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This article is interesting, but it makes the fundamental error of assuming that the primary product of an R1 research university is education for undergraduates, which it is not. The primary product of an R1 research university is research, largely performed by Graduate Students, Postdoctoral Researchers and Professional Researchers. All of these are paid a salary of some form, some market-rate, others less-so. That's where the cost is, along with actual costs of instruments, libraries, consumables and buildings necessary for cutting edge research. Most of the funding for that comes from research grants and you can see how it represents a huge fraction of the budget in his charts. Unfortunately, all of the expenditure data that the Education department puts out combines both R1 and non-R1 institutions, so it's hard to see just how different the top 120 schools are from most of the rest. If you have expenditure data segmented by research intensity, I would love to see it.

The undergraduate education is part of the university, but not the primary part. (At UChicago, grad students still outnumber undergrads!) If you want to see what the finances of an institution that primarily educates undergraduates looks like, go to one of the Liberal Arts colleges, or non R-1 state schools, like any of the Cal States in California, or non-flagship schools in other states.




Good points, and thanks for reading!

You're definitely right that "educating undergrads" is not the "primary purpose" of these institutions. I definitely did not & do not believe that. If that came through in the essay, I apologize for being inaccurate. If anything, I expected the response to be that I was assuming the primary product of a research university was Investment Returns, which is at least closer to a point I tried to make.

Regarding Research: "Research" in the abstract is -- I believe -- considered a tax-deductible expense in America, and the IRS treats it pretty favorably and that's probably for the best.

However, engaging in "research" to some capacity does not -- to the very best of my knowledge -- allow you to claim a full tax-shield on the Investment Profits of $10 billion+ merely by virtue of the fact that you engage in "research" (compare: Big Pharma, which actually has to write off expenses in order to reduce taxes, or Google or Boston Dynamics).

That is VERY different from how Education works today. To be a University is to be a Charity operating in the Education space. Additional Revenues and Expenses in Research areas are not important for this designation. Once the designation is established, the returns on your Investment Profits (invested in both the open and closed markets) are tax-free, forever.

That's a pretty big deal in the finance world as it relates to your ability to accumulate capital and build Wealth.

Whatever the "primary purpose" of that Wealth might be, the fact remains that (at MIT) that Wealth has grown 1,500% over the last 25 years, while the operating budget has grown ~250%. I believe that is somewhat noteworthy, and I could not avoid noticing how critical the Education-Charity tax-shield was to this compound growth.

The question I tried to raise was: "if your Education was affordable, would we allow the service provider to be considered a Charity?"

Regarding finances & more data: every institution named in this essay has it's 2017-full-year financial report linked, which I spent some time going over to better understand revenue sources (i.e. to understand the truly minimal importance of Tuition) and expenses (to understand the nature of the costs involved).

Sadly that data doesn't appear to segment anything by "research intensity", but it usually pulls research out at least research in all forms. And you're right, that Research usually dominates both "Instruction" and "General & Administrative" in terms of spend. (Quick example here: https://web.mit.edu/facts/financial.html, the other institutions have their fully detailed reports linked in the bullets at the start of the essay )


I see that your point is more focused on the financial side, which I don't have a lot of experience to evaluate.

> Whatever the "primary purpose" of that Wealth might be, the fact remains that (at MIT) that Wealth has grown 1,500% over the last 25 years, while the operating budget has grown ~250%. I believe that is somewhat noteworthy, and I could not avoid noticing how critical the Education-Charity tax-shield was to this compound growth.

This is noteworthy, but is it really out of line? You're comparing apples (Wealth) to Oragnes (Operational Expenses). From a strict financial perspective, the standard advice to ensure an endowment or lump sum lasts is a 4% withdrawal rate. At a 4% rate, a 1500% increase in wealth would result in a 60% increase monies available to spend operationally. 250% is much higher than that, although not all of the operational increase comes from the endowment.

Is there an accepted rate of expenditure that endowments should target? Is MIT meeting or exceeding that?


I think your math is off. If I have a $100 endowment, I have $4 to spend. If I have $1500, I have $60 to spend, 15 times as much as $4.


> Once the designation is established, the returns on your Investment Profits (invested in both the open and closed markets) are tax-free, forever.

So it sounds like you'd be a fan of Trump's tax on university endowments? I was surprised it wasn't mentioned at all in your writeup. https://www.chronicle.com/article/A-Tax-on-Endowments-Became...


