Legacy admissions are pure capitalism — and they might be on their way out

When is capitalism illegal? According to the Biden administration, the answer might be found in college admissions.

Why it matters: Allocating scarce resources to the rich is unremarkable elsewhere in the economy, but is increasingly anathema in the Ivy League.

Driving the news: The U.S. government is investigating whether legacy admissions — a preference that disproportionately benefits the white and wealthy — are a civil rights violation.

• The news comes after not-particularly-surprising revelations that the children of the 1% are much more likely to get into top schools than mere members of the upper middle classes.
• Be smart: Even if the rich kid pays exactly the same tuition fee as the middle-class kid, her expected total lifetime value to the university — including all future donations — can be an order of magnitude higher.

The big picture: Capitalism has a standard solution for allocating anything that is both highly desirable and extremely scarce (a Harvard diploma, say) — it goes to the people who can afford to spend the most money trying to procure it.

• That's uncontroversially true in secondary education, where attendance at elite and expensive "feeder" schools is dominated by the children of the ultra-wealthy — in itself, a way to try to buy admission to top colleges.
• Similarly, money buys a head start in everything from golf to foreign-language development — skills that top colleges like to see in applicants.

The other side: Even as the rich try to get into the best universities, the best universities also want to attract the rich. After all, their main source of donations is rich alumni, and especially alumni with multi-generational wealth.

• Cultivating those alumni across decades and generations is a very effective way to raise the kind of money that allows a university to stay at the top of the rankings.

Between the lines: The argument around legacy admissions, like the recent Supreme Court affirmative-action case, is fundamentally centered on questions of fairness and equality of opportunity.

• If universities cannot actively shape their student bodies for reasons of diversity, then it stands to reason that they shouldn't be able to do so for financial reasons, either — especially when they receive government funding for their research.

The bottom line: The attack on legacy admissions comes as college finances are more precarious than ever.

• While elite institutions hog the spotlight, the competing imperatives of fairness and solvency will be much more existentially important for those lower down the pecking order.