Tough argument:
The economist Brad DeLong pointed out last May how, on a public budget,
the University of California system expanded from teaching 5,000
undergraduates a year in 1960 to 40,000 a year today. During the same
time, Harvard grew from 1,200 to 1,600 a year, despite accumulating
billions in private donations. It is hard to argue that those
additional funds for Harvard were effective on the margin. Harvard has
a vested interest in keeping its student body small, since what it
produces is essentially a luxury good in the form of Harvard diplomas.
As one commenter on DeLong’s article pointed out, “the rationale for
Harvard is not the education of young people. It is to produce a
certain class of educated person who will go on to fill a certain role
in society.” The University shouldn’t be ashamed of this, but it also
ought to admit that, in the end, it is a privately-interested
organization which happens to have quite a few socially beneficial
consequences.
That’s not to say Harvard should be taxed at
standard corporate tax rates and its funds be deposited into the
government’s general accounts. One good compromise would tax the
endowment at a lenient rate and use the funding exclusively for public
higher education. Such a program would redirect a sliver Harvard’s
income in a way that would still, in Faust’s words, “enable students
and faculty of both today and tomorrow to search for new knowledge.”