Wednesday, May 14, 2008

Great News About Panmure House!

The Scotsman 14 May:

"University bids for Smith's home"

"An £800,000 bid by Heriot-Watt University to buy the former home of the "father of economics", Adam Smith, has been approved by councillors. The decision over Panmure House in Edinburgh's Old Town, where he lived from 1788 to 1790, will now be scrutinised by the Scottish Government. Councillors chose a lower bid over a £950,000 member of the public's bid so it could be "accessible to the public". Plans are to restore the house to promote the study of economics.

A higher bid was placed by, Laura Strong, who wished to restore and live in the property. She also planned to allow the public into the house occasionally throughout the year. However, it was not a "clean bid" as she put the offer in subject to a full structural survey. Councillors at Tuesday's Edinburgh City Council's policy and strategy committee decided to take the lower bid so that the building could remain accessible to the public.

Adam Smith was born in 1723 and died in 1790, aged 67. He is known primarily as the author of two treatises: The Theory of Moral Sentiments, which was published in 1759, and An Inquiry into the Nature and Causes of the Wealth of Nations, which was first published in 1776. Smith is also known for his explanation of how rational self-interest and competition can lead to economic well-being and prosperity.

University officials hope Panmure House, just off Edinburgh's Royal Mile, will "bring substantial benefits to the national economy" as well as place Scotland at the "international forefront for the study of economics". Heriot-Watt's Edinburgh Business School is one of the world's largest providers of postgraduate education in business, with more than 6,500 MBA students from more than 150 countries. The university's principal and vice-chancellor Anton Muscatelli said: "We are very encouraged by the council's decision to accept our bid and now hope for a decision by the Scottish Government which will approve our purchase. "An international economics centre will be of significant importance to the development of scholarly activity on the subject.

"We will be pleased if our purchase is successful and we can play a part in saving a building with such historic significance. "Adam Smith's impact was truly international and it is therefore very relevant that Heriot-Watt as Scotland's most international university should open and run this centre."

This is excellent news for the University and for Scotland. It remains for the Scottish Government to approve of the purchase of Panmure House.

In discussions among academic economists and commentators in Blogland, there have been a few from those who simply said: ‘sell to the highest bidder’ and who claimed to be speaking on behalf of the ‘authentic’ Adam Smith, heavily influenced by the creation of the epigones educated in the environs of Chicago University.

I prefer the actual views of the Adam Smith born in Kirkcaldy in 1723, an altogether different person to the Chicago ‘Adam Smith’. Frankly, these persons didn’t know what they were talking about, even making allusions to the use of public money. They didn’t understand Scottish property law by which all property is sold in sealed-bid auctions and in which the seller is ‘not obliged to accept the highest or any offer’ (it’s the owners property!).

A public authority is closely scrutinised by public regulators and, of course, by the electorate and by the media. There have been scandals recently in which Aberdeen Council sold properties well below (£1.2 million properties sold for £350,000) the District Valuer’s estimate of their worth and presently it is under investigation. In the case of Panmure House the district valuer’s estimate was £750,000 and Heriot-Watt’s bid was £800,000.

The higher bid of £950,000 was overridden by the Council on two grounds. First, it was not a ‘clean’ bid; it was conditional on a ‘structural survey’ being acceptable. But this is not a ‘sale’ until it passes the buyer's structural survey in the opinion of the purchaser, not the seller. For a house built in the 1690s (long before Chicago existed), the risk falls on the seller, not the buyer, who can pull out at no cost, and leave the seller to start all over again.

Meanwhile, Heriot-Watt’s bid was ‘unconditional’; the entire risk falls on the University, which cannot pull out and must hand over the full purchase price on the exchange of contracts (in Scotland: ‘the missives’).

Secondly, once the official valuation is met or exceeded by an offeror, the other grounds on which a public authority can accept a lower offer to a higher bid, is that it can demonstrate a ‘public benefit’ from doing so. I think readers can see the future use to which Heriot-Watt will put the building, as described by Professor Anton Muscatelli, the Principal of Heriot-Watt University I(and a leading Scottish economist). All bidders were required to describe in their bid their intended use of the building and there was a clear public benefit involved in the University’s bid that was not manifest in the higher bid.

I should add that though Heriot-Watt University is supported by public funds, not a penny in the £800,000 bid comes from public funds. The bid is financed by Edinburgh Business School a separate charity within the University, the entire funds of which are raised by its worldwide commercial educational work (it has 6,500 students, mainly overseas, all of whom are taught postgraduate subjects by distance learning and all of whom sit closed-book examinations, with no choice of questions, graded in Edinburgh and subject to External Examiners from other British Universities).

The building requires extensive renovation, and possible some structural work, which is subject to its status as an ‘A-listed’ building (the highest category of protection as a heritage building), which preliminary estimates suggest a sum of £2 to 3 million may be needed. This sum too will be raised from private sources.

Moreover, the professors at Edinburgh Business School are well-known for their Smithian free-market philosophy which is practised in all of their education work. As a charity it is non-profit, though it regularly makes a surplus over costs, all of which is devoted to its charitable objects, as required strictly by UK charity law.

Its management of Panmure House as a premier education centre will be characterised by its role as a net contributor to the University, which readers may rest assured would most certainly have been approved of by the Kirkcaldy Adam Smith.

I hope the recent detractors will reconsider the facts and drop their unhelpful assertions (and perhaps re-look at what they learned from the Chicago condition).


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