The Myth Of Nonprofit Higher Ed

If the Varsity Blues bribery and cheating scandal has done anything positive, it has been to shine some light on a basic reality: very little in higher education is truly nonprofit. It turns out some analysts—and residents—of the ivory tower have been making this point for years. But nothing elevates things in the public consciousness like rich people—especially celebrities—behaving badly.

The specifics of the scandal involve outright fraud by people outside of the ivory tower trying to get their kids into the penthouse—elite institutions including Yale and UCLA. There is no evidence of which I’m aware that the schools themselves encouraged such fraud, though some employees, seeking to enrich themselves, allegedly did. This was especially true of coaches, including a former Georgetown University tennis coach who reportedly took in $2.7 million to put kids on athletics admissions lists. And even if the schools did not condone their behavior, these individuals nonetheless illustrate something crucial about the whole system: just because you work at a place with a nonprofit tax designation doesn’t mean you cease to be self-interested. Indeed, trying to maximize one’s happiness is a very human thing to do.

Of course, all schools are populated by human beings, hence all are inclined to maximize their profit: the benefits they get versus their costs. As the late Henry Manne, who taught at Emory University, the University of Wisconsin, George Mason University, and other institutions, explains in his chapter—a reprint of this 2014 essay—in a new book I co-edited, the idea that people in organizations with nonprofit tax status do not seek profit “is a hallowed and egregious myth. Human nature does not change with the legal structure of the employing organization. Managers of nonprofit organizations are no less interested in maximizing personal utility than are managers of for-profit firms.”

Varsity Blues has inspired people to pay new attention to the many legal ways putatively nonprofit institutions pursue monetary gain through… (continue reading)