Academies, that are founded at the public expense, are instituted not so much to cultivate talents [ingenia colenda] as to constrain them. [ad eadem coercenda instituuntur.] Skills and sciences will flourish best [optime excolentur], in a free republic, if every one who asks permission [is granted] to teach in public, at his own expense, and to their own reputation risk. [si unicuique veniam petenti concedatur publice docere, idque suis sumptibus, suis sumptibus, suaeque famae periculo].--Spinoza Political Treatise, Ch. 8, p. 49, translated Robert Harvey Monro Elwes [with most modifications]
Spinoza assumes that a true cultivation of dispositions will generate excellence in the sciences and technology (or technical arts [scientiae et artes]).* He denies that publicly funded universities produce such excellence. Because regardless of what their purported aims are, the true aim of public universities is to mold talents into the assumed or perceived needs of public authority. This generates a species of conformity, and is incompatible with true excellence. As Adam Smith put the same point in the Wealth of Nations, “The discipline of colleges and universities is in general contrived, not for the benefit of the students, but for the interest, or more properly speaking, for the ease of the masters. It's object is to maintain the authority of all masters.”*
A key hidden assumption is that diverse talents must be cultivated in a variety of ways such that sciences and crafts can flourish. And through direct and indirect censorship (i.e., a curriculum, etc.) public universities prevent this variety from being developed.
More could be said about this passage and his then recent rejection of the Chair at Heidelberg. And much more ought to be said about Spinoza's views of human nature in the Political Treatise. Given the fondness for Spinozza among today's self-styled radicals and marxists, he is, to be speak frankly, surprisingly elitist about the intellectually gifted (8.2). But that's for another time.
Given the diversity of human character and given the diversity of excellence in the sciences and technology, what's needed according to Spinoza is unlimited freedom to would be educators to teach what they wish constrained by their budgets and reputation.
I assume that Spinoza is only speaking of higher education (academies) here. It is notable that even Smith, who was a fierce critic of the universities of his age, would not go as far as Spinoza. Smith thought that professors should indeed be paid by their students (such that a higher enrollment meant higher fees). But Smith did not propose that everybody could organize higher education as they see fit.
It is notable, Sinoza does not consider an option to reform higher education: the creation and advocacy of something like academic freedom. While the term is a bit anachronistic, it is not much a stretch for the advocate of freedom of philosophizing/scientific thought (which is the explicit thesis of the Theological Political Treatise--a text he refers back to regularly in the Political Treatise);** there is no doubt that the nature and extent of academic freedom was debated in various controversies at Leiden University in his lifetime (some of them having to do with the status of Cartesianism). But given everything else he says about the way incentives and human nature interact to generate conditions of corruption in the Political Treatise, he must have thought this decidedly unpromising (perhaps especially in an aristocracy [since the paragraph is tucked away in a chapter on the best aristocracy]).
Another option would be for universities independent of government (and religious) control in the manner of some ancient academies and future private universities. But it is crucial, I think, that Spinoza does not advocate for the establishment of a single private university to create such freedom. Rather his emphasis is on educators, many would be educators ("each" unicuique). I happen to think we're invited to think of Plato and Aristotle and their business model with fee paying students attracted by their reputation. And it is quite clear that Spinoza thinks that in a heterogeneous population of fee-paying students, it is the interaction of payment and reputation of teachers that will produce the excellence in the sciences and technologies conducive to the flourishing of a free republic.
It is a peculiar fact of the reception of Spinoza that a book which seriously curtails speech (but not thought), the Theological Political Treatise, is treated as the origin of modern freedom of speech; whereas the book that despite curtailing such speech (3.5) quietly promotes a market place in intellectual ideas is still (to quote Yitzhak Melamed and Hasana Sharp) a "neglected masterpiece."
+Smith is ordinarily read as criticizing Oxford in context. And he is thought to be praising Glasgow University where students pay the professors directly. This may be true, but note Smith's "all" in all masters.
*I don't mean to deny that artes can involve fine arts and crafts, too.
**The TTP was published anonymously. So, Spinoza was either planning to out himself formally, or the Political Treatise was always intended forposthumous publication.
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