Harvard’s Muddled Cheating Scandal

On Friday, Harvard University announced that it had imposed academic sanctions on dozens of students involved in a cheating scandal.  The back story tells you a lot about the state of modern education — even at an exalted academic institution like Harvard.

The incident involved an undergraduate course called “Introduction to Congress” that was seen as a gut course — that is, an easy A.  The scandal came to light when a teaching assistant for the course noticed that students may have shared answers to the “take home” final exam.  After an investigation that took months, Harvard’s academic integrity board announced that a number of students were required to withdraw from the school for several terms, others were put on probation, and others received no disciplinary action at all.  The President of Harvard’s Undergraduate Council says that the withdrawing students shouldn’t feel “alienated” from Harvard and should be embraced when they return.

A letter from a Harvard alum about the scandal raises some interesting questions.  According to his letter, the professor teaching the course had previously encouraged “open collaboration” on his exams.  He then changed the rules to say that the students couldn’t collaborate with professors, teaching fellows, “and others,”  the letter alleges, but some teaching fellows for the course nevertheless went over the exam in open sessions with students.  The vaguely defined rules, the letter suggests, led students to engage in lots of collaboration — although even the letter writer concedes that some students “went too far, literally cutting and pasting their answers.”

What does this incident say about Harvard?  For one, it tells you something about its academic rigor.  A class called “Introduction to Congress” that encourages “open collaboration” and features a “take home” final exam that TAs discuss with students beforehand sounds more like a community college course than an Ivy League offering.  It also tells you something about Harvard students.  Even with a basic subject area that is taught in every American high school and the luxury of a take-home final, some students were so dim-witted and unprincipled they thought they could get away with cutting and pasting answers of other students.  The students don’t exactly come out of this sounding like the cream of the crop, do they?  And finally, it tells you something about the hidebound nature of colleges, and the general atmosphere on campuses, that the investigation of a cheating scandal takes months and even students who blatantly cut and pasted answers are only required to withdraw for a few semesters, to be “embraced” on their return.

If Harvard, and other American colleges, don’t want to be seen as diploma mills, how about taking this approach:  have a meaningful honor code, offer challenging courses, require students to appear in the classroom for the exam and write their answers on paper, act promptly when potential cheating is detected, and punish those who violate the rules rather than telling them they will be welcomed back with a hug.

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Not Smart (Cont.)

I’ve written before on the enormous losses Harvard recently sustained as a result of the investments of its endowment funds and capital accounts.   The Boston Globe has now published an article on how the losses happened.  It’s a familiar story and good lesson for anyone managing their 401(k) account.  People made aggressive investments notwithstanding cautions about risks, the aggressive investments produced very strong returns for a time, and the investment decisionmakers overlooked the risks, focused on the returns, and then took an uppercut when the markets went south.  They forgot the basic questions all investors should ask:  what am I looking to achieve with my account, and how much risk am I willing to take to try to achieve that goal?  These questions should be asked regularly — not just when the markets experience a downturn.

Not Smart

Harvard University has announced that it paid hundreds of millions of dollars to get out of interest rate swaps.  The school also said that its General Operating Account, which is the principal account that funds the schools’ operations, lost close to half its value in the last fiscal year, falling from $6.6 billion to $3.7 billion.  The value of the school’s endowment fund, on the other hand, dropped from $36.9 billion to $26 billion during the fiscal year.

What’s interesting about this story is not that Harvard’s investment accounts lost value — virtually all investment portfolios, except those invested exclusively in gold, have declined in value since the economy and the credit markets hit the wall last fall — but how much Harvard has lost and the nature of its investments.  Any kind of swap investment is risky; you really have to know what you are doing and what the potential downside risks are to make a properly informed investment decision.  It is curious that Harvard would invest hundreds of millions in interest rate swaps.  You have to wonder if its investment advisors really described the risks to the university body that oversees investments and, if so, whether that body really understood those risks.  As for Harvard’s endowment, losing more than $10 billion in one year is extraordinary.

Many colleges and universities have been aggressively raising money to up their endowments, and it appears that they have been investing those funds with, perhaps, even more aggressiveness.  That seems to defeat the traditional purpose of an endowment fund, which is to provide a financial cushion and regular investment income for the institution.  Given that purpose, you would expect endowment funds to be invested more conservatively, and not in a way in which the endowment fund could conceivably lose more than 25 percent of its value in one year.

If you have been a contributor to a university’s endowment fund, only to see the value of your contribution go poof in the past year, what do you say when the college comes back to you this year to ask for help?