ABSTRACT
This chapter explains a historical perspective on the economic theories which have underpinned higher education over three broad phases: the medieval, the modern and the postmodern. It examines the ways in which funding and governance, which themselves reflect changing political and economic ideologies, affect the structure of universities and the nature of university knowledge. The chapter explores the changing relationship between university, society and the state. The state fully funds the university and gives it academic freedom to carry out research, to create knowledge and to teach: ‘The university became a privileged place where the future of society is forged through research’. J. Gray maintains that the strong government intervention is always required to enable a free market, pointing out: Encumbered markets are the norm in every society, whereas free markets are a product of artifice, design and political coercion.
