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Funding for research is an interesting topic isn’t? It seems as though many organisations who fund research are asking “How will this benefit me?” instead of “How will this benefit science/arts/whatever the discipline is?” It is funny how you mentioned Newman. He did axe the literacy awards and the got what he deserved when Queensland University Press(?) refused to publish his book. At his book signing the other day hardly anyone was there to meet him. Ultimately, he missed judged what the public wanted and suffered.
Allocating funding is a tricky business at universities. Research students need support, but to attract the best future researchers you need to invest in undergraduate programs. To get the support you need revenue, which is brought in by research students. I think if a student isn’t happy with a university, they can leave. So if a university experiences a major drop in undergraduate numbers then they will know something isn’t right and will need to make adjustments accordingly. Things have a way of working out.