Friday, September 05, 2008

2 Things I Didn't Know Yesterday

by Andrew Gillen

The first thing I didn't know yesterday was that it is sometimes possible for individuals to have the officers that direct university endowments mange their investments as well. Felix Salmon points out (here but the background is here and here)- with the help of Anne Tergesen- various schemes by which they do this. He concludes:
there's a good reason for these options being largely underneath the radar screen: they're all basically ways of piggy-backing on the university's tax-exempt status. If they become too popular, there's always a risk that the IRS will start cracking down on them.

The second thing concerns something that's been bothering me for awhile now - the mini-controversy that is associated with the Consumer Price Index (CPI), which is widely used to adjust dollar figures from different years for inflation so as to allow direct comparisons. Years ago, the Bureau of Labor Statistics changed the method by which it is calculated, and conspiracy theorists have been arguing ever since that the changes were a way to mislead the public. What does this have to do with higher ed? A lot. If the CPI is wrong about inflation, then statements such as "tuition has doubled over the past X years after adjusting for inflation" wouldn't be valid. Thankfully, the BLS has responded to these claims. As James Hamilton notes, this thoroughly debunks the conspiracy theorists.

Bottom line: You can continue to use the CPI to adjust for inflation.

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