The Story of Seguira

This week's reading assignment relays the story of Seguira, the newly appointed rector of a South American university. Upon inheriting his new office, Seguira surprised the locals by quickly turning into a serious reformer. Through the institution of a merit system, Seguira allows for competition between Professors and Graduate Students at the university. Yet in this system are a few kinks, which Seguira addresses with new regulations. Yet again, even in this new system, there are some kinks. So again, he institutes new regulations and new sets of rules. This back and forth game continues until the entire system falls apart.

To be honest, I am not quite sure what to make of this story. At first, I thought it was a specific instance of a free-market failure. The free-market system is not universally beneficial, especially in arenas which do not have the proper institutions. Rizzo explained this in class this week, citing the fact that Russia is poorer today than 30 years ago, despite the introduction of a market system. This could be an illustration of that point. Universities should focus on teaching, rather than competition, and are therefore not conducive to a market system. Forcing one on them is destined to lead to failure. So, as Pinzio warned, most solutions to the dilemma of higher education would have disastrous consequences. 

However, then I realized that Seguira was playing the role of a central planner. Therefore this was not a true market system. In addition, the consistent shifting of rules is an indication of the importance of the "Rule of Law" in allowing for economic growth. And there is the "Law of Unintended Consequences". Each regulation Seguira instituted was well-intentioned, but failed due to unintended consequences. Excuse the quick term binge, but the three of these came to mind after I re-thought the story. So perhaps calling this a "free-market" is a misnomer. The problem is that it was a forced market, not one that developed naturally due to the proper conditions. In my opinion, this is the correct interpretation. Looking at it this way, everything makes more sense. 

Main Ideas:

1. The free-market system does not work in any situation. There must be proper conditions.

2. A free-market cannot be forced.

3. Every decision has unintended consequences.

4. There must be a consistent and non-discriminatory "Rule of Law" for economic growth. 

Questions:

1. What were the unique conditions that doomed the University's merit system?
2. What incentives could improve the fact that universities are "run in reverse"?
3. What is the meaning of the end, where Seguira leaves after receiving an offer from another university?  Is there an indictment in the relaying of this action?