First, ND is not short on money. They have already invested a huge amount of money in the new neoclassical economics department and have seen a real payoff from that money in terms of the quality of the people being hired. They now have quite nice groups in both labor and macro.
Second, ND's real problem in raising the quality of the department is not money, it is getting people to come to South Bend. It is not a major urban area (though it is a relatively easy train ride from Chicago) which means not so many urban amenities and a tough time solving joint match problems. They share this difficulty with every other university not located in a big city.
Third, ND is not trying to please other economists by maximizing prestige. It is trying to please students, parents and donors by offering a course of study the leads to jobs and good graduate programs in business and other fields.
I am not unsympathetic to the idea of building strength in areas presently somewhat out of fashion. Arizona did this when it built up in experimental economics before that subfield became hot. I have argued for doing the same here at Michigan in economic history. But heterodox economics is not just out of fashion; most of it is just plain awful. Moreover, students can often obtain much of the intellectual value (e.g. thoughtful critiques of neo-classical economics) they would get from learning non-awful heterodox economics by attending courses in other disciplines.
Addendum: An anonymous reader provides the "Chicago" translation of my remarks:
the post you blogged about was the stupidest post imaginable. You have a discipline like economics where you can train kids to go out and earn a very good living. It gets captured by a bunch of unproductive, shallow Marxists so the Dean at ND is supposed to roll over let them to continue to not train their students? Why? Because in 30 years someone might cite their work. Hmmm."