2007 December 05 Wednesday
Ivy League Gets Steadily Richer

The trend in finance for higher education mirrors the trend of increasing inequality of distribution of wealth and is at least partially drive by it.

Meanwhile, the wealth gap between the Ivies and everyone else has never been wider. The $5.7 billion in investment gains generated by Harvard's endowment for the year that ended June 30 exceeded the total endowment assets of all but six U.S. universities, five of which were Ivy Plus: Yale, Stanford, Princeton, MIT, and Columbia. Ivy dominance extends to fund-raising. A mere 10 schools accounted for half the growth in donations to all U.S. colleges and universities last year. All of the top five on the list were Ivies, led by Stanford, which set a record for higher education in 2006, collecting $911 million in gifts.

During 2006-07, the Ivy "Big Three"—Harvard, Yale, and Princeton—collectively spent $6.5 billion on operations, up over 100% from a decade ago. This was more than double the 41% average budget increase for all U.S. colleges and universities over this period and quadruple the 26% rise in the consumer price index. The Big Three sank a further $1.2 billion into new construction and other capital spending last year. "Yale is wealthier now, so we can add resources in almost every dimension," says its president, Richard C. Levin.

The people who attend the Ivy League are selected for in large part for their future prospects for success. This becomes a virtuous cycle (at least for the Ivies) as very successful alumni make big donations to their alma mater which increase the prestige of these schools and hence their appeal to those who are most likely to achieve big successes in business and finance.

What I wonder: Could second tier schools more precisely target the future wealthy and get a competitive edge against the top tier? Consider, the top tier hobble their institutions with racial preferences and wide humanities and social sciences offerings as well as other majors that do not give as big a leg up on the road to success. A more narrowly focused institution could profile prospective students more narrowly based on odds of financial success.

The second tier could also shape their general education offerings and programs for internships with the single-minded aim at getting their students aimed at investment banks, venture capital start-ups, and other higher potential careers. Why train future botanists when you can train future genetic engineers and medical doctors? Recruit students who claim they want to start their own business.

What I also wonder: Are these huge donations to the Ivies a waste? The billions of dollars can't be improving the quality of undergraduate instruction all that much. Some of those donations just go toward making the undegraduate experience more plush. So that part's a waste. But the portion that goes toward science buildings and higher pay for research superstars pulls smarter people into research and outfits those people with more of what they need to perform.

To the extent that Ivy fund raisers get rich people to fund R&D who otherwise would spend that money on conspicuous consumption (or even worse: leave their money to heirs who then become unproductive) the Ivies are serving a constructive purpose. But if wealthy people want to speed up the rate of research in some area of interest they ought to think about more efficient ways to do that. For example, fund highly talented young researchers regardless of which institution they are at.

Share |      By Randall Parker at 2007 December 05 10:46 PM  Education

John S Bolton said at December 6, 2007 1:34 AM:

or give money to a department directly where this is allowed

anonat1042 said at December 6, 2007 7:39 AM:

IMHO it's very dubious to put unrestricted money into the oily hands of the administrators of any institution of higher "education".

Unless you can identify and target a specific individual researcher or educator and support his or her work directly, your cash is better off in the bank being invested by professionals or being spent by you to fund hard-working yacht builders, chefs, or wine stewards.

Unless your money is spent wisely under your direct supervision, it just disappears into the vast wasteful edifice of cronyism called “higher education” [sic].

Ned said at December 6, 2007 7:07 PM:

The top five total university endowments belong to Harvard, Yale, Stanford, Princeton and the University of Texas. In terms endowment per students, the top five are the same (although the order is different), except that the University of Texas is replaced by Grinnell, which has about 1600 students and an endowment that amounts to about $1,000,000 for each one. This didn't keep Grinnell from raising tuition about 12.6% recently (to about $29,000). Grinnell, of course, is far from alone in stoking its endowment while socking it to its students in the form of double-digit tuition increases - in this regard, it ranks with some of the finest colleges and universities in the country. If donors are really interested in promoting good causes, they should consider endowing scholarships or chairs in useful areas such as science, engineering or medicine, which, aside from being practical, are remote from the ill winds of political correctness. Another approach is to set up a foundation that dispenses its money to a particular institution as long as the institution follows the foundation's wishes. Unrestricted grants to oily, politically correct university administrators are best avoided. I seem to recall that there's a major lawsuit now over just such issues involving Princeton and some unhappy donors. Let the benefactor beware!

Dave Gore said at December 15, 2007 10:53 AM:

Contribute to K-12 education. That's where children spend their time, and learn the most important lessons of their lives.

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