In the highly competitive global market for college students and faculty, Harvard is the leader. A major consulting firm that was hired to advise Oxford (I think it was McKinsey & Co.) found that Oxford could potentially compete with any institution in the world except Harvard. In a business obsessed with rankings, Harvard sits on top, and everyone else emulates it.
President Larry Summers was popular with students (Harvard’s “customers”), but unpopular with faculty (the employees). He was forced out by the Trustees, who have a fiduciary duty to protect the institution. Although we know that students never have much clout, it’s a bit of a puzzle that the faculty should prevail in an organization that is so successful at attracting student-applicants.
Of course, it’s possible that Summers was forced to resign because he was wrong on the merits, and the Trustees saw that. I suspect, however, that the issue was not his comments about women scientists or his confrontation with Cornel West (on which the Trustees might have thought he was wrong). The issue was a set of curricular and budgetary reforms that promised to enhance Harvard’s actual education while eroding the power of tenured professors in the Arts and Sciences. On those matters, Summers was very likely correct.
I want to emphasize that I don’t see students as customers. Nevertheless, an economic analysis is useful for revealing how institutions actually work (as opposed to how they should work). Here are two contrasting views of the economics of the situation: