Lawsuit Says 16 Elite Colleges Are Part of Price-Fixing Cartel

 

The federal lawsuit against Yale, M.I.T. and other colleges is the latest legal action to question admissions practices

By Stephanie Saul and Anemona Hartocollis of The NY Times. Excerpts:

"A lawsuit filed in federal court on Monday accused 16 of the nation’s leading private universities and colleges of conspiring to reduce the financial aid they award to admitted students through a price-fixing cartel."

[It] "takes aim at a decades-old antitrust exemption granted to these universities for financial aid decisions and claims that the colleges have overcharged an estimated 170,000 students who were eligible for financial aid over nearly two decades.

The universities accused of wrongdoing are Brown, the California Institute of Technology, the University of Chicago, Columbia, Cornell, Dartmouth, Duke, Emory, Georgetown, the Massachusetts Institute of Technology, Northwestern, Notre Dame, the University of Pennsylvania, Rice, Vanderbilt and Yale.

The allegations hinge on a methodology for calculating financial need. The 16 schools collaborate in an organization called the 568 Presidents Group that uses a consensus approach to evaluating a student’s ability to pay, according to the lawsuit.

Under federal antitrust law, these universities are permitted to collaborate on financial aid formulas if they do not consider a student’s ability to pay in the admissions process, a status called “need blind.” The group’s name is derived from a section of federal law permitting such collaborations: Section 568 of the Higher Education Act.

The suit claims that nine of the schools are not actually need blind because for many years, they have found ways to consider some applicants’ ability to pay.

The University of Pennsylvania and Vanderbilt, for example, have considered the financial needs of wait-listed applicants, the lawsuit says. Other schools, the lawsuit says, award “special treatment to the children of wealthy” donors, which, given the limited number of spots, hurts students needing financial aid.

The lawsuit claims that the actions of these nine schools — Columbia, Dartmouth, Duke, Georgetown, M.I.T., Northwestern, Notre Dame, the University of Pennsylvania and Vanderbilt — render the actions of all 16 universities unlawful, turning it into what the suit calls “the 568 Cartel.”

“Privileging the wealthy and disadvantaging the financially needy are inextricably linked,” the suit said. “They are two sides of the same coin.”"

Related post

Threat of anti-trust investigation leads colleges to compete more for students (2019)

Why Are More Performers Selling The Rights To Their Music? Maybe Tax Laws

 

See Primary Wave Turns Up the Volume on Music Deals: Music publisher invests in Paul Rodgers, America song catalogs and plans more acquisitions by Anne Steele of The WSJ. Excerpts:

"There is still an appetite for deals this year given high valuations and uncertainty about timing for possible tax adjustments. A special provision for musicians who sell self-created works means they owe capital-gains tax rates of 20% on the sale. That compares with owing ordinary tax rates of up to 37% each year on the royalty income they get from streaming, licensing and other uses of their works. That artist advantage is unlikely to change in the short term as it isn’t a part of significant pending legislation, but other tax laws could change.

President Biden’s Build Back Better bill, currently stalled in Congress, would impose a 5% tax on adjusted gross income above $10 million and an additional 3% on income above $25 million, and those rates would apply to the capital-gains income that musicians get when they sell their song rights. Under the version passed last year by the House, those increases were slated to start on Jan. 1, 2022, and that effective date could still become law, even if the bill isn’t finished for a while.

Artists who are closing deals this year are taking a risk that their income could be subject to the higher rates. But with the legislation stalled, lawmakers could reconsider that date and other details. They haven’t made any decisions yet."

Bruce Springsteen, for example, recently sold his master recordings and music publishing rights to Sony for $500 million. I assume an artist would not sell their music for less than the amount of future income it would generate.

But that future income would get taxed at 37%. Selling it now means they only get taxed 20%. So that is a good deal for the artists.

The company buying the music could come out ahead if they pay a little less than what the music is worth because the artist does not need the full price. Why not? Because they are getting such a good tax deal they can sell it for less than it is worth.

If your music is worth $100 but you sell it for, say, $90, you still come out ahead. If you earned $100 by keeping the music, you pay $37 in taxes and you are left with $63. But if you sell it for $90 and only get taxed 20%, you pay $18 in taxes. That leaves you with $72, more than $63.

A Special Valentine's Message On Romantic Love

But first some links to related news stories:

The first one is Researchers at AAAS Annual Meeting Explore the Science of Kissing. The following quote gives you an idea of what it is all about: "Kissing, it turns out, unleashes chemicals that ease stress hormones in both sexes and encourage bonding in men, though not so much in women." I guess economists call this "interdependent utility functions." Meaning that what brings one person pleasure brings brings the other person pleasure, and vice-versa.

The other is Cocoa Prices Create Chocolate Dilemma. (that is from 2009) The article opens with "Soaring cocoa prices are creating a Valentine's Day dilemma for chocolate makers. They don't want to raise retail prices when recession-weary consumers are trying to limit their spending." The problem is crop diseases in Ivory Coast and Ghana. You might need to be a WSJ subscriber to read the whole article.

Here is a new article from yesterday's San Antonio Express-News (2-13-2011). Romance in bloom at workplace: Survey indicates 59% have taken the risk-filled leap. It seems like many people admit to having a romance at work and/or meeting their spouse at work. So what starts out as economic activity leads to some other needs being met.

Now the economic definition of romantic love.

