Property and Freedom Society, Bodrum 2025
Guido Hülsmann on “The Universities and the State”
Reported by Sebastian Wang

It is always striking when a lecture manages to give shape to something one has felt but not quite articulated. We all know, vaguely, that modern universities have become deadening places, bureaucratic in tone and often hostile to the very notion of truth. But what exactly went wrong? When did the decline set in? And is there anything left to salvage? Professor Jörg Guido Hülsmann, an Austrian School economist and one of Ludwig von Mises’s most incisive interpreters, addressed these questions at the Property and Freedom Society in Bodrum. His theme was “The Universities and the State.” It was as rigorous in its history as it was devastating in its conclusion: universities today are not heirs of the medieval model of self-governing communities of teachers and students, but creatures of the state and of fiat money.

Hülsmann began with a wide sweep across civilisations. Elites everywhere have created institutions to train their successors. Ancient China had its Confucian academies, where mastery of the classics was the key to office. India had the gurukula and the Buddhist monasteries. The Islamic world developed the madrasa. The Aztecs and Incas taught their priests and administrators in temple schools. Japan’s feudal han schools trained the samurai class. Greece and Rome relied on philosophers and rhetoricians, usually hired privately. Education has always existed wherever there was wealth and hierarchy. But what Europe developed in the twelfth century was something altogether new: the universitas, a corporate body of students and masters, legally recognised, self-governing, and with certain privileges against both Church and state.

This medieval birth was not romantic. At Bologna, the students banded together in guilds to protect themselves against rapacious landlords and innkeepers. At Paris, the masters formed their own guild to defend their prerogatives against the bishop. In both cases, the university was a corporation: a legal person, able to make statutes, impose discipline, and defend its members. What made this possible, Hülsmann noted, were three preconditions: a critical mass of students able to pay, a supply of masters competent to teach, and a shared intellectual framework—Latin, a belief in God, and the conviction that faith and reason were not contradictory.

The curriculum was equally distinctive. The lower faculties taught the trivium (grammar, logic, rhetoric) and quadrivium (arithmetic, geometry, music, astronomy). The higher faculties—law, medicine, and theology—were where real careers lay. Aristotle was the common text. He was revered, dissected, attacked, defended, but never ignored. From him came the assumption that knowledge was systematic, and that disputation could reveal truth.

The life of these early universities was turbulent. Hülsmann quoted from an early twentieth-century anthology that gathered medieval descriptions of Paris. Students insulted one another by nation: the English were “drunkards and had tails,” the French “effeminate,” the Germans “furious and obscene,” the Lombards “cowardly,” the Sicilians “tyrannical,” the Flemish “slothful.” These slanders often led to fights in the streets. Theologians were accused of pride, caring more for attracting students than for saving souls. And yet, amid the chaos, something remarkable was happening. A genuine community of learning had taken root.

By 1300, Paris, Oxford, Montpellier, Bologna, and Salamanca were established. By 1526, there were 73 universities in Europe; by 1617, 142; by 1800, 166. New disciplines arose, often under pressure from the changing world: chemistry, physics, economics, sociology. But the structure remained recognisable. The mendicant orders entered in the thirteenth century, bringing discipline but also clerical control. By the sixteenth and seventeenth centuries, however, the state began to move in. National monarchies increasingly asserted control over curricula and appointments. What had been self-governing corporations became instruments of patronage.

From the seventeenth century onwards, the decline accelerated. The original guild autonomy was hollowed out. Universities became bureaucracies. The state, jealous of independence, replaced internal statutes with external regulation. As printing and later industrialisation transformed learning, the old corporate model ceased to grow organically. By the nineteenth century, universities were largely national institutions, their freedom circumscribed. And with the arrival of democracy, the final blow was struck: the mass university, egalitarian in ethos, funded by taxation, answerable to political fashion rather than to truth.

Hülsmann stressed that this decline was not merely political but also financial. Universities were preserved and expanded by paper money. Central banks, by enabling deficit finance, made possible subsidies on a scale that would otherwise have been impossible. In a hard-money system, governments would never have been able to carry hundreds of thousands of subsidised students and vast armies of administrators. Fiat money insulated universities from the market, allowing them to grow bloated, mediocre, and politically conformist. They became what he called “rationality traps”: institutions that justified themselves in the language of science and reason, but which in fact channelled thought into dead ends, suppressing dissent in exchange for state protection.

This analysis has the virtue of explaining what one senses walking across any modern campus. The ceremonies—the gowns, the Latin mottos, the elaborate graduation rituals—are all still there. But the soul is gone. What remains are bureaucratic certificate factories, enforcing conformity, and producing graduates trained in compliance rather than inquiry. Rivals are already outcompeting them: professional schools, private institutes, online academies. The medieval universitas survives only in ghostly form.

The commentary that follows from Hülsmann’s lecture is uncomfortable. When one sees the photographs of medieval disputations, noisy and even rowdy, one is tempted to laugh at their excesses. But better noisy disputation than silent conformity. Better insults about national stereotypes than workshops on “diversity and inclusion.” The medieval universities were alive; ours are embalmed. The scholars of Paris argued about the Trinity, and in the process invented systematic theology. The scholars of Bologna argued about Justinian, and in the process revived Roman law. Today’s professors argue about microaggressions, and in the process extinguish thought itself.

This is not a nostalgic lament. Hülsmann did not pretend that medieval universities were perfect. They were quarrelsome and often corrupt. But they were independent. They were communities of teachers and students bound together by statutes and a shared belief that truth mattered. That is precisely what the modern university lacks. Its autonomy has been traded for subsidies, its curiosity for compliance. The state has made it into a factory of bureaucrats.

The wider implication is that civilisation itself has lost one of its safeguards. For centuries, the university was a place where the state was not supreme, where ideas could be tested against tradition and reason rather than decrees. That space has closed. Hülsmann’s warning is that without independent communities of learning, the West will become a society where no serious challenge to the ruling order is possible. The pretence of debate will remain, but its substance will vanish.

Listening to him, I could not avoid thinking of my own classroom experience. I am in a school where ideology intrudes on every subject, where form matters more than substance, where the past is treated not as a source of wisdom but as a quarry for grievances. It is the same logic writ small. If this is what the universities have become, then what hope is there for the next generation?

Yet Hülsmann did not end on despair. He argued that just as the medieval university was not planned but grew out of need and circumstance, so too might new forms of education emerge. They will not be funded by central banks or designed by ministries. They will come where there are students hungry for truth and masters willing to teach. They may be small, scattered, and even eccentric. But they will carry forward the spirit of inquiry that the state-funded universities have abandoned.

It is a hard message but a hopeful one. Europe once built institutions that became models for the world. It destroyed them by nationalisation, by fiat money, and by egalitarian dogma. If it is to recover, it will not be through reforming the existing universities, but by replacing them with new ones. Only communities independent of the state, bound by freedom and truth rather than by subsidies and slogans, can once again deserve the name of university.

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