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Comment by fancyfredbot | Hacker News Reader

This is a great question.

- Why would college tuition decrease?

1) College tuition would decrease if it led to increased profit for the college. This could happen for many reasons including the case that they can't find enough students willing to pay.

- What's actually stopping the elite schools from doubling their tuition in a single year?

2) Mostly the fear that it would reduce profits - for example through bad publicity, increased regulation, or an inability to find students willing to pay

-What forces would actually cause colleges to lower their tuition?

3) market forces - on the demand side a decrease in students willing to pay, or maybe on the supply side an increase in competition for students. Or maybe government/regulatory interventions. Or possibly even a reduction in the costs of providing education.

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What does it mean for a school like Harvard to make a profit? Why do they want to do that?

They won't call it a profit. What they will do is spend as much as they can on salaries (especially for the senior employees), increasing the size of the administration (more jobs for insiders), buildings, sports, etc.

Basically, people think non-profit means the organization works for the public or puts the public first. Unfortunately, what it often means is money goes to employees and insiders instead of shareholders. For colleges, it means the students (and the Federal Government which issued the student loads) comes last and the college's employees come first. Not great public policy.

This is why running things that aren't a business "like a business" is profoundly dangerous and destructive and anybody advocating it should be dismissed as ideologically driven.

but on the other hand, these private colleges do not ever claim to be run for the public (tho they are a non-profit, which carries with it the connotation of being run for the public good despite there not being any laws requiring it).

If college is expensive, students should choose not to go, or find a cheaper one. Choosing an expensive college, whether the outcomes are good for said student or not, is the choice of said student and therefore, subject to their rational utilitarian calculations. Choosing badly is always possible, just like any other life decisions.

That's individual consumer based which is still part of the problem.

We need to collectively choose to structure education for the benefit of society because we want people to be educated.

It's not about consumer choices or utility functions. That type of thinking has zero place here.

> We need to collectively choose to structure education for the benefit of society because we want people to be educated.

so it is done already with k-12 education. Not everybody agrees that tertiary education should be paid for by the state, but do agree that the state should help subsidize a bit.

This is the education loan system that is the collective decision.

And that 56 year old decision by Governer Reagan should be revisited.*

A majority of people get a college degree these days. It isn't some effete luxury of the literati in country club colleges. If someone is willing to do the hard work of educating themselves we should support it without burdening them with a lifetime of debt.

You want a doctorate and are willing to put in the years of effort? Good, we need more. It should be free. It's not like information is a scarce resource these days. Spending years of your life to defend a dissertation is a big enough sacrifice.

* see https://theintercept.com/2022/08/25/student-loans-debt-reaga... or https://www.washingtonpost.com/made-by-history/2022/12/29/hi... . The same people who whine about h1-b workers also don't want to fund education to get more domestic ones. We need to stop pretending people with such incoherent policies deserve a seat at the table.

I can see the logic of administrators wanting to spend money on their own remuneration, but why should they care about building new buildings?

Well typically employees at a college typically treat the facilities like their private country club. Instead of getting the family membership at the bouldering gym, just build a bouldering wall and now you can go anytime.

This could just be a case of the profit motive aligning with the good for society as a whole.

New buildings can house new students and academics which is good and also helps bring in more money in future.

New buildings also preserve the status of the university as a top institution - there is some level of competition for students and talented academics and if Harvard fell behind other universities it would be harder to bring in grants. Of course this is a good thing for the university but it's also good for any administrator who wants to preserve their pay.

Not sure this answers your question but Harvard does make a profit (technically an operating surplus as they are not a for profit) which they then reinvest. Although technically it might not seem like a profit motive I can see how a lot of this money might find it's way into the pockets of the administration of the university (although I'm no expert on this - presenting this as a personal view, not a fact)

Https://finance.harvard.edu/financial-overview

"The University ended fiscal year 2023 with an operating surplus of $186 million compared to $406 million in fiscal year 2022, on an operating revenue base that increased 5% or $262 million, to $6.1 billion. The reduced surplus was not unexpected and was driven primarily by expenses associated with renewed return to campus activity and strategic investments in our workforce, with increased compensation for faculty and staff, a decrease in vacancy rates, and overall growth in new workers across campus."

Sure, but that money isn’t going to shareholders is it? Why would the school’s management want to make that number bigger?

The same reasons as any other business enterprise under capitalism.

But that’s the point: Harvard literally isn’t a “business enterprise under capitalism”. It’s a non-profit organization with no shareholders. Nobody has equity in Harvard.

>Harvard literally isn't a “business enterprise under capitalism”

It literally is. "Non-profit" is a particular way of doing accounting, categorizing funds, filing taxes, but the incentives and interests are no different.

The incentives and interests are hugely different. A for-profit business is controlled by shareholders who directly own claims to its revenue. A non-profit is not. Harvard has no shareholders and the members of its primary governing board are not compensated.

Businesses tend to distribute their profits to shareholders, either through dividends or buybacks. Boards try to structure the way businesses are governed to align the interests of management with those of shareholders. But Harvard has no shareholders, so I’m not sure what you’re trying to suggest.

So that they can increase their own pay and benefits. Nonprofits still have to pay their staff and the amount of money some pay theirs can be rather... inflated.

The operating surplus is net of paying staff. If they increased their pay, wouldn’t it be lower?

The operating surplus says nothing about how they increased pay, except that they increased revenue more than they increased pay.

If you wanted to justify further pay increases this would be the best strategy - if you have an operating deficit you'll be under pressure to cut staff or pay.

Again I'm being very cynical here and I have no idea if this is actually happening. Just speculation.

Actually on reflection perhaps I'm being too cynical here. The motivation of administration doesn't need to be lining their pockets. They may simply see increased revenue as a means to invest in staff and facilities which they can use to further the university's mission of research and education. There doesn't have to be any bad intent.

Certainly when I was a student, I got the impression that my university saw its purpose as supporting research and training new researchers. One reason to like scholarships is that being a researcher doesn’t actually pay well so saddling people with lots of debt by graduation might discourage them from becoming researchers, though I’m not sure how much the university thought of that. It did feel like the majority of undergraduates who were not going to become researchers were a bit of an afterthought. However people outside had different ideas about what the university was trying to do, and the university obviously hoped to solicit donations from those students who eventually left.

The gains come from (re)investing donations, not from tuition.

In big organizations (of any type, including companies, universities, hospitals, military), people's sense of importance is determined primarily by the number of people they manage, and/or the size of their budget.

People want to be more important.

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