"Non-profit" doesn't mean you don't make any money, it means you spend all your money. I went to a tiny liberal arts college you've never heard of, with a 1300-student enrollment today. The president makes well over half a million dollars a year. There are half a dozen deans making anywhere from $75-250k. A career services department run by a six-figure employee who has never held a job outside of that college (for real). They're technically a non-profit but with a sticker price of $40k a year and actual per-capita revenue somewhere in the high $20's, that is a lot of money to spread around to administration while you have 150-person lectures taught by a $25k/yr adjunct.

Is this RPI?

No but I've actually heard very similar experience to folks that went there, although I don't think it qualifies as a liberal arts college.

Incentives are a lot more complicated than simply being non-profit = altruistic mission optimizing. The president makes a million bucks a year. Faculty pursue status, power, and resources for research or personal interest. Alumni often wish to keep their institution exclusive and elite to increase the value of their degree and average member of their community, and provide resources to their institutions (Donations) as a means of control over “mission”.

Of course, that’s all on the pretty cynical side and the majority of people I think are overall aligned with the mission of providing the best possible education and research environments. But, the above is where Scott is coming from, and certainly holds some water. Particularly in his area of academia ahem business schools ahem.

"Nonprofit" is a tax designation in the U.S. There is nothing in that designation which prevents those running the nonprofit from personally profiting greatly from their positions. There are limitations in the methods to gain such personal profit, but they far from forestall it. Wikipedia has a good overview: https://en.wikipedia.org/wiki/Non-profit_organization_laws_i....

I haven't read the link but I assume it means something like: The institutions do not have ownable shares that can be traded, and so ownership of the institution itself is not a profit-seeking endeavor (is it even "owned" at all?), but salaries are uncapped and so being employed by it can be?

There's more nuance to it but those are the basics.

Mind you, there are extra book-keeping rules. For instance, the highest salaries at an institution (and I believe salaries over a certain amount) and who is making them must be publicly disclosed.

They are non-profit, but bureaucracy begets bureaucracy. The growth in higher education from raised tuition partly goes towards better facilities, but most of the money is going towards administration. That, plus a competitive environment, has almost makes a zero sum game where colleges offer more services to attract a dwindling pool of full-pay students.

Perhaps you've heard the old quip about colleges with large endowments: a college is hedge fund with a small teaching arm attached to get the non-profit designation.

You don’t want to appear less premium. Hyundai increased their prices to make the Genesis seem like a luxury brand. It worked, their sales went up.

Not to mention Harvard has a $40 billion endowment on top of that.

At the end of the day, it's a way to not pay taxes.

Stakeholders are still getting paid in different ways: high salaries and job security, "administrator" jobs that shouldn't exist.

In other words, it's socialism.