I eventually found it in Isaac Asimov presents The Great SF Stories volume 15. That’s the problem with individual short stories. They can be harder to find than full books. That particular anthology focused on stories published in 1953, by the way.
The academy, incidentally, really comes across as a middle school that just happens to teach magic. It doesn’t have the flair or individual touch of, say, Hogwarts, as an obvious example. However, it does actually do the intended trick of making it clear that magic is an every day thing in the setting.
Even more spoilers
The unnamed magical land of the story is surrounded by a ridiculously big wall. Porgie, the 13-year-old protagonist, figures out how to build a glider and fly over the wall. There he learns that there’s a high tech world on the other side that built the wall to create an environment where magic could develop. In fact, his school teacher is an observer to both track magical development and make sure folks who figure out how to get over the wall end up okay.
My first reaction to the story was ‘Wow, this is so pre-New Wave’ So many of the social issues that the setting brings up are glossed over, particularly how the high tech civilization that created a giant prison camp as an experiment is depicted as benevolent :D The story is a classic example of science fiction being about how to solve a problem through cleverness. (I blame John Campbell)
Which isn’t to say ‘The Wall Around the World’ is a bad story. It is a silly romp that was fun to read. I definitely enjoyed reading it. And I don’t mind the ‘it was science fiction all along twist’ which wasn’t exactly new even in 1953.
Still, I went in looking for a revolutionary story and got a good but standard yarn with a cute detail. Really, Ursula K. LeGuin earned the credit she gets for developing the idea.