The gift seemed too good to pass up: a $5 million bequest from a wealthy alumnus for the University of Missouri, endowing three chairs and three professorships in its business college. The condition was unusual, requiring each of the six to be a “dedicated and articulate disciple of the free and open market economy (the Ludwig von Mises Austrian School of Economics).” But after the donor, Sherlock Hibbs, died at 98 in 2002, Mizzou accepted. It shouldn’t have.

The university betrayed its benefactor almost immediately, putting...