Given the current preoccupation in the United States with economic inequality, it is natural that a certain amount of attention has turned to higher education, and the fact that America’s most prestigious universities no longer really serve as a conduit for class mobility. Thomas Frank, for instance, has been on a tear (here and here) complaining in particular about the fact that tuition rates have gone up 1,200 per cent over the past 30 years. But he – along with all other American commentators that I’ve read – misses a more obvious problem. Even if America’s best universities stopped charging any tuition at all, it would hardly make a dent in social inequality. That’s because it would leave unaffected the most fundamental problem with America’s elite universities, which is that they have almost no students.

Canadians are used to hearing lamentations from south of the border about how competitive parenting has become in the United States – how if you want to get you kid into Yale, you have to start early, with a nanny with a BA delivering “enriched” care, piano or violin lessons, and entry into the most selective kindergarten as a gateway to the better private schools. Many Canadians think that’s a bit weird – after all, if you want to get your kid into a comparable school in Canada, like McGill or University of Toronto, it doesn’t seem to be that hard.

But of course there’s a reason that it’s so difficult to get into Yale – it’s because Yale has only 5,400 students, in a country of over 315 million people! By contrast, McGill has over 30,000, and University of Toronto has 67,000 undergraduates, serving a country of only 35 million people. That means there’s roughly one spot at Yale for every 58,000 Americans, compared to one spot at McGill for every 1,100 Canadians. No wonder American life is more competitive.

Furthermore, all of the best schools in the United States are tiny. Here is a list of the top 10, as ranked by U.S. News & World Report, along with the number of students (undergraduate, I believe):

Princeton: 5,336

Harvard: 6,658

Yale: 5,405

Columbia: 6,068

Stanford: 7,063

Chicago: 5,590

Duke: 6,655

MIT: 4,503

Upenn: 9,682

CIT: 997

Dartmouth: 4,193

That means the top 10 universities in the United States – a country of over 315 million people – at any given time are educating a grand total of only 62,150 students.

By contrast, here are the rough numbers of undergraduates at the top 3 Canadian universities:

McGill: 30,000

UBC: 47,500

UofT: 67,000

So the top 3 Canadian schools are at any given time educating a grand total of 144,500 students – more than twice the total of the top 10 U.S. schools. (In fact, the University of Toronto alone has more student capacity than the top 10 U.S. schools combined.) The United States has almost exactly 9 times the population of Canada, so in order to have the same sort of capacity in higher education, the top 27 schools in the United States would have to have 1.3 million students.

The other striking thing about U.S. universities is that they easily have the facilities to handle several times more students than they are currently enrolling. I was at Princeton earlier this year, which apart from being very posh, has a campus that is probably three times the size of McGill’s, with certainly quite a few more buildings. As a Canadian, if you asked me to look at their physical infrastructure and guess how many students they have, I would have said 35,000. The fact that they have fewer than 5,500 is ridiculous. And Princeton is not even that big. Duke is enormous, like a vast, sprawling country club. It seems to me they should be able to handle 50,000 to 60,000 students without batting an eyelash.

Part of the problem stems from the fact that these schools are private non-profit enterprises. One of the problems with non-profits is that they tend to become overcapitalized. They have to earn sufficient revenue to cover their expenditures, but because they have no owners or investors they do not have to cover the “cost of capital.” As a result, the capital tends to just pile up over time, since no one cares whether it is being put to good use.

Whenever I walk around a fancy U.S. university, the one word that always springs to mind is: overcapitalized.

What is perhaps even more wasteful than the overcapitalization with respect to physical infrastructure is their overcapitalization with respect to human capital. Again, the faculty at these universities could easily teach 5 to 10 times more students – there are important economies of scale in university lecturing. But instead, the top 10 U.S. schools hoover up all of the best and brightest, then sequester them so that practically no American students have any access. It’s an unfortunate misallocation of resources. Imagine that Hollywood studios made amazing movies, but then let only a couple thousand people see them – at a cost of $50,000 per ticket. This might be a viable business model, but it certainly wouldn’t be maximizing social welfare.

Now without getting too ad hominem, I would just like to point out that many of the players in the recent debates over inequality in America teach at some of the universities listed above (I’m looking at you, Paul Krugman). One simple way that they could make a tangible commitment to reducing this inequality would be to press for a dramatic expansion in the student population. At University of Toronto, we effectively doubled the size of our two suburban campuses – from 7,000 to around 15,000 students each – over a period of under five years. The top U.S. schools could easily do the same. To the extent that they don’t, it’s a tacit admission that their basic business model is not really one of education, but rather of rent extraction.