Academic institutions already pay salaries whether they fund open source development or Wolfram Research, so not sure what you’re trying to argue. People haven’t been starving while doing research in the open.
But academic institutions didn’t produce Mathematica. The point is simple: a lot of useful software like Mathematica has not been open-source for a reason. It is not about distribution being free; it is about production being expensive.
Some form of Mathematica has been open for a long time, in the form of Sage etc. There's no reason why academic institutions can't pool more money to develop these further.
Sage is a nice effort, but it isn't Mathematica. I use Mathematica, I don't use Sage. Academic institutions had almost 40 years to "pool more money", yet there is nothing that rivals Mathematica. The reason is simple: open-source doesn't pay well enough.