This article suggests, that from an economic perspective, Harvard is a giant hedge fund with a college attached to it. Harvard employs a number of hedge funds to manage its endowment. Their 5 hedge fund managers earned $78 million in one year. Their average income from Harvard was $16 million. Harvard has 450 full professors who earned slightly more than Harvard's 5 hedge fund managers. They earned $85 million in one year. Their average income was $188,000. They also were taxed at a higher rate than the hedge fund managers.
There are some lessons to be drawn from these data. Harvard's full professors are very smart and accomplished in their fields. I would assume that they make a significant contribution to society. They create new knowledge, and they prepare our future leaders. Harvard's faculty attract top students from all over the world, and its graduates are the primary contributors to its endowment. Harvard's faculty also bring in research grants to fund its graduate programs. Their compensation, however, pales in comparison to that of the hedge fund managers who are compensated for their ability to make winning bets in asset markets. That is primarily a sum zero game. Society derives little benefit from that game. The bets that they win are some other investor's losses. They make a big contribution to Harvard's endowment when they have a good year, but Harvard's endowment suffers more than they do when they have a bad year. They have a much better financial deal than Harvard's faculty, which is responsible for Harvard's brand, and whom make a more substantial contribution to society. Something is wrong with this picture. It also should not be surprising that so many of our most talented students are attracted to careers in the financial industry. We reward talented gamblers more than we do talented professors who add value to society.