The Whole Elite-School Racket And FTX

I left off yesterday wondering if the whole elite-school racket, which earlier fraudsters like Madoff, Lay, and Kozlowski avoided, has anything to do with some of the less familiar features of the FTX scandal. I referred to David Brooks's 2000 Bobos in Paradise: The New Upper Class and How They Got There, which bases his argument on what might be called the bourgeois-optimistic interpretation of elite-school admissions: after World War II, James B Conant reformed the Ivy admissions process by introducing the Scholastic Aptitude Test, which devalued the role of money and social standing in determining who got into Harvard, Yale, Chicago, Stanford, MIT, and the like, and instead stressed merit and ability.

At the same time, the Ivies are thought to have dropped Jewish quotas, which allowed Jews to increase their presence on campus and qualified them in greater numbers for careers at upper levels in business and government. One needed to look no farther for confirmation than Brooks himself, from a Jewish family but admitted to Chicago purely on merit. Brooks doesn't hesitate to say that the Bobos, bourgeois bohemians, baby boom Jews from elite schools, became the new US upper class, and this is a Good Thing.

Alan Dershowitz, a much smarter guy than Brooks, offered a different take on Conant, the SATs, and Jewish quotas in his 1991 Chutzpah. In his view, the elite schools made good publicity for themselves by seeming to abolish Jewish quotas, but in fact they simply fudged their admissions criteria to accomplish the same ends: instead of directly ruling out applicants with identifiably Jewish surnames or aquiline features in their application photos, they claimed to stress applicants from outside the Northeastern cities and suburbs in order to achieve "diversity" and cancel out factors like the toublesome SAT scores themselves. Jewish quotas continue, but just with a different name -- and in their objective they now apply to Asian applicants as well.

Jerome Karabel's 2006 The Chosen: The Hidden History of Admission and Exclusion at Harvard, Yale, and Princeton in part echoes Dershowitz, but it goes much farther to argue that admissions departments put applicants into "basket" categories whose criteria and proportions are closely guarded secrets. There are occasional controversies that spill into the public forum -- several years ago, it was revealed that Dartmouth had reduced the number in the athletic "basket", athletes specifically recruited by coaches for the incoming class, in order (presumably) to increase the size of the academically gifted "basket", but where either basket stood in relation to other baskets, and what those other baskets comprised, was never explained.

Karabel, though, argues that legacy "baskets" for offspring of alumni are still highly important, as are "baskets" for offspring of donors who intend simply to buy a spot for their children in the incoming class -- the cost of this route, although presumably in the multimillions, is nevertheless completely legal and tax deductible as well. This is in contrast to the celebrities who didn't have the resources to endow a football stadium but felt a lesser amount in bribes to the right people could get their kids in as easily; this, however, was illegal.

It's hard to avoid thinking that the Varsity Blues scandal exposed only the tip of the iceberg. On one hand, it left aside the question of why lots of money via the right channel -- say, endowing a computer center -- can assure one child completely legal admission, while less but still significant money paid to a volleyball coach is against the law. And what the Varsity Blues scandal completely left aside was the question of how all these policy routes that bypass transparently meritocratic admissions can thrive, which they continue to do.

This brings me to Caroline Ellison, Sam Bankman-Fried, and FTX. I noted yesterday that they're the offspring of David Brooks's bourgeois-bohemian "new upper class", people who at least according to Brooks have risen entirely on merit. And we'd be entitled to think this was the case if the university system were in fact provably transparent and meritocratic, which it definitely isn't.

Let's just take the peculiar case of the parents, the Ellisons and Bankman-Frieds, both of whom are in the remarkable circumstance of being married to each other and together on the faculties of elite schools -- and not just on the faculty, but in the same department. There are marked class divisions on faculties, the first between those on the tenure track and those like graduate assistants and adjuncts who are not. Then there's the distinction between those who can earn tenure and become associate professors and those who are promoted to full professor -- but then there's the distinction between those with an endowed professorship ("Harley Throckmorton Distinguished Professor of Blahblah") and those who are simply full professors.

But the absolute pinnacle are the Ellisons at MIT: Glenn Ellison is the Gregory K. Palm Professor of Economics at MIT, and his wife, Sara Fisher Ellison, is currently described as "also an economist at MIT", although for whatever reason, I haven't been able to reach her faculty listings on the MIT website, quite possibly due to the current publicity over their daughter. If two faculty members are married in the same department at the same university, it frequently means that one spouse has been hired effectively to grant the other a family income that exceeds university limits on individual faculty pay.

Thus a Harvard or Yale may wish to recruit a pinnacle-level academic, who wants to be paid N. However, the university's policy limits professor pay to N - Y. But if they can work out a deal where they can also hire the prospect's spouse for Y, the total family income will reach N, and they can hire the big gun. This leaves aside the question of how the typical elite school like Stanford or MIT, with multibillion-dollar endowments, would be so parsimonious in its faculty salaries while maintaining informal means of bypassing that parsimoniousness. My own view is that the academic world loves corruption; it breeds it. If there were hiring and salary policies that were models of transparency, the deans would seek out ways to undermine them, and not even for their personal benefit, just on general principle. That's just how the academy runs.

We may assume the Bankman-Frieds, married and teaching together at Stanford Law, are in a similar enviable position. They're powerful people; they have cronies, contacts, and enablers across the world university system and beyond. My assumption is that their ability to place their utterly unpromising and incompetent children at elite schools is just one indication, though not a small one, of their standing in a corrputed and interdependent system. I've got to wonder what their kids picked up from that family environment.

Bobos in paradise indeed.