Tag Archives: crowding out

Targeting university donations more precisely

If a donation is an expression of gratitude to a university where one acquired great skills or had a good time, then why not target it more precisely? Why donate to the entire university or a particular department as opposed to the people making up the university? Some people probably contributed more than others to the excellent university experience. It would make sense to reward them more. The people who made the studies enjoyable or useful may be gone from the university, especially if they were coursemates, but the employees of universities also change jobs. Those who are gone do not benefit from a donation to the university. A gratitude-based donation should go directly to the people one wants to thank.
If a donation is for the purpose of advancing education and research, then the money should be targeted to where it does the most good. But the universities receiving the most donations are those who are already rich. It is difficult to measure the benefit to education or research that an additional unit of money generates in different universities, but diminishing marginal returns seem reasonable. In that case, do-good donations should go to the poorest regions of the world and the poorest universities.
The richest universities often spend money on fancy architecture, with stonecarvings on the outside of buildings and woodcarvings and paintings inside them. The money thus spent clearly does not contribute to education or research. It may even have a negative value if architecturally interesting buildings are less well suited to study and work than a standard office block (this is true in my experience).
It is not enough to donate under the condition that the university must spend the money on scholarships or salaries, not buildings. There is a crowding-out effect: if the university receives a donation for a particular purpose, it spends less of its own money for that purpose than it would have without the donation. Effectively, part of the donation still goes to buildings.