Edwin S. Rockefeller (“but not one of those”) began his education in a one-room Quaker schoolhouse then went to Yale where he was in the class of 1948 with George H. W. Bush. He went on to Yale Law School then became an antitrust lawyer. Unless he was unusually precocious, he is about 90 and, in 2015, he published a book called “Yale and the Ivy League Cartel: How a College Lost its Soul and Became a Hedge Fund.”

A few weeks ago I went to see him speak and stayed to have lunch with him. I just finished reading his book, which begins with a note of appreciation to Herman J. Lippke and William Brinkerhoff Jackson, “who provided the money and made possible my college education.” Definitely not one of those Rockefellers.

This Mr. Rockefeller is not very happy with Yale’s current direction, and both his book and his talk happened before the recent firestorm about safe spaces and free speech. One can but imagine a sequel.

Yale is a Brand

Yale is a valuable brand at least in part because it is associated with wealth, power and membership in an elite cadré of graduates including five U.S. Presidents, 19 Supreme Court Justices, 13 living billionaires, 52 Nobel Prize winners and 230 Rhodes Scholars to say nothing of John Kerry and Hillary Clinton.

Telling almost 94% of applicants they are not good enough to go there enhances the value of the brand. Never mind that drumming up extra applicants and counting even those who take barely any steps to apply fattens up the denominator of the acceptance rate fraction. Yale is only for the very best, and most years it raises the price to prove it. After all, if you only sell your product – the branded Yale diploma accompanied by the permanent resumé line – to 6% of potential buyers, price-cutting is low on the list of suggested business strategies. And, if the diploma does not suffice, Mom can always slap the bulldog sticker on the back of her SUV to one-up the other players in her tennis group.

This might be a good moment to put to rest the legitimate accusation of being a Harvard guy who just wants to pick on Yale. Harvard does all of the same things of which Mr. Rockefeller disapproves and, as we will see later, a Harvard President had a significant role in what appears to be a favorable but unfortunate policy decision. Yale is the subject of this book but any number of other SUV sticker colleges could just as well have been.

Old Yale New Yale

If you are circling 90, chances are you might not think much of Yale’s current direction. On the other hand, the opinions of 90-somethings rank low on the list of undergraduate concerns especially when they say, “sex without constraint was welcomed on campus.”

Interestingly, Elihu Yale, whose donation bought him the naming rights, made a fortune with the British East India Company, which was not exactly a paragon of virtue in the treatment of the downtrodden. It might create a spot of bother for the Yale brand burnishers if the new Puritans on campus decide that Elihu has to go the way of Woodrow Wilson at Princeton.

Whitney Griswold (Yale President 1950-1963) and Kingman Brewster (1964-1977) draw special fire for doing more to dismantle the Old Yale than anyone by “replacing values with academic freedom and religion/capitalism with an omnipotent caring government.”

But Rockefeller is not alone in his concern. Lee Bass (Yale ’79) gave $20 million to Yale for a Western Civilization curriculum. According to The Wall Street Journal, “Between 1991 and 1995, Mr. Bass repeatedly sought assurance that his money wouldn’t be dumped into multicultural education. He kept asking the university president, Richard Levin, when the program will materialize. When it became clear that the liberal faculty’s objections to Mr. Bass’s gift had won the day, he asked for his money back.”

Benno Schmidt, Yale’s President when the gift was solicited, later told The Wall Street Journal, “The greatest threat to academic freedom today is not outside the academy, but from within. … The assumption seems to be that the purpose of education is to induce correct opinion rather than to search for wisdom and to liberate the mind.”

Though the author began his book with the Old Yale New Yale discussion; he barely mentioned it in his talk and we should follow his lead to get to the more important points.

Financial Aid

What a lofty idea. It suggests that actual money contributed by donors is given to needy students to permit them obtain an education. Does it make a difference to your feeling – or more importantly to your generosity (if you happen to be an alum) – to know that no actual money changes hands? Financial aid, a.k.a. a scholarship, is in fact nothing but a discount offered to desired students whose families can’t afford the artificially inflated sticker price charged to wealthier ones.

The whole point of a brand is to make people pay far more for a product or service than it costs make or provide it. If the brand is working well enough that 16 people want each available place, how much relationship do you think there is between to sticker price and the cost of providing the service? If you failed to answer “none” to that question you are more likely one of the 16 who did not get in to Yale than the one who did.

But surely competition with other colleges limits the ability any one college to raise prices endlessly?

Not so fast. And this is where Edwin Rockefeller’s book becomes really important.

The Cartel

As with so much that is wrong with today’s higher education, we begin with sports. In 1852, Harvard and Yale competed in a boat race and, in 1875, they followed with a football game. Ivy league competition began after World War II.

