Profitable Nonprofits

by George Leef

In today’s Pope Center Clarion Call, I comment on the recent paper by Prof.Vance Fried, “Federal Higher Education Policy and the Profitable Nonprofits.” His argument is that nonprofit colleges act like profit-making enterprises, but they simply spend their excess revenues in ways that keep the people in and around them happy — the faculty and administrators primarily. That leads to needlessly high costs and inefficient use of resources. Market competition usually squeezes out inefficiency and excess profits, but the market for higher education is not very competitive due to barriers to entry and government subsidies.