Modern Academia

I thought I was done for the weekend, but the New York Times ran a remarkable profile of the Dean of the Columbia Business School, Glenn Hubbard, who turns out to be Romney's chief economic adviser and author of many of his economic plans. Professor Hubbard made an appearance in the superb documentary Inside Job a couple of years ago which you can watch here. He wasn't quite as entertaining as the Harvard economist Professor Mishkin, who had to explain how he got paid a healthy five-figure sum some years back for praising the brilliant, cutting-edge banking system in Iceland not too long before it bankrupted the entire country, but he was still one of the stars of the show, and the article got me thinking about modern academia.

We easily forget that the modern university is less than 150 years old. Before the late nineteenth century, universities were primarily religious: they existed to investigate the eternal mysteries of life. The early state universities in the Unite States broke that mold, but by the late nineteenth century a new ethos had emerged: universities were centers of free inquiry, developing knowledge for the benefit of mankind. To make this model work, they had to be independent, operating with their own funds. They also needed faculty dedicated to knowledge for knowledge's sake and motivated primarily by the joy of their work. After the Second World War universities expanded exponentially. Take it from me, a man who has spent his entire adult life in higher education: there are not enough smart people motivated by the joy of their work to staff today's universities. And because they do not form a critical mass, to borrow a phrase from this week's Supreme Court arguments, such people have become a rarity in university life.

Today's universities have an insatiable appetite for cash, and thereby have to cater, in dozens of ways, to those who can provide it. Quite a few, including my own alma mater Harvard, have turned their endowments into hedge funds and thus experienced both the pre-2007 boom and the disastrous 2008 crash. (To be fair, Harvard's endowment just reported a flat year, indicating that its new manager, Janet Mendillo, has in fact adopted much more conservative strategies.) Dr. Hubbard's career is another example of how they function as one side of a triangle that also includes the financial services sector and government.

Glenn Hubbard served in the Bush Administration as chairman of the Council of Economic Advisers, where he helped design and pass the Bush tax cuts, making billions for Wall Street. After two years on that job he returned to Columbia, pulling in hundreds of thousands a year as a consultant to various financial services firms. He also co-authored a paper on the magic of credit default swaps and how they had helped make recessions milder (which they have not been for decades) and allowed banks to make more loans. Shortly thereafter, of course, those swaps played a key role in the worst financial crisis since 1929.

The Times story plays up another angle. Among the firms Professor Hubbard consulted for was Kohl, Kravis and Roberts, and Henry Kravis, one of its founders, recently donated $100 million to the Columbia Business School, which he attended, for a new building. One of Dr. Hubbard's colleagues is quoted in the piece to the effect that this could be seen as payback for the much larger sums that the tax cuts Dr. Hubbard helped put through under George W. Bush made for KK & R. Mr. Kravis does have genuine philanthropic impulses--not too long ago, he contributed money for a new dormitory at his high school and mine, Loomis Chafee, whose faculty I am sure had no means of returning the favor so extravagantly. Still, the whole story is enough to give one pause. At Harvard, Professor Niall Ferguson also frequently gives well-paid talks to hedge funds and is now, as I have noted, strongly advocating the election of Mitt Romney. I have no idea whether this will result in any bequests to Harvard or not.

The financial services industry owns government and a good deal of academia, especially the part that has the most to say about itself. All this would have been grist for a good Democratic populist campaign, but the Obama Administration is only marginally less tied into the financial community than the Bush Administration was or a Romney Administration would be. Perhaps younger Democrats should take note. Obama's friendly attitude hasn't helped him at all with Wall Street in his re-election contest; given the choice between a Republican and a Republican, to paraphrase Harry Truman, the Street will take the Republican every time. In any case, my poor old profession hasn't been playing the independent role society needs it to play--and it shows.