New gilded age money mania and America’s elite universities

If you want to see tenure being put to good use, read this Veblenesque jeremiad from Johns Hopkins University history professor Francois Furstenberg, about the gross financial recklessness and irresponsibility of his administrative superiors (I have a keen professional and personal interest in just how much longer Campus Leadership is going to be tolerating these outbursts of lese majeste from the lower orders).

A sample, but it’s all good as the kids say:

The project was initially budgeted at $250 million, also in prepandemic dollars. The history professor is curious to know the final price tag. He thinks about the soaring utility bills for his old Baltimore row house. What must it cost to maintain this colossus?

Johns Hopkins, he’s often been told, follows a decentralized budgeting model. Responsibility-centered management, it’s called. It sounds like something for Serious People who know numbers—executives who throw around phrases like “fiduciary responsibility.” The professor thinks about the trustees who approved this ostentatious facility, knowing they’d pass the bills for upkeep to future deans. He’s no fiduciary, but he wonders how responsible that is.

Still, he has to admit the building is stunning. With its 29 cantilevered roof planes and its clerestory glazed windows, it will quickly become the highlight of campus tours. Prospective students will look on with envy. Maybe it will attract more applicants.

He sometimes wonders why the university would need more applicants, given that its admissions rate now hovers under 6 percent. There’s a statistic to make the US News & World Report rankers swoon. But is it wise to choose a university based on the number of cantilevered roof planes in its student center? He also wonders where those prospective students are to be taught. Space has been tight for years. The campus only has 84 classrooms for its 65 departments, teaching 5,600 undergraduates and 3,500 graduate students.

America’s First Research University!

Though it lacks new classroom space, the student center will have “new dining options, a theater, dance studios, club meeting rooms, recording spaces, and an esports lounge.” That all sounds a little like the arts center the university tore down to make room for this new building, which also had dance and visual arts studios, a digital media center, a theater, music practice rooms, and an outdoor cafe.

But no one thought the old building looked good. Actually, the history professor hated it too.

He remembers when that building came up, back in 2001, replacing a grove of elm, beech, and oak trees on campus. The old arts center hadn’t been cheap: $17 million was real money at the turn of the millennium, in the wake of the dot-com bubble’s collapse. The architects had even worked with a specialized manufacturer to create a unique “Johns Hopkins brick,” speckled with a bespoke glaze to give a special blue-gray hue.

He marvels that the erstwhile arts center had a shorter life span than his Honda, which still runs pretty well despite once having its catalytic converter stolen. He’s pretty sure several of his home appliances were older than the arts building when it came down.

The essay includes an aphorism that I hadn’t heard before, but is all too resonant to anyone who can read a spreadsheet:

Everyone thinks universities have to do what donors want because they pay the bills. But that gets it backward, and not just at Hopkins. Giant donations, he’s come to realize, often increase the university’s bills, generating new operating expenses for projects that may have only tenuous links to the university’s core mission. The new fixed costs cannibalize existing funding streams, increasing pressure to grow revenue. He remembers the quip from a former dean: “The endowment is the gift that keeps on taking.”

It’s incredibly expensive to be rich, which eventually leads to one of those Hegelian synthesis thingees where the rich man becomes poor because of his wealth, which is apparently what’s happening at JHU and lots of similar places. Ironically, Veblen’s own University of Chicago is probably the most spectacular example of this pattern at the moment.

 The professor wonders if Hopkins followed the same path as the University of Chicago. There, the leadership went on a wild spending spree, growing the university’s fixed assets from $1.16 to $4.3 billion in just 20 years. Now the great research university is restructuring its humanities departments and slashing PhD funding by nearly a third.

An article in the Wall Street Journal helps explain why such wealthy universities are suddenly so cash-strapped—again. The richest ones have mostly invested their towering endowments in illiquid assets, like private equity. Alas, as Columbia University has learned, tens of billions of dollars in opaque assets don’t even add up to protection money. Then again, Columbia does have some great new Piano-designed atriums up in Harlem now. What must those maintenance costs be?

The historian thinks about the only thing he remembers from the economics class he took in college—an old joke. “What do you call a failed mathematician?” it went, demonstrating that even practitioners of the dismal science can have a self-deprecating sense of humor.

I remember how about ten years ago a mechanic told me that he used to work at a shop that serviced Lamborghinis, and that at that time it cost $1,600 to change the oil, which the owner was supposed to do three or four times a year. I imagine that this figure has probably doubled since then. Thanks Biden!

Some not random numbers:

Johns Hopkins endowment increased by a factor of ten in real dollars between 1990 and 2025.

The University of Michigan’s endowment has, since I was an undergraduate there 45 years ago, increased nearly 200-fold in nominal dollars, and by a factor of a mere 57 once we adjust for inflation ($115.3 million in 1982; $21.2 billion in 2025).

Salaries for full, associate, and assistant professors at American institutions of the higher learning all declined in real terms between 1971 and 2023 (the latest year for which national figures are available). Wages for the average American worker, who needless to say hasn’t had a great last 50 years what with all the Capital in the 21st Century, went up by 36% in real dollars over this time.

I wonder where all that money is going? Actually I don’t:

“We believe Hopkins has the single best university president of this generation,” the former chair of the university’s board of trustees once blurted out, when asked by students why the president earned so much. In the last five years, the trustees have paid the university’s president over $18 million for his strategic vision, a sum that doesn’t even include the many millions he has earned from his service on the boards of companies that do business with the university.

Walled off by the president’s abundant staff from alternative perspectives, the trustees probably do believe he’s the best. Maybe the president even hired some expensive compensation consultants to tell them so! Of course, by private equity standards, his compensation is low. Fiduciary responsibility and all.

Support to train new PhD students, meanwhile, is collapsing. Departments across the School of Arts & Sciences have seen huge cuts in their graduate programs. University officials insist the students are to blame for their temerity in organizing a union and negotiating salaries in the mid-five figures.

The deficit created by those raises amounts to approximately $12 million, but no one—in a university that has lavished billions on new construction—can seem to find the money.

Here it’s important to note that 90% of America’s 4,000+ institutions of higher education have no endowments to speak of, and that the “average” salaries of full, associate, and assistant professors nationally in 2022-23 ($135K, $95K, and $83K respectively) would look positively astronomical at many of them. Again, those “average” salaries have actually declined in real terms over the past half century, and of course none of these figures reflect the ongoing adjuctification of the American higher educational system. Percentage of faculty who were full time in 1970: 78%. The comparable figure for 2023 is 54%. Given differential teaching loads, the modal class at an American university is taught by an adjunct, who is paid far less than minimum wage.

As Prof. Furstenberg points out, tenured professors at places like Johns Hopkins are, with certain notable exceptions, the Carmela Sopranos of this remarkable collocation of synergistic synergies, moving fast and breaking things in a disruptive synergistic way:

Faculty didn’t say much as the president stormed this last bastion of shared governance on campus. Underwritten by a donation, salaries were going up and teaching loads down. If anyone worried that Hopkins was following states like Texas and Indiana in its allergy to faculty governance, they kept those concerns to themselves.

Crying won’t help you, praying won’t do you no good.