Research is great. Donating money to super-rich colleges like Harvard is still dumb.

Steve Hoffman thinks I owe hedge fund manager John Paulson a bit more slack for his decision to give $400 million to Harvard's engineering school. I, naturally, disagree. But Hoffman's piece was a useful reminder of some of the many reasons Paulson's donation was a huge waste that didn't make it into my original piece on the topic.

"Matthews is mistaken for one simple reason: he assumes universities only exist to educate students," Hoffman writes. Well, no, I don't assume that at all. Like Hoffman — who holds an adjunct appointment — I have a personal tie to Harvard, having graduated from the college, and with a couple of wonderful exceptions the faculty weren't particularly shy about signaling how little interest they had in undergraduate education. They were clearly just there for the research. But Hoffman's argument — "Harvard does research, research is good, giving to Harvard is good" — still fails, badly. Here are just a few reasons why.

1) Remarkably, Hoffman actually admits that Harvard isn't Paulson's best bet. "I'm not saying that handing Harvard a fortune is the best use of Paulson's money," he writes. "It's probably not. Like all places where cash is plentiful, money is wasted and fat could be trimmed." Exactly! Never donate to Harvard. Your money is always better used somewhere else.

2) We have no reason to believe that Paulson's donation will increase research spending at Harvard. For one thing, it's not even earmarked just for research. In Harvard's article announcing the gift, Paulson clarified that the donation was for "faculty development, research, scholarships, and financial aid."

The former two are potentially justifiable, if one is concerned with increasing funding for worthwhile research projects; the latter two are absolutely not. Harvard already has extremely generous scholarship and financial aid programs, expansion of which would only serve to reduce costs for affluent, upper-middle-class students. To the extent that Paulson's funds are used that way, they're wasted.

3) But it wouldn't have really mattered if the funds were specifically earmarked, because money is fungible, and Harvard already had a cartoonishly large endowment before Paulson's gift. It's completely possible — likely, even — that a world without Paulson's donation would see no less spending on engineering programs at Harvard, and that the gift merely freed up money that would have otherwise filled the same role so that it can be used for other, more frivolous things, like baking an 18-by-15-foot red velvet cake in the shape of an H for Harvard's 375th anniversary:

(Harvard University)

4) Let's suppose, though, for the sake of argument, that the gift actually would increase absolute spending on engineering at Harvard relative to a counterfactual world where the gift never happened. Let's suppose, also implausibly, that most of the money goes to research. To defend the gift, you still need to show that the private sector is underspending on computer science and engineering research relative to societal needs.

This contention is, at the very least, underproven. There's obviously a huge amount of private research spending in computing and various engineering-related fields — chemicals, biotech, etc. And much if not most of that spending is directly tied to consumer needs. Google spends huge sums researching self-driving cars precisely because it thinks consumers will use them and pay for them. Its incentives and the public's are pretty well-aligned.

5) Put another way, the nonprofit sector should only spend on research in cases of market failure. Some kinds of health research clearly qualify. For example, there are diseases where ongoing, costly treatment is going to be more profitable for pharmaceutical and other firms to provide than a vaccine would be, and in those cases there's a strong argument for charitable funding for research that the private sector is unlikely to provide itself.

It's much, much harder to think of equivalent examples in engineering and computer science, which is the kind of research Paulson's contribution is ostensibly funding. If a breakthrough in, say, machine learning would improve consumers' lives, why wouldn't the private sector be pursuing that breakthrough on its own?

6) If you squint hard enough, you can still see an argument for donating to Harvard once you consider all these factors. After all, Harvard does do basic biological research and medical research that doesn't merely crowd out research the private sector would do, and thus leads to real gains for society at large. Because money is fungible, donations to anything at Harvard help this kind of research ever-so-slightly on the margins.

But it's very difficult to believe that this would be a particularly effective way to boost that kind of research. A donation to, say, the Howard Hughes Medical Institute — which provides funding directly to well-regarded researchers working on important biomedical problems and does not simultaneously operate a finishing school for children of privilege — would almost certainly do more to increase net societal spending on worthwhile, underfunded research than a gift to Harvard would.

7) Similarly, if you're interested in boosting research on health delivery in the developing world — that is, in translating biomedical research breakthroughs into actually desirable outcomes in the field — your money would be much better spent helping groups like Innovations for Poverty Action or the Poverty Action Lab or even the Gates Foundation than an institution like Harvard, where your money, earmarked however you wish, nonetheless falls into a giant pot and is spent according to the preexisting priorities of the university leadership.

Good Ventures / Innovations for Poverty Action

Two kids in Kenya show they've swallowed their deworming pills. (Good Ventures/Innovations for Poverty Action)

8) Hoffman's dismissal of donating according to the recommendations of rigorous charity evaluators like GiveWell is pretty misguided. He argues that the Against Malaria Foundation, GiveWell's top charity, couldn't absorb $400 million on its own. Fair enough — the group's top charities have roughly $50 million in room for more funding, which Paulson could easily fill on his own if he so desired.

But GiveWell also has a companion institution, the Open Philanthropy Project, that's designed for much higher-scale giving. If Paulson is worried about overwhelming specific charities, he should donate his money to Open Phil, or to another large, highly effective foundation like Gates or Hughes. Scale isn't an excuse for giving to Harvard.

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