Author: Sarah Waldeck

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More On Endowments

Late last week Crooked Timber had a lively discussion about university endowments, prompted by my recent post here and Larry Solum’s response to it. Those who are interested in the topic should take a look at the discussion, as it partially mirrors the debate that is taking place more generally. I’ve been following Crooked Timber with interest, and here’s several points that have struck me:

* I’ll start with the observation I found most interesting: that some elite institutions have a mission that is as much (or even more) about research than about education. I agree that I need to emphasize this distinction more than I have to date. My proposal that an endowment per full-time student of $300,000 or more trigger less favorable tax treatment could penalize institutions whose primary output is research rather than education. Recall, however, that the most frequently proposed trigger is an absolute endowment value of $1 billion or more. Elite research universities tend to have endowments of this magnitude, so my proposal is not tougher on these institutions than the oft-suggested alternative. In fact, my proposed trigger would exempt some research-oriented universities that would otherwise be subject to new tax rules, such as Cornell and Columbia. The institutions most “negatively” affected by the $300,000 trigger are liberal arts colleges with endowments less than $1 billion and small student populations.

More important, however, is that a research-oriented mission actually strengthens calls for increased endowment spending. The sort of research taking place at America’s premier universities is designed to eventually lead to much social good: the easing of the global food crunch, the elimination of certain diseases, and so on, as well as the creation of knowledge more generally. Few science departments, for instance, are likely to argue that a dollar is better spent in the stock market than in their labs. The ability of researchers and scholars to make productive use of endowment funds seems almost endless, as do the potential gains from their work. This strikes me as a strong argument for elite research universities spending more of their endowments than they currently do.

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On Reading the Paper and Watching MSNBC (Or Perhaps Not)

I will confess to having spent (squandered?) way too much time following the race between Obama and Clinton—more hours than I prefer to count. I’m not even talking about the substance of it all, such as the merits of Obama’s healthcare plan as compared to Clinton’s. I mean the race itself: the endless discussions about the predilections of super-delegates; how voters were expected to break in certain states; what Bill Clinton had said or not said on a particular day. And I continued to closely follow the race long after the mathematicians and pundits assured me that Obama had it wrapped up. (Of course, the pundits keep talking too, but that’s a different issue.)

The whole endeavor has brought to mind a 1998 article called Folding the Times that George W. S. Trow published in the New Yorker. Usually I don’t find personal histories nearly as interesting as their authors seem to, but this one—about the relationship Trow’s father taught him to have with the newspaper—contained a lesson that has stuck with me, even though I seem unable to follow it. But I pass on Trow’s advice nonetheless, in preparation for the general election. (Because the article is almost 10 years old, some of its references are dated. You’ll still get the point.)

I read every work in the paper about Algeria, Ukraine, and Belarus; these are the underreported zones. You should get a sense of what is underreported and what is overreported. Overreported is Newt Gingrich. One tenth of one percent of what has been written about Newt would have done you just fine. You also need to read every word about Shanghai, Chinese billionaires, and the Russian mafia. Stories are boiling (or seem to be boiling) here. If you have a personal reason to take an interest in a Baby Bell reaching out to yet another media, sure, read it, but be aware that the deal will ravel or unravel, happen or not happen, be consummated or not consummated, be important or not important, and that you will just have read ten thousand words.

I read nothing about the Equal Rights Amendment during the time it was in the news, for instance. Either it was going to get to be an amendment or it wasn’t. There are a lot of stories like that: years in the making; infinite detail; you have no say in the outcome; it will happen or it won’t.

Do yourself a favor. Just wait to see if Al Gore is nominated. Wake up the day after the next Democratic convention and ask a friend, “Did Gore make it?” My guess is that he will have made it. Take the fifty-thousand word investment you were prepared to make on Gore’s election prospects and follow another story.

My goal? To follow Trow (in moderation) as the media shifts its coverage from Obama-Clinton to Obama-McCain.

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Super-Sized University Endowments: Is Your Alma Mater Richer (or Poorer) Than You Think?

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The New York Times recently published an opinion piece by a Harvard alum who was refusing to make a donation to her alma mater, which in 2007 reported an endowment of more than $34 billion. Yesterday the Times reported on a group called Harvard Alumni for Social Action, whose goal is to convince Harvard to use its endowment in untraditional ways, such as for the support of colleges in Africa. As the Harvard alum opined, “Many colleges may genuinely still need alumni contributions to stay solvent, but Harvard isn’t one of them — nor are Yale, Princeton or several other super-rich universities.”

Endowments provide plenty of fodder for discussion and this month I plan to do at least a couple of posts about them. Today I want to start with the preliminary question of how to determine whether a university or college is “super-rich.” This is a critical inquiry, because everyone agrees that if Congress adopts measures designed to spur endowment spending, most of these measures should apply only to the wealthiest institutions. In my estimation, this means those institutions with an endowment per full-time student of $300,000 or more. In 2006, about 30 universities and colleges fit this description.