If OP's analysis is correct, will this new law help keep Ivy's tuition in check?

I wonder if we will see those school open a "sister school" which enrolls tens of thousands of students, with that school under the same endowment, so that they can remain under the threshold of $500k per student, while keeping the prestige of the original school intact?


Yeah it turns out that new regulations often lead to unexpected consequences, especially when the regulated entities are some of the most well-advised organizations in the world. I saw a lot of this in my prior life working at a big law firm as a tax lawyer.


The top priority of a R1 research university is its ongoing existence in perpetuity. A lot of its decisions make more sense under that lens.


Continued existence is a prerequisite for ongoing production of research, no?


> go to one of the Liberal Arts colleges, or non R-1 state schools, like any of the Cal States in California, or non-flagship schools in other states.

...and look at the instructor's salaries. PhD's from top universities who could easily make 300k+ in the private sector but instead take positions that pay 60k-70k. Even with tenure, that's a labor of love.

Blaming highly paid admins would be great, except that university presidents at teaching colleges are the highest paid (reminder: branch campuses and liberal arts colleges never have Div 1 sports programs) and still make $50k-100K less than a green phd out of a top 10 CS program (200k is good money for a president of a branch campus or liberal arts college -- and remember, that's typically a person with 30+ years experience and a uniquely positive track record).

I worry about what will happen to the American teaching college (public or private) over the next 50 years if the current war on college -- which this article typifies -- wins out in the public mind.

If you doubt a single word of this feel free to reply to this comment. I'm extremely familiar with both markets. When I say that (even tenure-track) CS teaching requires a 200k paycut, I really do know what I'm taking about.


> Blaming highly paid admins would be great, except that university presidents...

When people talk about the cost of university administration, they're not always talking about the cost of the most highly-paid, but rather the aggregate cost:

"Since 1980, the number of administrators per student at colleges has about doubled; on most campuses their numbers now match the number of faculty,” the study reads. “Here are some of their titles: senior specialist of assessment; director for learning communities; assistant dean of students for substance education; director of knowledge access services."

from http://mediahub.unc.edu/administrator-salaries-drive-cost-pu...


> Since 1980, the number of administrators per student at colleges has about doubled

I don't doubt that's true; I see it at my college. But I also see at my college that the percentage of students who need extensive administrative attention has shot up in the past ten years. (I teach at a SLAC, so if I have a concern about a student then I call an appropriate administrator and they genuinely try to see if the student is OK. For instance, not too long ago I called about a student and it turned out to be a suicide risk and my call and others prompted an intervention, and the student is OK. I don't know how many hours of administrator attention was clocked on this one person but I expect it was a lot.)


There may well be a need for more administrators these day. Not saying I agree, but I'm sure some people (like Jonathan Haidt) would say this is because we over-coddle young people – and by the time they reach college they are not as independent as students a generation ago.

Note: I am not at all saying this applies to suicide risks, which obviously are not new and which colleges have had support staff for going way back.


> some people (like Jonathan Haidt) would say this is because we over-coddle young people

I'm sorry, I don't know that person. But we try our best to deal with who we have in front of us. I don't know what else we can do, in good conscience.

I am not saying that all additional admins are accounted for by this kind of thing. I don't know enough about it. (Actually the cost is a mystery to me but I've never been an admin of any kind.) I'm only saying that some of the increase I see on the ground is in response to trying to meet real needs.


Jonathan Haidt is a famous social psychology professor at NYU, whose work has been widely cited in recent years. He co-authored the book The Coddling of the American Mind: https://www.amazon.com/Coddling-American-Mind-Intentions-Gen...


Agreed. I think a big part of that is the expansion of access to the academy that we've seen since 1980. Applicants to Berkeley increased 4-fold from 1976 to 1986. (It's gone up another 4-fold in applicants and two-fold enrollments since then.) The increased applicant pool and enrollments probably means that a lot more less-well-prepared students were attending, and the schools staffed up administrative services to meet those students' needs: https://academic-senate.berkeley.edu/sites/default/files/kar...

We've also added a lot of services for disabled students, transfer students, etc. All to the good, I would say give more students access to a quality education, but the services needed for 6,000 students of 80,000 applicants is way different from when they were enrolling 3,000 students of the 5,500 who applied.


It's good that the student got help, but these students are adults, aren't they? Why can't they use the same resources as everyone else?


