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Runaway Higher Education December 14, 2007

Posted by federalist in Education.

The classic “runaway higher education” story is about the vicious cycle in higher education prices spawned by government subsidies.  However, yesterday a few essays in the  Wall Street Journal warn of another runaway scenario: the most well endowed universities have reached a point at which they are no longer dependent on anyone for funding.

Fay Vincent warns that with such vast endowments universities will no longer be accountable to any outside entity.  “In the present circumstances, the administration and boards of these schools now control the money because the endowment is managed by internally controlled entities.”  The Dartmouth coup is just a preview of things to come.

To this point universities depended on students, alumni, and (except for Hillsdale and Grove City colleges) the government to sustain their operations.  The most endowed universities have just recently reached a point at which they can readily afford not only to snub donors but also to stop charging tuition, should they so desire.

For what did the generations of alumni and donors who built these institutions hope?  A majority probably donated so that their children could eventually enjoy the same college experience as their parents. “Legacy” admissions used to be an explicit mandate at these institutions, and only recently have life-long donors realized that competitive schools are no longer reciprocating the financial commitment of their alumni.

Other donors may have donated to the ideals for which an institution stood in the past.  Depending on the era this might have included any of the following:

  • Preservation of Western civilization
  • Subversion of Western civilization
  • Promotion of WASPs
  • Promotion of colored minorities
  • Promotion of conservative ideals
  • Promotion of liberal ideals

Over the past century private higher education has given us a taste of each of these, indubitably to the consternation of large groups of preceding alumni and founders.  One hopes that astute donors discerned the whimsical nature of academia and never gave substantial gifts without tight controls to ensure that their vision was honored.

The alarming fact is that, regardless of the original intent of the donors, the unrestricted endowments of top universities are now so large that they have essentially purchased their administrators independence from any oversight.  For those who aren’t already appalled at the fact that private colleges have become bastions of anti-American, anti-capitalist liberalism, we could imagine any number of appalling scenarios engineered by faculty and administrators with vast resources and no accountability outside of their own ivory tower.

One dynamic in particular that worries me is the ability of elite universities to define an elite.  In spite of revelations to the contrary, there is still a strong cultural myth that our most elite schools are filled with our most elite students.  The reality is that to various degrees they have always tailored their student bodies to satisfy nebulous and fleeting visions of diversity, and they have done so at the expense of what would generally be accepted as academic merit.  Nevertheless, until recently they still had to worry about collecting tuition on the one hand, and keeping up average standardized test scores on the other.  Without the need for the former, and with a surfeit of candidates exceeding the latter, elite schools can now engage in unfettered social engineering.  They can essentially buy whichever students or faculty they want.  They can pursue whatever programs of indoctrination or evangelism they want.  If we thought it was bad before (and I, for one, did), it can get much, much worse.

How can other colleges that depend on tuition for operating expenses compete with schools that can pay students to attend?  Given the number of superbly qualified candidates, admissions to these schools is already a lottery.  If they follow their plans to extend tuition subsidies then elite college admission will really be like winning the lottery:  If you get in, college is free.  If you don’t, you have to pony up six figures for your bachelor’s degree.

This seems like a very unappealing situation: Unaccountable elite universities set the standards for playing a lottery and sweeten the pot to the point that every aspiring student wants to play.  As a Yale alumni interviewer I have already seen talented students jumping through hoops to look competitive in the Ivy League admissions pool.  For example, it is not yet necessary to actually be a registered Democrat or a card-carrying Communist, but it does seem to help.

We may never be able to take away the fiscal advantage of these Elite Independent institutions, but with some effort society may be able to curtail its abuse.  Social opprobrium carries some weight in these matters.  We can hope that:

  • Donors will cease unrestricted and disproportionate donations to institutions that already have more than enough money to pursue their mission.
  • Employers, students, and professors will realize that elite universities are running a lottery, not a strict meritocracy, and that those institutions do not have a monopoly on top scholars.


1. federalist - December 16, 2007

WSJ published an editorial on the new Center for Excellence in Higher Education a few months ago. It looks like an admirable and productive project:

The Indianapolis-based center … aims to help donors “use philanthropy as a lever to reform higher education,” says Frederic Fransen, its executive director. Reform includes a greater emphasis on core curricula, a free-market understanding of economics, a more balanced approach to politics, affordable tuition, tenured faculty who spend more time in the classroom, greater transparency in university governance, and an end to grade inflation.

How do they propose to do that?

University administrations have often ignored “donor intent” when spending the proceeds from a particular gift. And thanks to an antiquated hiring system and a faculty that will scream “infringement on academic freedom” any time an outsider tries to exert some influence, the problems in higher education have become entrenched.

There are donors with the money to get around these problems — to create entirely new schools or departments within a university. But how do you get a university to agree to, say, starting a separate school devoted to the study of free enterprise? And make sure they’ll stick to the plan once they cash your check? CEHE will help donors (free of charge) craft contracts with universities to ensure their money is used properly. It will also perform due diligence on these gifts once the agreement is complete.

[For example, a donor] can ask the center to sponsor a contest among three or four different schools, each submitting a proposal detailing how the money would be spent. “Competition tends to have the impact of bringing out the best,” says Dr. Templeton, of the Templeton Foundation, which regularly runs such contests.

2. Reader - January 2, 2008

What “Dartmouth coup” are you referring to? The expansion of the board of trustees? How is that a “coup,” and by whom?

3. Reader - January 13, 2008

What “oversight” did private universities have when their endowments were $1b instead of $5b? Governments and donors have limited their individual grants, and they always will, but there was nobody “overseeing” universities who has suddenly been deposed. Shouldn’t you be happy that schools are finally able to be independent of government subsidies? Now that they are, why do you care what they do with their money? Having an uninformed difference of opinion with the way Harvard operates doesn’t begin to suggest that you should be given a hand in running it.

4. federalist - January 13, 2008

First note: I fixed the link on the “Dartmouth coup” in my original post.

Regarding your second comment:

When universities depended on tuition, donations, and/or the government they were accountable to students, alumni, and taxpayers respectively. My argument is precisely that at a critical level of endowment these overseers truly are deposed.

Granted, I would be thrilled if government funding were curtailed, but that is not the question here. The most endowed universities continue to take government funding, and will do so as long as it is convenient. But they don’t have to, hence the government does not exercise any effective oversight. (And note my earlier reference to a few relatively unendowed universities that get along without taking government funding even though they could.)

Of course, as private entities in a free country these universities can in fact pursue whatever agenda they want. We could argue about the terms under which they should enjoy preferential tax status. My concern here, however, is twofold:

1. They achieved their independence through the donations of parties that had certain assumptions about how their donations would be used. Oral and implied contracts may not be binding, but going forward let the donor beware.

2. Through no one’s intention they have achieved a position of unfettered social power. As a society we should be on guard against the abuse of that power.

5. Reader - April 19, 2008

I agree that the government should limit the property rights of private corporations in order to fetter those corporations’ social power and bend it to the will of the state, but I am not sure of the best way to go about it. The Soviet model is worth investigating, but Ceausescu’s work in this area might prove the most useful.

On the other hand, we could leave the system the way it’s been for hundreds of years, a system that has allowed American universities to become the best in the world. The state attorney general holds the university accountable for compliance with its founding document and state law. If being rich were by itself enough to require state control, then we would be living in a socialist state.

6. federalist - May 18, 2008
7. federalist - July 16, 2008
8. rossevancoe - July 10, 2009

Good thoughts about gov’t intervention in elite universities. See what happens when legislators and governors are responsible for the governance of UVA :

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