Economic Principles on Mission and Money
‘The book appears at a propitious time. Just last week, Sen. Charles Grassley (R-Iowa) and Peter Welch (D-Vermont) convened a daylong session in Washington with a couple dozen college presidents in order to pressure them to spend their endowments more freely, especially on financial aid to students. Grassley often has indicated he would like to require the richest universities to spend five percent of their endowments annually, as foundations have been required to do since 1969, and last week’s discussions are thought to be preliminary to formal hearings. Last week, he sounded a slightly softer note, according to reporter Tamar Lewin, writing in The New York Times: “We’d like to encourage you folks to look inward and correct what can be corrected,” he told the assembled presidents…
‘Meanwhile, Weisbrod assembled a roundtable of his own last week, in Chicago, under the auspices of the Searle Center for Law, Regulation, and Economic Growth of Northwestern University’s Scool of Law, in connection with the publication of his book. The Washington discussions were likely to be seen as “the first sorties in what will soon be a full-scale war on college endowments,” he said, proceeding on two fronts, federal and state.
‘It was true, he said, that the richest and most powerful universities had undergone a considerable metamorphosis is recent years, building up war-chests, adding laboratories and facilities, inventorying their research programs in search of marketable patents, adding campuses abroad, burnishing their athletic programs. It was true, too, that tuition had climbed rapidly, especially at the most widely admired and fashionable institutions, and that elite public and private universities were becoming more alike.
‘But the key to understanding university economics lies in recognizing that colleges and universities pursue lofty social goals and crass money-making activities at the same time, supporting their mission-related activities (for which there can be no simple “bottom line”) by engaging in conventional business-like activities – everything from charging tuition and renting rooms to students to licensing the school name to sweatshirt manufacturers and squeezing rich alumni for big donations in recognition of their hopes of small (and not so small) favors. “Understanding universities is complex,” said Weisbrod. “But there is no way around it.”’