Charity Should Help People

Via Tyler Cowen and Chris Blattman an op-ed about the madness of donating more money to Harvard's already-giant endowment (various other private universities also work here) rather than focusing your giving on causes that will actually help people in need.

A university that rich ought to either embark on some kind of ambitious expansion program and start educating substantially more students, or else decide that it would unduly alter the character of the place to expand that much and just close up the development department and enjoy the luxury of being able to focus single-mindedly on the university's core teaching and research functions.

Comments

The author of the Op-Ed comes up with an excellent idea:

A few hundred alumni have formed Harvard Alumni for Social Action, to try to channel 25th-reunion giving to destitute universities in Africa.

This is brilliant because it makes out the role of supporting Harvard to be just a means to and end: the alumni functions and the university serves as an organizing point around which like-minded people can do serious fundraising for genuinely charitable academic projects. Token support to the university is not an end in and of itself, but rather a way to provide a crucible through which the resources of the alumni can be leveraged.

Redirecting Harvard's alumni fundraising infrastructure by using the university as an organizing-point sounds genuinely socially valuable.

Posted by Tyro | May 26, 2008 3:34 PM

"A university that rich ought to either embark on some kind of ambitious expansion program and start educating substantially more students"

Isn't Harvard opening up all course content on the internet so that anyone in the world with access to the internet can effectively audit any Harvard course? Seems I read about this a year or so ago.

Posted by GPS | May 26, 2008 3:45 PM

correct me if I'm wrong, but I believe the Harvard endowment does help people in need. I believe they saved Bush and his Harken Energy in their hour of need. So nice the intertwining of Harvard's finances with that of the Bushes.

Posted by della Rovere | May 26, 2008 3:58 PM

A university that rich ought to either embark on some kind of ambitious expansion program and start educating substantially more students, or else decide that it would unduly alter the character of the place to expand that much and just close up the development department and enjoy the luxury of being able to focus single-mindedly on the university's core teaching and research functions.

And where do you think the magical ponies will come from? Out Tom Friedman's ass? They are all about accumulating wealth. Why do you think things like legacy play such an important part in who is admitted?

Posted by Joe Klein's conscience | May 26, 2008 4:05 PM

I thought the whole point of Harvard was to educate the children of the existing elite and develop new talent for the elite of the future. Where does this idea of it being the place o' charity come from?

Posted by Helter | May 26, 2008 4:09 PM

The Harvard endowment has been incredibly successful with their speculations, not investments. For they 'invest' largely through hedge funds and hedge funds do not invest. They are take no prisoner, hugely leveraged speculative vehicles. They helped sustain and then kill the dotcom bubble. They were there, and still are, at the heart of the credit crisis. Since they made money last year it seems they picked funds who's strategy was to profit on the distress in the mortgage arena.

So they aided the insane housing inflation and now are profiting on the millions who will be bankrupted by it. Some charity.

Oh, and lest we forget the hottest arena now for speculation is commodities. All that hot money in the commodity markets are taking food and energy prices to the moon. Millions worldwide will probably starve.In the US more will be hungry,and desperate. Well we can't expect such considerations to enter into where speculators go to make big coin. If it's OK with Harvard then who isn't it OK for?

So Harvard has firmly joined the ranks of the Pigmen. The men for whom there is never enough.

Posted by rapier | May 26, 2008 4:09 PM

"A university that rich ought to either embark on some kind of ambitious expansion program and start educating substantially more students"

Isn't Harvard opening up all course content on the internet so that anyone in the world with access to the internet can effectively audit any Harvard course? Seems I read about this a year or so ago.

Posted by GPS

Probably lots of schools are starting to do this - including MIT and Yale:

http://ocw.mit.edu/OcwWeb/web/home/home/index.htm

http://oyc.yale.edu/

If nothing else, it'll takes the mystery out of what happens in the classrooms of such places.

But we all know old school social networking is the real point of those places.

