Abstract
ABSTRACT This study argues that endowments can be efficient, both for a finite-lived and infinitely-lived agent. When the lost utility from forgone consumption is less than the discounted utility brought by the cash flows paid throughout the endowment, endowments are utility-enhancing. Given that this can be utility enhancing for a finite-lived person, the direct connection can be made to an infinitely-lived agent who would receive utility enhancement through an endowment, such as a university. Given the recent political push to force well-endowed universities to spend down their endowments, displaying how an endowment’s existence can be efficient is important for policy-makers.
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