittoons, a choice that was available to them when the costs of facilities were separated from the cost of their education.