Harvard Is More Of A Tax-Free Hedge Fund Than A University


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Ron Unz over at the American Conservative points out that from the perspective of its balance sheet Harvard looks a lot like a giant, aggressive hedge fund attached to an educational facility for tax purposes.Each September, Harvard’s 6,600 undergraduates begin their classes at the Ivy-covered walls of its traditional Cambridge campus, owing annual tuition of around $37,000 for the privilege, up from just $13,000 in 1990.

Thus, over the last two decades, total tuition income (in current dollars) has increased from about $150 million to almost $250 million, with a substantial fraction of this list-price amount being discounted in the form of the university’s own financial aid to the families of its less-wealthy students.

Meanwhile, during most of these years, Harvard’s own endowment has annually grown by five or 10 or even 20 times that figure, rendering net tuition from those thousands of students a mere financial bagatelle, having almost no impact on the university’s cash-flow or balance-sheet position.

Of course, this argument is not wholly new. Jim Manzi raised it years ago.

But Unz does make a highly original contribution in the form of his suggestion that Harvard auction off at least one admission to the highest bidder each year.

Suppose, for example, that instead of such surreptitious and penny-ante wheeling and dealing, Harvard simply auctioned off a single admissions slot each year to the highest blind bidder on the international markets.

I suspect that the same sorts of individuals who currently pay $50 million or $100 million for a splotchy painting they can hang on their walls would surely be willing to spend a similar amount to have their son or daughter embossed with the Harvard stamp of approval.

The key factor is that such prestige goods are almost entirely positional in value, with most of the benefit derived from the satisfaction of having outbid your rival Internet billionaires, oil sheikhs, or Russian oligarchs, so the higher the price goes, the more valuable the commodity becomes.