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Opportunity Cost--What Harvard Could Do With $50 Million:

A good economist like Larry Summers always knows that the real cost of any expenditure is not the out-of-pocket expenditure, but the opportunity cost of what the money could otherwise be used for. In case Harvard alumni donors and tuition-paying parents were wondering what Harvard could have done with $50 million (other than, of course, save Larry Summers's neck)--one option, would be that (by my estimate) they could eliminate tuition for their entire incoming freshman class for a year and easily break even.

Andrew Samwick also does the math and concludes that the opportunity cost is that rather than hiring 8-10 distinguished chaired professors (which it otherwise could do with the same amount of money), the complementary head-count promise means that Harvard instead will hire 40 new junior untenured professors just to fill these slots. It is not clear the extent to which this will foreclose the opportunity to hire other professors who do not fit in these approved categories.

Marc J. (mail):
Yes, because without that particular $50 million, Harvard simply hasn't a dime to spare. After all, their "endowment," if you can call it that, currently stands at a measly $22.5 BILLION.
7.11.2005 9:07pm
HLS student:
If we're going to start talking about resources society has wasted in higher education rather than say, saving starving children in Africa... maybe we should ask how much society has invested in the education of legal academics. For a sizable segment of the academy, I'm not sure the return on the investment has been that great. And I see the best.
7.11.2005 10:18pm
HLS student:
Ok, on second thought -- that was a cheap shot. There are plenty of legal academics who make significant contributions, not least of all in the classroom, imparting the values and skills of an important profession to students like me.

Maybe I'm just feeling that at something like $270,000 invested in my education, I've got some bigger debts than my student loans to pay.
7.11.2005 10:29pm
Guest:
Just curious - when did this blog become the Zywicki conspiracy?
7.12.2005 1:41am
Buck Turgidson (mail):
Well, they could have used a very small portion of it to hire a new president--one who's a bit more stable and less compulsive and self-centered. Larry Summers, like most people of high intellectual capacity in a position of power, all too often forgets that his existence as the President is about Harvard, not about Larry Summers. So bury the sucker and hire someone more even keeled. BTW, did I mention that I am one of the alumni?
7.12.2005 1:51am
Proud Generation Y Slacker:
That could reduce undergraduate tuition by $8,000 per student for one year.
7.12.2005 10:04am
Steve:
If Harvard simply announced that it was hiring 40 faculty members, without any mention of the fact that there would be some level of priority given to women and unrepresented minorities, I wonder if anyone at all would be speculating on how the money might be better spent.
7.12.2005 12:55pm