Posted by: Discover Scholars | October 2, 2008

Stop giving to Harvard – and other schools, too!

Prolific author and commentator Gregg Easterbrook urges his readers in a column this week to stop donating to big schools with large endowments:

Harvard University just announced it received $651 million in donations in the fiscal year that ended this summer. Harvard’s FY 2008 donations alone exceed the endowments of Brandeis University, Carleton College, Colgate University, College of the Holy Cross and Washington and Lee University, respectively, just to name a few great schools, and of the entire state university system of Louisiana. Harvard’s 2008 donations exceed the entire endowments of Spelman College and DePaul University combined. Harvard’s 2008 donations alone exceed the entire endowments of Alfred University, Beloit College, Millsaps College, Randolph-Macon College, Ursinus College and Xavier University (Ohio) combined.

Yet Whitworth University, to cite a typical liberal arts school, has an $87 million endowment. … The kinds of colleges that serve people of average means have still less. Appalachian State University has a $52 million endowment, Concordia University (Nebraska) has $28 million, Averett University has $24 million, Worcester State College has $12 million, to cite a few of many underfunded schools. Yet the rich keep giving to Harvard, Yale and Stanford, which already have too much. Give to underfunded schools where the donation might change someone’s life! (our emphasis)

In less hyperbolic terms, Easterbrook is illustrating the basic economic principle of diminishing returns: the more money a school has, the less likely it is to use that dollar productively. It follows, then, that underfunded schools could actually do more good with the money that’s being heaped upon schools with large endowments.

Whereas a well-funded school would likely go after more superstar professors, add more perks for students, or grow its internal bureaucracy, an underfunded school could expand their curriculum, provide better laboratory equipment, or even lower tuition costs.

While Easterbrook is right that, on average, donations to schools with less funding are probably more productive than donations to rich schools, for reasons we’ve previously blogged about, donating to any school is still inefficient, and helps to push tuition costs higher. To maximize a donation’s impact on higher education, donors are better advised to give directly to students (who have no endowments) instead of to schools. It’s a surefire way to change someone’s life.

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