Posted by Richard | May 26, 2008 4:28 PM

I've maintained that Harvard should open a free, pure-teaching university, staff it with some of the best teachers in each field, and enroll only promising lower income students. But, channeling what JKC said, I may as well ask that each student gets a pony as well.

Posted by eriks | May 26, 2008 4:39 PM

Admit more students? Reduce the growth of the endowment to only somewhat above the market rate? But then the average SAT scores, "selectivity," and "financial resources rank" might go down, and then the U.S. News rank could fall! They might have to spend a second year at #2, or even plummet all the way to #3. They might as well close the doors at that point. At that point it might as well be Appalachian State.

Posted by Elliot Reed | May 26, 2008 5:00 PM

Admit more students? Reduce the growth of the endowment to only somewhat above the market rate? But then the average SAT scores, "selectivity," and "financial resources rank" might go down, and then the U.S. News rank could fall! They might have to spend a second year at #2, or even plummet all the way to #3. At that point there wouldn't be any point in keeping the university open: it might as well be Appalachian State.

Posted by Elliot Reed | May 26, 2008 5:01 PM

Isn't there something to be said for having a few extremely wealthy/powerful institutions tasked with maintaining our scientific and cultural knowledge just in case something really bad happens that sends the country on an extremely anti-intellectual or facistic path? Sure, Harvard's undergrad college is probably still something of a country club for the elite on their way to cush jobs at Goldman. Still, the graduate and professional programs churn out an enourmous amount of important research and highly skilled individuals. I think its a good thing that Harvard could threaten to substantially impact the economy if anyone tried to interfere with thse programs, or to self fund them if government support of the arts, humanities, and/or sciences.

Posted by Pickandroll | May 26, 2008 6:00 PM

"Charity [or more generally "voluntary giving"] should help people" seems like a real no-brainer. In fact almost all voluntary giving does help people. Of course the people in question are not always the means-tested needy. The reasons why people donate money to this or that cause or institution in fact are a lot more complex than simple altruism (or simple selfishness). 99% of all "charity" is performed with some kind of good coming back to the giver. Recognition, honors, rememberance, generating graitude from extremely prestigious organizations, and at times flat-out material rewards. It's been said, many things that are priceless can indeed be bought; it's actually true. Giving away your wealth to support the annual operating expenses of some poor third rate liberal arts college doesn't have the same appeal as adding your coin to the crimson's pile of gold. All this seems depressing, but at least it's good for dispelling the idea that private giving is some kind of free-market for benificence where wise and good individuals give to the causes that really deserve it, while individual freedom is preserved.

From Harvard's perspective, shutting down the development office would sort of be the equivalent of Bush saying that people can spend their own money better than the government can. But the argument's worse in this context: Harvard would have to conclude that they know better than their voluntary donors, and in fact on average whatever their second choice for donations is, it's going to be morally better than giving to Harvard. I doubt it's really true. Harvard could think of really great things to do with the money. Give all the profs a raise. Heck, give the janitors a raise. Endow a hundred more post-docs. Double cancer research. Fund free travel study to Africa and Latin America which involves charitable work. Fund travel study to Appalachia so that "trust fund scumbags" like Obama and MY aren't so hated by folks in West Virignia.

Posted by Colatina | May 26, 2008 7:41 PM

Conan O'Brien (Harvard '85) gave a Harvard Class Day speech several years ago in which he related a (fictitious) conversation with a Harvard fundraiser. It was something like this: "I said, you've got billions. Why do you need MY money? We don't NEED your money; we just WANT it."

Posted by q | May 26, 2008 10:05 PM

They should open a Department of Applied Learning, where they give their students experience in applying their knowledge to major social/economic/cultural challenges. Bonus points for producing a profit. Worthy but inherently unprofitable ventures could become the newest focus of fund raising.

All this would advance the academic mission by putting ideas into practice, thus producing a respected metric for testing the value of current theory.