I probably come from a very certain camp on these kinds of issues, but...

Most students are hardly adults. They look it, but they are not necessarily yet fully equipped to manage themselves.

And what if the people the same age who didn’t attend college— well, I would push for more and improved social programs to help them. Of course then you could reduce the staff at the colleges.

I’m all for being proactive about rising needs like social and mental health issues, but I also think a reactive response needs to take place in the interim.

The approach of “here’s a helpline phone number, now deal with it” hasn’t proven effective so far so why lean into it?


Because raising the cost of uni for everyone including poor folks to provide a bundled service they don’t need is not fair to them.


somewhat cynical perspective: maybe the long-term cost of a suicide on campus is greater than the cost to prevent them? one or two over the course of many years is sad, but probably not that damaging to the institution. on the other hand, if your school becomes an outlier, you probably start to feel it in the admissions department.


Yup. When i taught a class (contract) at a local U i had 6 supervisors, none of which taught students. I had a list of another dozen who while not direct supervisors could still command things (diversity coordinators, access to education people etc).

But when i was at law school my contracts prof was the semi-retired former dean and all the admin taught at least a couple courses. Admin was a secondary duty to teaching. That old school still exists in places.


I don't doubt any of it. The CS market is an outlier though, so I wouldn't make too many arguments based entirely on that. For someone with a decent degree in a biological or physical science, the pay cut for a tenure-track position compared to industry is not that bad. (The work-life balance and employment market may be worse, but that's a whole 'nother issue.)


> with a decent degree in a biological or physical science

Mathematics is as close to "humanities" as the STEMs get in terms of compensation and employment options for PhDs, and even top 10 mathematics PhDs can make 2x in the private sector with at least 2 years fewer opportunity costs.

Basically the only fields where what you're saying is true are the humanities and social sciences, but those aren't expanding programs or cost centers.

Work-life balance is one of those things that you would think would better in academia, but is often actually not.

The broader point is that outside of R1, prices mostly reflect the fact that for most students education doesn't scale very well and experienced human labor is more expensive than ever. Those are self-reinforcing, for obvious reasons. Case-in-point: the would-be educator who can't afford a 200k pay cut because of the loans they took out for their own education.


> The broader point is that outside of R1, prices mostly reflect the fact that for most students education doesn't scale very well and experienced human labor is more expensive than ever.

Education scales fine with motivated students or with mechanisms to help students with their motivation. I did a MicroMaster’s with EdX that covered ¼ of a Master’s degree. Now I’m doing a Master’s with SOAS, University of London. Exam and essay marking aside marginal costs per student are close to zero. MOOCs work with motivated students.

For students who are tackling subjects with steeper learning curves scheduling and project based learning seem to work very well along with initial selection. Lambda School is 40 hours a week for 30 weeks. It’s entirely online but the lectures are live so it’s cohort based and you are on the same schedule as the rest of the class. They have a university like method with TAs and lecturers, where the TAs can solve most problems. It seems to be a pretty good system, people have gone from lambda school to MicroSoft and Google.[1]

Education scales fine. The fact that it hasn’t been scaled yet means we’re getting started.

[1]https://mobile.twitter.com/austenallred/status/1010214066701...


I do agree with your comment. Education scales fine as long as your students are independently motivated and have the study skills that help them help themselves. Unfortunately, that describes a surprisingly tiny fraction of the US college population.

Education is not about what works for outliers.


Yeah, I think we largely agree. At just a 2x pay cut, and the potential to be an tenured scholar, there are plenty of people who want to try for it. It's also close to the height of the job market right now, with unemployment very low. That pay disparity may go down quite a bit during the next recession.

>The broader point is that outside of R1, prices mostly reflect the fact that for most students education doesn't scale very well and experienced human labor is more expensive than ever. Those are self-reinforcing, for obvious reasons. Case-in-point: the would-be educator who can't afford a 200k pay cut because of the loans they took out for their own education.

The challenge here is that for the 85% of students getting an education from a public school, is the increase in tuition costs they've seen due to increases in expenditures (which I haven't seen any supporting data for), or a decrease in state funding of tertiary education (which is wide-spread)?


what tier of liberal arts colleges are you talking about here? the president at the college I attended made over $400k base and that was five years ago.


For some other data points:

https://www.bostonmagazine.com/education/2017/12/11/boston-u...

