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Posts Tagged ‘college’

Today’s Times details the extensive donations that Michael Bloomberg has made to his alma mater, Johns Hopkins University — over 1 billion dollars! This is totally nutso. Yet, it is relatively common for highly selective universities to get giant donations from rich alums.

This is bad for a variety of reasons:

  1. College is probably not the best place to use your dollars if your goal is societal improvement. By the time you get to college, your life track, income, etc. is pretty much set within a narrow range of outcomes. It’s probably better to spend your money improving early childhood and elementary schools.
  2. If you assume that college is still quite important for other reasons, don’t fund Johns Hopkins (or Harvard or Yale or wherever). Your return-on-investment there is pretty bad, since these institutions coast on reputation. Why not give to community colleges instead — which are always hurting for cash and have lower attrition rates than four-year colleges? Additionally, the students that attend Hopkins or Harvard or Yale already have lots of breaks in their favor? Why not give a break to the students at the margins of success who need it more?
  3. Additionally, the highly selective undergraduate institution relies on cartelization to keep its prestige. Harvard, with its $34B endowment, could reasonably educate a lot more people than it does now. Instead, it limits who can attend with unnecessary precision. Can’t dilute the brand! If that’s the case, why keep giving so much to an institution that will do so little with your money?

So, if this is so bad, why do we do it?

  1. Sentimentality (or availability bias): Michael Bloomberg got a lot out of Hopkins; he wants to show his appreciation. He loves the place and has fond memories. As such, he wants to give money.
  2. Our tax code: By giving the money away, Bloomberg gets a legacy that he doesn’t have to lose upon death (estate tax). Additionally, he gets to deduct those donations from his massive income.
  3. Prestige: Rich people love giving away money when they can slap their name on it. (Not so much when they can’t, see, e.g., Donald Trump.) Additionally, we shower people with attention for their donations.

All these factors lead to a quite inefficient distribution of wealth to higher education. Hopkins has a $3B endowment; it educates 5,000 undergrads and 2,000 grad students a year. The University of Maryland-College Park has a $792M endowment; it educates 26,000 undergrads and 10,000 grad students a year. I can’t find statistics, but I would hazard that the parental income of a Hopkins student is higher than the parental income of a Maryland student. I would also hazard that the percentage difference in income of a student who was waitlisted at the university and got in vs. a student who did not is bigger at Maryland than at Hopkins.

Which is all a long way of saying that donations are vastly inefficient ways to redistribute wealth, and we should just tax people a lot more. I’m not saying that central planning is a better way to distribute wealth; plenty of this money could just be block-granted to states/municipalities with some strings (i.e. required income reporting, tracking students after graduation, etc.).

Philanthropy may sound good, but a system with a lot of big-dollar philanthropy probably isn’t equitably distributing wealth in the first place.

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It’s time for the latest installment of the Unpersons podcast!

This time we discuss college and recent debates about its purpose and worth. Reading the first two links in the footnotes helps get the background, but I think our conversation makes sense anyways.

Our topics meander from:

– What the value of college is; i.e. why would anyone want to go to college
– The Menand argument of sorting vs. democratic functions of college — which is it?
– What to do with unprepared college students
– Bashing/defending Professor X’s (no not that Professor X) teaching ability; what is a professor’s job?
– Connections between the failures of K-12 education and problems in college education
– Scholarships, loans, and poor financial decisions (it’s only worth it if you don’t drop out!)
– Tracking into vocational schools and why we are queasy about the idea
– Inherent elitism/classism in the “don’t go to college” movement

Footnotes:

– Linus’s original blog post, my response, and the original Professor X article
– Professor X’s new book and article
– the Louis Menand New Yorker article about the value of an education
– List of drop-out factories
– Wealth effects of first job (PDF)

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