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MOVING TO FRONT FROM YESTERDAY–SEE THIRD COMMENT WHICH EXPLAINS WHAT PRINCETON IS DOING
Now this is a striking decision, not only because this is a top sociology PhD program, but because Princeton is far and away the richest university in the United States. Have other PhD programs in philosophy or other fields announced that they are suspending admissions for a year?
I very much hope not. There will doubtless be many prospective 2021 applicants who lack the luxury to postpone their applications for a further year (financial, familial reasons etc.). It would be a great shame to see the doors to academia closed to them.
Of course, efforts to secure the prospects of these applicants mustn't silence the claims of other stakeholders (current graduate students, recently graduated students, academic staff etc.). But nor should prospective graduate applicants be the only party made to bear the cost of this difficult situation.
One thing that makes this a more difficult situation than normal to navigate is that the incentives for very rich "top" universities are very different than the incentives for other universities, even good ones. Princeton, Harvard, and a few others can afford to play it excruciatingly safe, a bunch of other schools would be taking a huge gamble if they played it excruciatingly safe, and probably the majority of schools simply will not survive playing it excruciatingly safe in anything like their current form, at least absent a bailout. (Sorry to leave 'play it excruciatingly safe' undefined, but I mean something like not physically opening until there's a vaccine.)
Princeton's Graduate School has made a deal with departments: if they sacrifice admissions slots next year, they can distribute the fellowship resources saved among their current students. Sociology is suspending admissions for a year; many other departments (including Philosophy) are reducing their intake for several years.
Departments are drawing from their own resources because the administration refuses to release funds to support extensions for grad students. Incidentally, Princeton's endowment is valued at 26 billion dollars, roughly equal to the combined GDPs of Armenia, Chad, and Kyrgyzstan.
Thanks for this clarification about what's going on. The gross figure, by the way, understates the real value of the Princeton endowment; see:
Note also that Princeton has no medical school, no law school, and no business school, units which often account for a significant amount of endowment at many universities.
I don't know anything about Princeton's specific situation, but Oxford colleges rely heavily on endowments. And the normal Oxford model is that you have a targeted spend-down rate (for my college it was 3.75%) such that you think that the endowment will preserve its real value, averaged over good times and bad, if you spend at that rate. That way it's forever, which is the idea of an endowment. Spending at 3.75% in a deep recession is already a draw on the endowment, in the sense that you're already getting a negative return; I can entirely get an institution's reason not to do more than that, even in a crisis.
3.75% is a low rate, most U.S. schools are at 4% or 4.5%. Some schools (e.g,. Northwestern in the current crisis) have announced that they will increase endowment spending temporarily to help with some of the budgetary shortfalls. Of course, endowments are not rainy day funds, and much of their spending is restricted to specified purposes.
The situation at Yale is identical to the situation at Princeton that comment #3 describes. To my knowledge, Yale Philosophy voted to reduce graduate admissions next year in order to extend funding for current graduate students adversely affected by the current pandemic. GSAS refused to increase funding to departments, so the only way for departments to provide relief for current graduate students is to slash admissions.
Of course, this did not stop the dean of Yale GSAS from immediately emailing me, as an alumnus, begging me to donate money to Yale GSAS so that GSAS could continue "supporting" its PhD students. (Given my own experiences with how much Yale "supports" its PhD students, I declined to donate.)
Princeton spends a little over 5% of the value of its endowment each year, and seeks a return of 10% or more. As a result, the endowment has grown by an average of 12% per annum over the last quarter century. Just since 2017, Princeton increased its endowment by more than 3 billion dollars! (For context, that increase is double the total endowment of Princeton's next-door neighbor Rutgers, a university which employs 3 times as many staff and enrolls 9 times as many students.)
A 1-year extension of funding and benefits for every Princeton graduate student would require about a 5.5% increase in the annual operating budget for a single year. Of course we have been assured that this would drive the university into penury. Thus, admissions freezes.
Please do not compare income and wealth! If it is interesting that Princeton could liquidate itself in order to soak up a year's production of Armenia, Chad, and Kyrgyzstan, it is not for the reason you think: for Princeton to do so would spell its end, while Armenia, Chad, and Kyrgyzstan would go on. So the presumptive intent of the comparison — that Princeton is obscenely rolling in it, soaking up resources equivalent to those shared by the 24 million citizens of Armenia, Chad, and Kyrgyzstan — cannot be reasonably drawn.
It would not be as misleading to instead look at the 'GDP' of Princeton's $26B endowment: if we think of this as the annual endowment payout, then per your message below, the relevant figure would be 5% of $26B, or $1.3B. This is roughly $1.238B, the GDP of Grenada — a single nation, with a population of only 111K.
To further the comparison, we might mock up a 'population' served by Princeton's endowment — perhaps those who are dependent on it for their living: its 8,289 employees + 2,845 graduate students = 11,134 souls. Drawing the analogous moral, we would now instead conclude that the endowment of Princeton enables its citizens to enjoy a PCI about ten times that of a small Caribbean island nation without petroleum reserves.
I am not sure how much meaning to find in comparisons of university endowments to national economies. But those who do find them useful will better avoid comparing apples with orchards.
Just for comparison: The University of Washington has been asked to model a 15% budget cut. https://q13fox.com/2020/05/25/washington-colleges-universities-brace-for-big-budget-hit/ That is probably a worst case scenario, but I don't know how any university cuts that much off an already tight budget.
This exposes the real sickness of US universities: they are not understood to be a public good. Ben Lerner's defense of the CUNY project aims to make this case https://www.nytimes.com/2020/05/26/opinion/cuny-cuts-ben-lerner.html. But all institutions need to be making similar cases, be they public or private. Universities _are_ public goods. We need to understand what we do that way, and make sure other do as well.
Re comment 9: Unless there are statutory (for lack of a better word) restrictions that sharply bind how much the Princeton admin can spend of the endowment, its decision to spend 5 percent annually (or whatever percentage) is a discretionary one. In that respect the "payout" is not like a country's GDP, which needless to say can't be increased by a chief executive at will and in one fell swoop. Countries of course can have economic plans that call for or envision an increase of X percent in GDP over Y years, but that's a different matter.
Hi Benj,
Analogies do not usually imply total correspondence between their terms. They turn on a point of comparison shared by these terms. In this case, the value of all goods and services produced in a year by the entire population of three nations is a lot of money. So pointing out that Princeton's endowment is even greater than this amount illustrates that it has a lot of money. This undermines Princeton's current claim that it has no choice but to cut programs, reduce departmental resources, push out grad students, and fire staff during a global pandemic and the worst US unemployment crisis since the Great Depression.
Hope this helps.
Although, I am sure that much more up to date stuff can be found, the classic Henry Hansmann's "Why do universities have endowments" is a fun counter to the idea that there is some super obvious rationale for the way that the university treats their endowments (esp. that spending should not exceed rate of return), and thus that calls to make more aggressive use of the endowment must threaten the university's existence.
You are wrong about the situation at Yale. Yale agreed to extend funding across the board for an extra year to every graduate student currently enrolled. (More precisely, they allowed departments to extend the funding.) They have not yet tagged that extension to reduced enrollments. They may well lower enrollments in the coming years. But they haven't yet, and they haven't tied to the funding extension to reduction.
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