I’m talking about colleges, of course. A while back I wrote a short post about the inferior endowment problems at Reed (the innuendo just keeps on giving). Now an economist/blogger named Felix Salmon raises an interesting question: Why don’t colleges spend their endowments during rough times to avoid the admissions and service cuts that they are currently enduring?
It seems like colleges are beholden to the same growth principle that drives publicly traded companies that says that simply sustaining the current level of profitability is not enough. The result must be an exponential increase or else that result is a failure. I just don’t get it.