Louis Vuitton Education

In light of the college admissions scandal, I’ve been thinking about the roles we expect our educational institutions to fulfill. We are repulsed by the those who sought to lie, bribe, and cheat their way into schools because we see education as a tool of social mobility. Typical American success stories often look like an immigrant/child of immigrants working their way through the educational system during their youth to land at an elite college with a ticket to the upper-middle class. Think Ben Carson or Shaan Patel.

Yet, why should we reasonably expect top-tier private universities to give economic opportunities to those that need them the most? It is true they have a moral/civic obligation to do so, but it does not fall exactly in line with their demonstrated goals. Big name schools want to retain prestige and power while doing what is necessary to avoid scrutiny.

This corresponds to what I will call the “Louis Vuitton” theory of higher education (stolen from Malcolm Gladwell in a conversation with Tyler Cowen).

Restricting supply is a surefire way to increase the price/value of a product if you’re a monopoly, or participate in what economists call “monopolistic competition,” which is what happens if you sell differentiated products of the same type. Louis Vuitton could sell many more bags than it already does, but then it would charge lower prices and be in the “commodity bad business” as Gladwell quips. Any monopolist knows she will make more money by reducing the accessibility of the product and waiting for the price to rise. This benefits consumers as well, if they can get their hands on a bag. Gladwell, and others, surely understands that part of the thrill of owning a luxury item is knowing few others have it. It’s the reason fashion companies charge exorbitant amounts for their products and destroy unsold merchandise.

I’m going to pick on Harvard. It’s safe to assume it wants to remain the best, most prestigious university in the world. Yet, prestige is inversely proportional to access. The reason why a Harvard undergraduate degree is so valuable is due in part because 96% of students who apply to get one do not. Any increase in the number of degrees awarded would decrease their value. Imagine if Harvard enrolled as many undergraduates as Ohio State or the University of Florida. 45,000 other students in your graduating class would surely put downward pressure on the perceived prestige of your degree.

Harvard, and other elite private universities, are “in the luxury handbag business, not the education business” according to Gladwell. This is the reason why enrollments are small and the price to get in —whether you’re paying indirectly by living in a good school district, paying private school tuition, hiring tutors, or bribing— is high. On the flipside, this confers huge benefits in the form of better future earnings prospects and increased social status to those that can finesse their way into a hyper-selective institution.

When you recognize some colleges behave like fashion houses, it seems downright irrational to expect elite private institutions to provide social mobility for Americans on the scale we desire. Even if they do commit to increasing the proportion of low-income undergraduates under threat of having their federal funding pulled, increasing percentages can only get you so far. There are still no incentives for these schools to dramatically increase their access.

It’s not like Harvard faces non-brand related barriers to expanding its educational reach, either. UCLA has an undergraduate enrollment of 32,000 on a campus of 419 acres. Harvard’s 6,500 undergraduates roam 567 acres, meaning space is definitely not an issue (UCLA is actually building even more dorms outside my window right now). Money is another restraint, to be sure, but I’d be skeptical of any financial excuses from a university that has a $40 billion endowment and just closed a $9.6 billion fundraising campaign. Yet, Harvard retains the status quo for the same reason LV doesn’t open a surplus store. You have to protect the brand.

Suppose Harvard increases the percentage of undergraduates from the bottom 20% of the income distribution to 25%, from where it currently stands at 4.5%. This is a jump from 292 to 1625 students from the bottom quintile of income. These numbers may seem impressive until you consider UCLA already educates 2656 students in the same economic bracket without having to undergo any significant demographic change in their undergraduate population.

Given, UCLA and other public universities are about five times as large their private elite counterparts, but this is exactly my point. I’ve written in the past about the educational limitations of massive public universities —and I stand by those views— but it appears institutions like those making up the University of California or the SUNY/CUNY system are the ones we should be paying attention to if we want the average American to be able to exercise some type of economic mobility. They do not fall prey to Louis Vuitton incentives and seem to understand they are providing a public good which entails occasional dings to their prestige. It’s never sexy to build bridges or roads or educate a poor student body, but nobody will argue these activities don’t serve vital long-term economic functions.

Public institutions actually have a chance of touching enough students to make anything resembling a dent in income inequality, and they’re good at it. In data compiled by the NY Times, 8 out of the top 10 colleges nationally with the highest social mobility index are public (Vaugh college, what I linked to, is private, but scroll down to the social mobility index row and click “all colleges” on the right hand side to see the top 10). Students going to these universities aren’t discussing heady political theory in an Ivy League seminar room, but the economic expected value of the average low-income individual applying to the City College of New York is much higher than submitting to Brown or Dartmouth.  

Dylan Mathews, writing for Vox, seems to recognize what a school that’s serious about social mobility would look like when he throws out that Harvard should double, or nearly triple its undergraduate enrollment to move the needle on poverty. The implicit statement is that a high percentage of low-income students is not enough, but an independently large number of such students must be graduating every year. Yet, some well-placed italics in the preceding clause, “if [Harvard] really wanted to expand the school’s impact on poverty and mobility,” indicate that he understands the Louis Vuitton mentality in higher education more than most. Mathews’ statement is a throwaway bit in an article about making a bad system transparent, but not better, by auctioning off spots to Ivies and the like. Princeton could accept these legal or illegal admission payments in ExxonMobil stock or bitcoin for all I care. Large public universities are the real engine of social mobility in the America. They are the way to realize the visions of opportunity we irrationally vest in private institutions.

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