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Anthropologists Debate Female Circumcision

TierneyLab has a post about the annual meeting of the American Anthropological Association, which included a panel on female genital cutting (FGC). Some of the panelists have stated that the Western “zero tolerance” approach to FGC represents cultural imperialism and a fundamental misunderstanding of certain cultural heritages. Other panelists have maintained that because of the American tradition of infant male circumcision, as well as the genital cosmetic surgery that some American women voluntarily undergo, those who argue against FGC speak from glass houses.

At the time of this writing, the TierneyLab post had generated a whopping 208 comments. Most, although not all, argued against the position taken by these panelists and emphasized the drastic physical effects of FGC as well as the circumstances under which it is often performed. But it’s hard to argue with one basic point of the post: genital cutting is a cultural phenomenon.

To wit, consider the experience of a medical center in Seattle which serves a large Somali immigrant population. The tale is recounted in The Seattle Compromise: Multicultural Sensitivity and Americanization, by Doriane Lambelet Coleman. (You can find the article at 47 Duke L.J. 717 (1998)). Many Somali mothers requested that the medical center circumcise their daughters; they were mystified that the hospital would circumcise boys but not girls. The mothers were clear about what they wanted: a symbolic cut on the hood of the clitoris, one that would draw blood but not excise any tissue. The mothers believed that as a cultural and religious matter, some form of genital cutting was necessary. If the hospital did not do it, the mothers would take their daughters to Somali “midwives” in the Seattle area or send them back home. In either event, their daughters would experience far more genital cutting than the mothers were proposing, possibly even complete removal of all external genitalia. The medical center convened a special panel to consider the matter. Eventually the hospital agreed to perform the cut suggested by the Somali mothers, with the use of a local anesthetic, and only on girls old enough to understand the procedure. The hospital was hopeful that this would serve as a transitional measure and that second-generation Somalis would abandon the rite.

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Accommodating Breastfeeding Mothers

mermaid.jpgBefore my guest visit at Concurring Opinions ends, I want to comment on a case that received media attention in September and October: Currier v. National Board of Medical Examiners. The Massachusetts appeals court granted a preliminary injunction ordering the National Board of Medical Examiners (NBME) to allow Sophie Currier additional break time so that she could pump breast milk during a medical licensing exam. The Supreme Judicial Court denied the NBME’s request for further judicial review. This was undoubtedly a victory for Currier, but what about for other breastfeeding mothers?

Over at slate.com, Dahlia Lithwick asked why more female columnists did not comment on Currier. She speculated that women are so beaten down by the Mommy Wars that they chose to remind quiet; or that some women silently wondered why a mother of two small children would start a medical residency; or that many women believed that because they breastfed and worked without accommodation, Currier should as well. I’ve found it difficult to discuss Currier, but not for any of the reasons that Lithwick suggested. I usually applaud policies and legal results that help women balance families and careers . But here I’m concerned that Currier’s legal victory will ultimately undermine the goal of widespread accommodation of breastfeeding employees.

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Squirrel Cop

Need some time away from the Thanksgiving festivities? Disappointed by (or don’t care about) the football scores? Spend 15 minutes listening to the segment Squirrel Cop from PRI’s This American Life. (When you link to the site, click on the “listen to full episode” icon and then fast-forward to minute 19:52; it’s worth it.)

In a recent post, I criticized James Q. Wilson and George L. Kelling for not providing a more substantive reflection in an Atlantic essay that revisited their broken windows hypothesis. But when I teach criminal law, I use broken windows to introduce the concept of police discretion and to remind students that the practice of policing usually is far-removed from what appears on Law and Order. The segment from This American Life accomplishes the same thing, albeit with much more levity than I usually muster in class.

A quick apology that I was unable to streamline the listening process. This American Life won’t give permission for their audio to be posted on any server but their own.

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Update To A PayPal Christmas

At Discourse.net, Prof. Michael Froomkin responded to Tuesday’s post about efforts to entice consumers to use PayPal instead of credit cards for their Internet shopping. Froomkin’s basic argument is the same as the one made in the comments to the original post: credit cards are more advantageous to consumers than PayPal, primarily because credit cards offer more protection to those who are dissatisfied with the goods they have purchased. The comments to Froomkin’s post discuss whether PayPal or credit cards are better for consumers, and what the loss of interchange fees means for credit card companies.

To clarify my first post, payment intermediaries (whether a credit card company, PayPal or something else ) make consumers and merchants better off. Indeed, it’s hard to imagine Web commerce existing without them. What I find interesting is how payment providers solve the chicken-or-the-egg problem that I referenced in my initial post; or in other words, why some payment options flop while others become widespread.

Right now merchants are offering consumers immediate benefits for a decision to use PayPal instead of a credit card. I’ll bet that many holiday shoppers will be unable to resist offers of free shipping or discounts from the retail price. Of course, consumers may regret their decision to use PayPal (and to make the purchase in the first instance) if they are unhappy and neither PayPal nor the merchant responds positively to their complaints. But if PayPal is going to take off as a real competitor to credit cards, consumers are going to have to use PayPal more than once; that is, it is going to have to become their preferred form of payment. Unless that happens, merchants who have changed their Web payment technology to accommodate PayPal have made a bad bet.

