Over the last couple of years, UCSD has increasingly sought private funds to sponsor what is a growing university in a time of budgetary cutbacks. For example, just recently it was announced that the Canyonview Pool would be expanded at a cost of $6.4 million, with funds coming principally from private (i.e. non-university) sources. Although many students remain enthusiastic about their future Olympic-sized facility, others have raised concerns over the impact of the decision. Some students (those who don’t swim well) fear the loss of the shallow end of the pool, while others have questioned the role private money will have in what has traditionally been a publicly funded university.
It is of course no mystery why some students fear the encroachment of private funds at the university. So many things (politics, sports, etc.) have already been corrupted through corporate donation; thus we have SBC Park and the re-election of President George W. Bush.
After all, why would private business take an interest in UCSD? Even more mind-boggling, why would any corporation donate money to expand our pool? Is there going to be advertising along the tile floor, or perhaps a subtle change in the name? (I think Petco Pond sounds nice.)
We can be pretty sure it isn’t pure generosity (or what economists describe as communism) that is driving such contributions. We expect business to act in its own rational interest, to be philanthropic when doing so directly increases profit margins. Therefore, why would investments made at UCSD be any different?
In this case, it seems that we may have reached some sort of economic paradox. Canyonview Pool will not be renamed, and that advertisement “mural” has been stricken from the agenda. So OK, maybe these donations aren’t just about the bling-bling, but the question remains, why give money to UCSD?
The answer to this apparent conundrum lies somewhere between greed and philanthropy: UCSD provides what economists call “positive externalities,” or what political scientists describe as “good things that come out of something accidentally, and are free.”
This is to say that our university provides a tremendous boost to the community, attracting students, business, innovation and investment, all of which come free to local businesses (unless you take taxes into account). Therefore, to a certain extent, what is good for the university is good for business. We are all in the same boat.
Local businesses, of course, recognize this fact: That a better, more competitive UCSD makes for a more attractive and competitive community. The grants and scholarships dedicated to the university are an indirect investment, helping the university turn out the managers, engineers and researchers of the future, while getting a nice tax deduction to boot.
However, there lies an inherent danger in private and public investment, and a tendency toward glitz and glamour. Investors are often tempted by large and overt projects, as they are direct in their conception and easily visible to the public.
For example, it is easy for philanthropists to point out a building that bears a plaque with their name, hang a picture of their generosity in an office lobby, or even say, “We helped build the university pool.”
It is much harder to frame a 15-percent discount on school textbooks, and it doesn’t sound quite as impressive to say, “Thanks to our organization, more professors have the opportunity to specialize in either teaching or research, depending on their skills and interests.”
There is a propensity for donors to support the big and obvious, while ignoring the more subtle and complex. Although this is not necessarily a bad thing — in some cases it is the big project that most needs funding — this often leads to an inefficient allocation of resources.
Money, both public and private, is efficiently allocated when used to increase the greatest overall utility possible. Thus donations should be used for programs that provide the most diffuse benefits to the greatest number of students. These are quite often the smaller, covert projects, like cheaper books or better professors. Larger, more overt projects often benefit only a few.
Considering the $6.4 million dedicated to renovate the pool, one must think, how many students does this actually benefit? Could more students have benefited had the money been dedicated elsewhere?
The pool is but a single example. In May of 2000, the university began “Imagine What’s Next,” an extensive fundraising campaign with the goal of raising $1 billion dollars in private funds. Likewise, the university has recently undertaken a multimillion dollar campaign to fund the construction of a new University House.
Considering the sharp increase in private donations, it’s important that we keep in mind what the most efficient allocation of these resources would be. Granted, donations often come with strings attached, i.e. the organization making the donation gets to choose where the money will be allocated. It is, of course, unlikely that the university will tell people where they can and where they cannot donate their money. After all, who turns down free money?
However, for a project as grandiose as “Imagine What’s Next,” I dream of a group of business leaders that donates money not where it looks best … but where it would make the biggest difference.