 Abstract: "Romantic love is characterized by a preoccupation with a deliberately restricted set of perceived characteristics in the love object which are viewed as means to some ideal ends. In the process of selecting the set of perceived characteristics and the process of determining the ideal ends, there is also a systematic failure to assess the accuracy of the perceived characteristics and the feasibility of achieving the ideal ends given the selected set of means and other pre-existing ends.

The study of romantic love can provide insight into the general process of introducing novelty into a system of interacting variables. Novelty, however, is functional only in an open system characterized by uncertainty where the variables have not all been functionally looped and system slacks are readily available to accommodate new things. In a closed system where all the objective functions and variables must be compatible to achieve stability and viability, adjustments in the value of some variables through romantic idealization may be dysfunctional if they represent merely residual responses to the creative combination of the variables in the open sub-system."

The author was K. K. Fung of the Department of Economics, Memphis State University, Memphis. It was from a journal article in 1979. More info on it is at this link. The entire article, which is not too long, can be found at this link.

Then there was this related article: Love really is blind, U.S. study finds. Here is an exerpt:

"Love really is blind, at least when it comes to looking at others, U.S. researchers reported on Tuesday.

College students who reported they were in love were less likely to take careful notice of other attractive men or women, the team at the University of California Los Angeles and dating Web site eHarmony found.

"Feeling love for your romantic partner appears to make everybody else less attractive, and the emotion appears to work in very specific ways in enabling you to push thoughts of that tempting other out of your mind," said Gian Gonzaga of eHarmony, whose study is published in the journal Evolution and Human Behavior.

"It's almost like love puts blinders on people," added Martie Haselton, an associate professor of psychology and communication studies at UCLA."

More links:

How to Be a Better Valentine, Through Economics by economist Paul Oyer.

Here’s what science says is the secret ingredient to making your love spark 

Can Giving Up Money And Material Things Lead To More Love?

What Do Men In China Need To Get A Bride?

Adam Smith, Marriage Counselor

A Special Valentine's Message On Romantic Love

Can You Put A Price Tag On Love?

Do Opposites Attract? Not Usually, Except Maybe When It Comes To Money

Return of the Love Headhunters

eHarmony To Provide Personal Counselors To Help You Find Mr. Or Ms. Right

Economist Paul Zak, aka Dr. Love (he studies the brain with "neuroeconomics")

This is your brain on love   (brain scans and biology seem to confirm the economic definition given above)

Dollars & Sex: The Blog of Economist Marina Adshade

Do Women Really Value Income over Looks in a Mate? by Marina Adshade

Is There A Booze Shortage?

See Don Julio Tequila Maker Diageo Is Running Low on Booze That Takes Years to Make: Owner of Crown Royal whisky faces shortages resulting from high demand during the pandemic by Saabira Chaudhuri of The WSJ (Appeared in the January 28, 2022, print edition as 'Pandemic Run on Booze Leads to Shortages.'). Excerpts:

"The world’s largest spirits maker is running low on some of its products.

Diageo PLC said soaring pandemic demand is depleting stocks of Crown Royal whisky, Lagavulin Scotch and Don Julio tequila. These bestselling brands can take months or years to age before hitting liquor-store shelves, making it hard to quickly increase production.

Diageo said it also hasn’t had enough bottles to package up Bulleit bourbon to meet demand. It is separately grappling with higher costs for aluminum and cereals that go into the booze-making process. Shipping and energy bills have climbed.[the rise in costs will reduce supply-CM]

To make up, Diageo is raising prices in some markets, including the U.S."

"“The constraint is simply on being able to meet very high demand, said Chief Financial Officer Lavanya Chandrashekar”"

"Manufacturers across industries and regions have faced similar constraints. Pandemic-induced shortages and price jumps have occurred at times for basic commodities like toilet paper and lumber and for bigger ticket items like hot tubs and used cars."

"While bars and restaurants have been closed off and on for the last two years, in the U.S. spirit sales at groceries, liquor stores and online have ballooned."

"consumers who couldn’t spend on concerts, travel or watching live sports instead bought upscale spirits to drink at home."

"Despite the supply-chain constraints, U.S. sales of Crown Royal rose 12% in the second half of last year, compared with a year earlier"

It seems that there actually is not a shortage. The article indicates that there has been both an increase in demand and a decrease in supply. This will cause prices to rise. But if demand increases more than supply decreases, quantity will increase. This may have happened since sales did increase (although it is not clear if that 12% increase is a dollar amount or a quantity amount).

Where the article says Diageo is "running low on some of its products" and "Diageo PLC said soaring pandemic demand is depleting stocks of Crown Royal whisky" it does not mean that there is a shortage.

A shortage means that price is below where supply and demand intersect. But what the article does say is that price went up. And again, that is what we expect to happen when demand increases and supply decreases. With price going up, it is not likely that there is a shortage. 

Related posts:

Car makers face ‘chipageddon’ (2021)  

Does the U.S. have a firefighter shortage (2021) 

Cold Snap Sparks Record Rise in Natural Gas Prices in Asia (2021) 

There is no truck driver shortage in the US (2021) 

Is there a shortage of homes? (2020) 

Is there really a shortage of construction workers (2019) 

Was there really a shortage of meatless burgers? (2019)  

What Chocolate Shortage? Cocoa Prices Steady as Record Output Projected (2019)  

Is There A Christmas Tree Shortage? (2017)  

Is There Really A Honey Bee Shortage? (2013)  

Will There Be A Pumpkin Shortage This Year? (2011)