On Campus
Dec 12, 2008, 09:38AM

Beyond Harvard Yard

Harvard's president defended the university's massive, un-taxed endowment on the grounds that without it, the school wouldn't be able to do the kind of good it does. Thing is, you could make the same argument for corporations.

Tough argument:

The economist Brad DeLong pointed out last May how, on a public budget, the University of California system expanded from teaching 5,000 undergraduates a year in 1960 to 40,000 a year today. During the same time, Harvard grew from 1,200 to 1,600 a year, despite accumulating billions in private donations. It is hard to argue that those additional funds for Harvard were effective on the margin. Harvard has a vested interest in keeping its student body small, since what it produces is essentially a luxury good in the form of Harvard diplomas. As one commenter on DeLong’s article pointed out, “the rationale for Harvard is not the education of young people. It is to produce a certain class of educated person who will go on to fill a certain role in society.” The University shouldn’t be ashamed of this, but it also ought to admit that, in the end, it is a privately-interested organization which happens to have quite a few socially beneficial consequences.

That’s not to say Harvard should be taxed at standard corporate tax rates and its funds be deposited into the government’s general accounts. One good compromise would tax the endowment at a lenient rate and use the funding exclusively for public higher education. Such a program would redirect a sliver Harvard’s income in a way that would still, in Faust’s words, “enable students and faculty of both today and tomorrow to search for new knowledge.”


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