Posted by Jon | May 26, 2008 10:59 PM

Maybe Harvard should use its endowment to open a second branch. Dubai would be a good location for that.

Posted by Ed | May 27, 2008 6:03 AM

Harvard would love to expand, but there isn't a lot of lebensraum left in Cambridge.

As to paying the janitors better, I was around when the Harvard employees unionized. They wore lapel buttons reading "We can't eat prestige," skewering the administration's contention that working at a world-famous institution like Harvard should be viewed as a privilege or perk. So Harvard took the low road, swiftboating them for ingratitude.

I remember Harvard throwing themselves a 350th birthday party along the banks of the Charles River, setting up barbecue grills to serve hot dogs and whatnot to the community. A troupe of divestment activists marched by, chanting. The suits manning the grills tried to get the crowd singing "Row Row Row Your Boat" just to drown out the critics.

Posted by Michael Bloom | May 27, 2008 6:59 AM

Harvard's fundamental problem is that is the proud, flag-waving leader of a rapidly growing pack of former charities that have converted themselves to being totally for-profit and gotten very rich doing so, but which have maintained their tax-exempt status (via inertia, politics and lobbying) as if they were still charities.

The first example, being targeted by the IRS right now, is the rich "tax exempt hospital".

Stage one: A group of well-intended people organize a hospital to aid an underserved community of the poor who can't afford to pay market rate for medical services. The charitable nature of the hospital is clear: it receives below-market payment, and its doctors and staff collect below market wages.

It gets its tax exemption not because it is providing an important social service (providing food and housing to society is even more important, but farmers and home-builders aren't tax exempt) but because it is doing so at below market rates and the tax exemption (which eliminates property taxes, etc.) helps it afford to pay its bills and its staff enough to keep operating.

Stage two: The hospital decides it can get even more money to provide its charitable services if it starts taking on some full-market price patients. It also starts collecting an endowment to assure its finanial stability. Sure, more revenue gives it more to spend, lets it increase the wages of its doctors to reduce turnover, hire more staff to better perform its services, etc. up to a point this is fine ... but we can see where the incentives are leading.

Stage three: The hospital charges 95% of patients full market rates, has the highest-paid doctors in the city, its administrators all have country homes and receive gifts of the best seats at the opera for investing its $100 million endowment ... and it is still tax exempt.

At this point the IRS comes in and says "Hey..." The hospital's top-dollar PR firm responds with a a big publicity campaign about how it provides the valuable social service of really top-quality medicine, is organized as a non-profit with no shareholders, and provides discount plastic surgery to 5% of its patients! What more does tax exemption require???

At least one former IRS commissioner has said: first the rich tax-exempt hospitals, then Harvard.

There is nothing charitable about Harvard. If its endowment paid out the minimun 5% required of foundations it would provide $90,000 per student -- yet it charges up to $77,000 in tuition and fees annually per student (business school) and for all its talk about how generous it is with financial aid collects $40,000 per student on average.

Its professors and staff are the highest paid anywhere, and charge the highest consulting rates on the side too. Nor is the university's own massive research and consulting income from work done for the private sector and government billed on a charitable basis. The university says it spends about 4% of its endowment annually, but if you look at the details a whole lot of that goes to buying real estate and constructing buildings -- converting one form of tax-exempt wealth to another.

The university had a $7 billion profit last year on consolidated operations. Giving every undergraduate a free education wouldn't even keep the endowment from growing -- and would destroy the competive market for top students (how many other universities could compete with "free Harvard"?) So that solution wouldn't work and nobody wants it.

The simple solution is to treat it as the for-profit entity it is. First the rich tax-exempt hospitals, then Harvard, then NCAA basketball and football bowl games...

There's an old saying in the tax law, "when a pig becomes a hog it gets slaughtered".

Posted by Jim Glass | June 6, 2008 3:48 PM