The recent college admissions scandal is spectacular in its size and scope, but hardly surprising. Let me make four major points.
Whenever there are scarce resources in much demand and a non-market solution is used to allocate those resources, there are bound to be problems.
At the schools involved in this admissions scandal, there are probably at least five applicants for every student admitted. In a competitive market, prices will be forced up to the point that the number of buyers equals the quantity supplied. Harvard has an Admissions Committee; McDonald’s does not. Selective universities gain prestige by turning away customers. Universities deliberately sell their services at below equilibrium prices, benefiting mainly relatively affluent kids who make up the bulk of the applicant pool. Admission to a top-ranked school may be worth one million dollars over four years, yet is sold by the school for dramatically less ($250,000 or less). Therefore, some parents think it makes good sense financially to use shady, morally reprehensible means of achieving admissions.This is particularly true for those wanting in the very top schools. Raj Chetty and his team of researchers have estimated the average family income of students at many Ivy League schools is about $500,000 a year (the median is “only” around $200,000). Rich kids want to network and bond with other rich kids, and if necessary, using an unscrupulous “private admissions counselor” to bribe your child into Elite U is money well spent. It is unfair, immoral, and prevents admission of some more deserving kids – but it happens. And rich kids then network with other rich kids and get super jobs through family connections.
This problem has existed at some level for decades, probably as long as there have been selective admissions.