“An athletic league to preserve sports competition between real college students rather than school-sponsored professional athletes provided a foundation on which to form a tuition price-fixing cartel. From agreement not to compete on price for athletes it was an easy step to agreements on prohibition of price competition for ANY (sic) student. The result is a cartel that prevents price competition and denies to students any opportunity to choose between the schools in the league on the basis of price.”

By 1958 it became clear that some students whom these colleges wished to admit could not afford to attend. If they were unable to afford the sticker price, they could be offered a discount so long as the practice did not get out of control.

Enter the Ivy Overlap Group consisting of the eight Ivy colleges plus MIT. Stanford was also invited to join as it was thought to compete for the same students, but to its credit, Stanford declined thinking the arrangement a violation of the antitrust laws.

The purpose of the Overlap Group was to compare the discounts (scholarships) offered to students admitted to multiple group member colleges to assure that none was out of line with the others. Sticker price fixed. Discount fixed. Bye bye price competition.

Enter the Justice Department

In 1989, during the administration of George Bush (Yale ’48), Attorney General Dick Thornburgh (Yale ’54) looked into the Ivy Overlap Group and concluded that its practices, especially the periodic meetings at which discounts were negotiated, violated the federal antitrust laws.

Negotiations carried on for several years highlighted by Harvard President, Derek Bok, a professor of antitrust law, telling the Attorney General that Bok knew more about both antitrust law and higher education than did the AG. True or maybe apocryphal, the exchange certainly enhances the Harvard arrogance brand.

Unsurprisingly, the negotiations were fruitless and the Department of Justice filed suit. Chief Judge Louis Charles Bechtle found for the Department of Justice and held that the Ivy Overlap Group was in violation of the antitrust laws. The decision was appealed by MIT after the others gave up, but the appeal was rejected 2-1 by the Court of Appeals. There was no appeal to the Supreme Court.

Exit the Justice Department

Should you ever reincarnate as a really long-term institution, for example, a religion or a college, remember the advice of Kenny Rogers: “know when to hold ‘em, know when to fold ‘em.” The colleges waited out the Bush administration — populated as it was with Old Yale values — in hopes the incoming Clinton administration — populated as it would turn out to be by those who might be a bit more New Yale — would prove to be more … understanding.

It was a wise strategy as the DOJ under Clinton settled with the colleges by saying (more or less) “well done boys keep up the good work.” True, the meetings to fix the discounts could no longer happen but they became unnecessary after the federal government took over the management of financial aid forms.

Rockefeller concludes his book with the words, “There is no life left in Derek Bok’s claim that Yale is not engaged in trade or commerce subject to the Sherman Act. The devious action of the Clinton administration of quietly washing out the success of the first Bush administration attacking it should be reversed.”

The Impact

According to Vance H. Fried of Oklahoma State University, “Undergraduate education is a highly profitable business for nonprofit colleges and universities. They do not show profits on their books, but instead take their profits in the form of spending on some combination of research, graduate education, low-demand majors, low faculty teaching loads, excess compensation, and featherbedding. The industry’s high profits come at the expense of students and taxpayers.”

Worse, some of America’s most prestigious colleges have successfully raised the price bar for all of the others. True, Professor Fried’s Oklahoma State might not get away with the same sticker price as Yale, but it can use the same model to inflate the price from what it was before.

Meanwhile total student debt is now more than $1.2 trillion as President Obama renewed the federal law that permits the settlement to continue. Yet the wife of the President who worsened the situation vies with her socialist opponent to outdo each other in calling for free college.

Sounds like Mr. Rockefeller’s Old Yale approach to solving this problem might have been better than Mr. Clinton’s New Yale approach.

Two End Notes

One: If you are circling 70 and fumbling around with writing, there is a well-deserved place on a pedestal for Edwin Rockefeller who is writing informatively and successfully at age 90. Thanks for the inspiration. If he does write a sequel, order an advance copy. Thanks as well to Herman J. Lippke and William Brinkerhoff Jackson, who provided the money and made possible Rockefeller’s college education. They made a wise investment.

Two: Today I saw a full-page ad in Harvard Magazine. It depicts the statue of John Harvard under the headline, “Earn Double Points on Every Gift to Harvard.” The ad continues, “Now you can earn double points on any gift you make to Harvard University with your Harvard Alumni World MasterCard. Take advantage of the only card designed exclusively for Harvard Alumni, featuring no foreign transaction fees, no annual fees and exceptional travel rewards. For more information or to apply for your Harvard Alumni Card, please go to harvardcard.com.”

I am far too Old Yale for that.