Arnold Kling  

Collegiate Aristocracy

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My alma mater, Swarthmore College, sent out a mailing (I can't find it online) that begins,


Swarthmore charges $41,280 per student in tuition and fees, and its endowment reached nearly $1.2 billion...Isn't that enough money for a small college...is it imperative to raise $230 billion in The Meaning of Swarthmore campaign?

The answer is yes, of course. The poor dears are barely able to make ends meet.

each year's budget is very difficult to balance. Moreover, significant savings cannot be had without eroding the quality of the Swarthmore educational experience.

It's sort of like England defending giving money to the Royals. Significant savings cannot be had without eroding the quality of the aristocratic experience.

Instead of raising $230 million to increase the amount of unused building space at Swarthmore by another X percent, suppose that they raised $230 million to give as vouchers to young people to attend community colleges. Is there any question that this would be a socially better use of the funds?


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COMMENTS (12 to date)
Don Lloyd writes:

Arnold,

...is it imperative to raise $230 billion in The Meaning of Swarthmore campaign?

This did seem a little ambitious.

Regards, Don

Robert Schwartz writes:

Swarthmore has about 1470 students and a student/faculty ratio of 8::1. So they have about 185 faculty. Toss in a few administrators and say 200 salaried positions. Now according to the US News book, the $41,000 number includes tuition of $31,500 and the rest is mostly room and board (they must serve steak every night).

1470*$31,500=~$46,000,000. but, according to USNews about half of the students receive financial aid and the average grant is $27,400 which is about $19,000,000. So the net yield of tuition is about $27 million.

In addition, taking the endowment to produce income at 5%, there would be $60 million in investment income.

The bottom line is that this college of less than 1500 students has almost $60K per student to spend. More than $400,000 per faculty member and administrator.

I have not accounted for light and heat, nor for hourly staff, but no matter how much I allocate to those functions, there is still a lot of money floating around.

What are they doing with all of that money? It cannot all be going to faculty salaries. Why are they charging tuition? Why are such institutions tax exempt?

Ivan Kirigin writes:

The movement should be for transparency on where the money is spent. Then, with the evidence, you can start really complaining. To be honest, I can't imagine where the money is going. I'm sure it is very creative.

The students on the other hand, might be more concerned with the actual endowment, and where it was invested. While at NYU, there was a large student campaign for such transparency. Fortunately, the administration refused. Rightly so, as the students aren't exactly shareholders in the university corporation. They are closer to customers. The official argument was that such investments are targeted to earn the highest yield, and disclosure would hurt that effort.

The argument on the students’ side was about divestment from Israel. Somehow I doubt the massive Jewish population at NYU (or their parents and past alumni) would be happy about divesting. Those closer to real shareholders would probably complain, both because of the ethics and the economics.

Luckily, NYU has a much smaller endowment and much larger student population ($1.4B and 20K undergrad), so I'm sure they don't run into such complaints about endowment spending as often.

John P. writes:
Instead of raising $230 million to increase the amount of unused building space at Swarthmore by another X percent, suppose that they raised $230 million to give as vouchers to young people to attend community colleges. Is there any question that this would be a socially better use of the funds?

No institution that seeks donations (as far as I'm aware) claims that giving money to it is the socially best use of your funds. The institution makes its best case as to why it should get your funds (i.e., it tries to sell you its donation experience) without denigrating competing donation targets, and it's up to you whether to spend your donation dollars there or elsewhere. It's not like joining a religion, where only one of the many choices is supposed to be the right one.

Parke writes:

Ha! I just read the same brochure last night, and had exactly the same reaction. Far from convincing me to contribute to the new campaign, the brochure convinced me not offer more than my usual annual minimum (which I do so that the school can report a high rate of alumni participation). When Swarthmore comes up with a campaign that better honors its history and convictions, I'll be there.

DrTaxSacto writes:

Is is surprising that someone with a good economic understanding does not seem to think about how a place like your alma mater actually uses its endowment. Indeed, a good portion of the money raised will give scholarships to the first two years of college to deserving students but then will follow up with the second two years. And by educating them at your alma mater instead of a community college - those students will likely have a better chance to finish their degrees in four years and probably go on to graduate school where they might actually make a larger contribution to society than they would in a community college. But the college will also use its endowment to put the finest professors before the students (earlier in the year you wrote movingly about one economics professor who had beeen particularly compelling for you) and to create the best learning environment possible. You can argue why the College needs more money - but indeed, that endowment provides the very quality of experience for this generation of students that you enjoyed when you were there. The reality of college finance, in both public and private institutions, is that NO student pays the full price of education.

I am not sure how long this campaign is for. In reality, Swarthmore will be back to its donors in a couple of years. I am also not sure why they picked $230 million. But the sources and uses of funds for the campaign are probably clearly explained in the materials you got. Most often campaigns go for a couple of purposes - improved facilities, endowed chairs for the faculty and scholarships. In each case, it is a judgment about whether having the best academic facilities or retaining the best faculty or whether assuring that no student would be denied a Swarthmore education simply on the basis of price - is a good idea. I happen to think that places like Swarthmore are doing their best to asure that this generation of students gets what your generation did.

The math on one of your responses is also a bit lame. The room and board figure - for food and lodging and all the other things that go into the educational program works out to about $40 per day. (assuming a normal academic year) I'd like to see someone else get a decent room and three squares for that price.

Does that mean that Swarthmore, and the rest of public and independent colleges and universities should not be careful with their resources and should not continue to work on improving transparency of how they use funds? Of course not. But endowment for that college and for others who are constantly trying to raise funds is an essential blanket of security that allows it to strive to the best. If you are too cheap to offer support for the college then don't contribute.

drtaxsacto writes:

In case you wanted to read the materials on the campaign they are at http://www.swarthmore.edu/support/

rakehell writes:

I can see questioning how the school is being run, but doesn't an increase in the endowment serve your self-interest by increasing the reputation of the school, and hence your reputation as a graduate of same? More money equals better profs, facilities, and scholarships to lure smarter students.

John P. writes:

Found it! The passage in Paul Fussell's Class (1983) where he describes college rankings as the U.S. version of a system of hereditary titles:

In the absence of a system of hereditary ranks and titles, without a tradition of honors conferred by a monarch, and with no well-known status ladder even of high-class regiments to confer various degrees of cachet, Americans have had to depend for their mechanism of snobbery far more than other peoples on their college and university hierarchy. . . . Granted, it's not much on which to base a scheme of invidious distinction, but in the long run it's virtually all we have. (128)
Phil writes:

Why do alumni donate to their college anyway? Seriously, what is the rationale?

I don't donate to mine because I paid a fair price for tuition in the first place. And even if the benefit I got was much higher than the cost, why does that justify donating? I don't donate to Wal-Mart as a thank you for their cheap goods.

dsquared writes:

Phil: the usual rationale advanced by business schools is that if the alma mater gets a really shitty reputation due to lack of funds today, people will look down their noses at you for having gone there. For people who are still trading off the name of their degree school ten years later, I daresay this is an important argument.

Paul N writes:

Economists say voting is pointless, but is it any more pointless than giving a few bucks to your alma mater? In either case it's just a drop in a bucket, and the utility is but a small fraction of the cost.

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