"Robert Brown earned nearly $2.5 million in 2015, according to the most recent tax filings." (President of BU)

"Three other leaders had seven-digit earnings in 2015: Harvard President Drew Faust, who will retire at the end of the school year, earned $1.57 million; Northeastern President Joseph Aoun notched $1.45 million; and MIT President L. Rafael Reif took home $1.03 million."

Maybe the OP isn't talking about the same tier of school, or maybe Boston is an unusual place for university president salaries, but those numbers are pretty far from $200k.


None of those are even close to teaching colleges. MIT, Harvard, Northeastern, Boston University... those aren't just R1s, they're top-tier R1s. Located in one of the most expensive cities in the country, no less.

I'm talking about places with words like "south eastern" and "central" and "state" in their names. And SLACs with endowments below ~100M. In other words, I'm talking about the vast majority of universities and colleges -- the ones that aren't (literally) Harvard or MIT. Places that don't have phds programs, and maybe don't even have sizable masters populations.


Given that the student loan system and accreditation process already imply significant central planning, I think it is fair to ask if these places are net positive for society as a whole.

Conditional on them existing students are forced to attend in order to keep up in the credentialism race, but a supra-market force like the federal government could impose a more globally efficient solution.


Think >60% acceptance rate, low 100MMs endowment.

(Even at 400K, "highly paid administrators" doesn't pass the smell test.)


If you look at california public payroll records for CSU system, the first few pages are dozens of people getting 400 to 500k altogether. Vice president of this and that, administrator IV, etc. But you're right that the people putting in insane hours and putting their hearts in are paid significantly less. (Still over 100k for assistant prof. Or department dean)


That is not the case. Here is the data: https://transparentcalifornia.com/salaries/california-state-...

The only person making $400k+ is the Chancellor of the whole system, the majority of people making $300k+ are presidents of the individual CalState schools, and the administrators over $250+ are almost universally CFOs and senior executives at each school. Many presidents of the smaller schools are in the $200k range. You only start getting to non-executive administrators under $200k.

PS: There are people getting $400k-$500k total, but over $100k of that is benefits.


> instead take positions that pay 60k-70k. Even with tenure, that's a labor of love.

Not to say academics don't take a pay cut compared to industry, but at least in CS $60k-$70k is very low for a tenure track position. Here's a good indication of where salaries are in CS: https://cra.org/wp-content/uploads/2018/05/2017-Taulbee-Surv...

$90k (9 month salary) is the bottom 10th percentile for a starting assistant professor in CS. $200k (9 month) is the 90th percentile for a full professor with 16+ years.

This obviously varies by school and region, but $60k-$70k is what you would expect for an instructor at a very low rank school, which is not a position PhDs from top universities would be applying for.


My posts are all about teaching, as opposed to more research-oriented academic labor.

> $90k (9 month salary) is the bottom 10th percentile for a starting assistant professor in CS.

That's only because your data includes professors at R1s and also not including instructors at R1s. This is doubly misleading, since those professors you are including spend most of their time on research and those instructors you aren't including are the ones doing the bulk of the teaching.

And outside of R1, 90k is damn good for ast professors.

If you are teaching for a living, as opposed to doing research, $90k is in the upper 10th percentile at the asst prof rank, and $100k is a ceiling for tippy-top candidates at the asst prof rank.

> $200k (9 month) is the 90th percentile for a full professor with 16+ years.

...and is also bottom 10th percentile for wet-behind-the-top- ears top 10 PhDs, who don't have 16+ years experience on top of their 5+ year phd...

> This obviously varies by school and region, but $60k-$70k is what you would expect for an instructor at a very low rank school, which is not a position PhDs from top universities would be applying for.

Sure, but outside of top 10 $150k is still pretty typical industry salary for phds.

The same problem exists at every scale.

Your assertion is also fairly confusing; lots of smart people decide to teach at places where they can have the greatest impact, which is typically not a large-endowment private school...


Colgate is a liberal arts college with a div 1 sports program. There are probably others


I can only think of 1 other.

There are literally hundreds of liberal arts/teaching colleges...

Also, Colgate definitely isn't in the tuition-dependent, take-all-comers mold of the vast majority of teaching-oriented colleges and universities in the USA. Their acceptance rate is below 30%, whereas most teaching-oriented colleges take 70+% of applicants (and draw from a much less well-prepared population of applicants to begin with).


Is the other one Colorado College? Because when I was there we played for the national championship in hockey, with only 1800 students or so.




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