All of this means that how PayPal responds to the criticism of its buyer protection program will go a long way toward determining whether PayPal really takes off, or whether it remains a service that most consumers associate with eBay and not with “traditional” Web retailers.

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A PayPal Christmas

santa.jpegJust in time for your holiday shopping, here’s a way to stick it to those credit card companies: use PayPal for your Internet shopping.

The New Times is reporting that high-end Web retailers are introducing promotions designed to attract consumers willing to use credit card alternatives like PayPal and Google Checkout. A quick tour of PayPal’s website shows that lower-end merchants like FTD and Avon are getting into the game as well.

Why do these retailers want to lure you away from your credit card? It’s mostly about processing fees, which merchants have been fighting with renewed vigor. Last spring the Washington Post reported that retailers were asking government to regulate per-transaction fees, which credit card companies collect from merchants each time you swipe your card. Credit card companies countered that retailers were seeking price controls. Now merchants are hoping that consumers will simply use an alternative form of electronic payment. PayPal and similar services charge merchants lower processing fees and offer other advantages, such as not requiring retailers to reimburse them for fraudulent purchases.

As David Evans and Richard Schmalensee describe in their book Paying With Plastic, payment systems are multi-sided platform networks. This means that PayPal and other payment providers are intermediaries that can make both consumers and merchants better off. But because a payment network is multi-sided, the benefit to a party of the network depends on how many parties are on the other side of the platform. In other words, consumers don’t care about how many other consumers use PayPal; they just care about how many retailers accept PayPal. Retailers don’t care much about how many other retailers accept PayPal; instead they care about how many consumers use PayPal.

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Twenty-Five Years of Broken Windows

police.jpgJames Q. Wilson and George L. Kelling recently revisited their broken windows theory of policing in a brief essay that appears in the November issue of The Atlantic. In a 1982 issue of that same magazine, they advanced their now well-known hypothesis that a decrease in visible signs of public disorder would lead to a reduction in crime rates. To be fair, the format of the essay—which appeared as one of many commenting on the “The Future of the American Idea”—did not lend itself to nuanced reflection. But because broken windows helped make community policing commonplace, sparked proposals for dramatic changes in criminal procedure doctrine, and is a key element in the biography of Rudolph Giuliani, Wilson and Kelling’s readers can be forgiven for hoping for a bit more.

In their new essay, Wilson and Kelling write, “Virtually all of the evidence we have from studies of police suggests that restoring order is associated with a drop in crime. This is reassuring, but it may not be conclusive. The idea has never been fully tested.” This does not satisfactorily answer scholars who have questioned whether a reduction in serious crime actually follows an increase in public order. Most importantly, it does not address whether a drop in serious crime—if it occurs—stems from the reduction in public disorder or from the increased surveillance that aggressive misdemeanor arrests make possible.

Wilson and Kelling also write, “Decency in public places may be only a small part of the American idea, but especially for those people living in dangerous, gang-ridden neighborhoods, it is an important one.” This is a statement with which it is difficult to argue. But it says nothing about whether constraining disorder is the best use of limited police resources, or how the police choose their targets in a public order campaign, or whether addressing disorder can ever mean more than moving it to a less visible place. We would all benefit from knowing more about how the original proponents of broken windows would answer these difficult questions.

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Corporate College Presidents and Super-Sized Endowments

Yesterday The New York Times had two articles that left me thinking about university endowments. One discussed the increased Congressional pressure on charitable institutions to spend down their endowments; the other noted the soaring salaries of college presidents. Combined, the articles highlight the need to challenge conventional thinking about what constitutes a strong endowment.

The Times reports that in the last 10 years, the amount of assets held by non-profits has nearly doubled, to $2.5 trillion by the end of 2005. Educational institutions held almost $600 billion. (If nothing else, employees deciding whether to enroll in TIAA-CREF should take note of what compounding interest and tax-free gains can yield!) Private foundations are required to spend 5% of their assets each year; educational institutions are not subject to even this minimal requirement.

Grinnell College, with 1500 students and an endowment of over $1 billion, was highlighted in the Times article. Russell Osgood, Grinnell’s president, points out that Grinnell gave about $1 million more in financial aid than it received in revenue from tuition and fees. He also says,“We’re here to ensure the long-term health and function of Grinnell College. That’s our sole objective.” But the Times does not quote Osgood as explaining why more than $1 billion is necessary to protect a small liberal arts college against an economic downturn. Rather, Osgood says:

Society at large benefits from those monies being invested in our economy. . . . The United States has a problem with its rate of savings, and one of the few bright spots are colleges and universities, which are two of the largest contributors to the national rate of savings. Anyone thinking about reducing endowments should think long and hard about what that might do to the overall ability to generate jobs and fund good ideas.

Maybe, although no-one is suggesting that universities empty their coffers. And the national savings rate is what not alumni were thinking about when they wrote checks to their alma mater, or what Congress was considering when it extended favorable tax treatment to educational institutions and their donors.

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