This blog has been home to some pretty extensive endowments discussion lately, so I figured I’d throw in my two cents. First off, I absolutely agree with George Leef’s reader that it’s not a good idea for the government to make universities’ decisions for them. Any time there’s a massive amount of money earning interest, there’s a serious tradeoff between spending money and leaving it to gather more interest, and colleges are best equipped to make that tradeoff with their futures in mind.
But a point I don’t think too many people have made is this: When a college gets a lot of money from donations and subsidies rather than tuition, there’s an incentive to shift resources from education to donor-luring. Yes, the two are linked (donors and governments will give more if they think the college is doing a good job), but seeing how universities waste money sometimes (diversity crusades, etc.), I wonder if there isn’t a better way to align incentives.
No, I’m not saying we should ban private gifts to schools. I’m saying it should happen voluntarily: If you want to donate money to further postsecondary education, contribute to scholarship funds, not directly to universities. Pick funds that use any criteria you like (merit, need), just put the money in the students’ hands. The same goes for government money — give out more vouchers and loans, rather than funding state and private schools.
Not only would this solve the massive-endowment problem, it would improve education; it would subsidize the consumer. Universities would have to sell themselves to students and parents, not alumni, philanthropists, and legislators.