(The following is the second part of a research project prepared by Jeff Seder, a junior in Dunster House, and David Labaree, a doctoral candidate in Social Relations. The CRIMSON welcomes opposing interpretations and responses to the articles.)

IN the first part of this article (CRIMSON, Dec. 18) we showed that Harvard College's admissions are biased in favor of upper and upper-middle class students. Preppies are favored even though as a group on applying they have poorer academic records, and lower S.A.T.'s. Later, after acceptance, they have lower rank list predictions.

We also showed that this bias was reflected in the present composition of the student body. We used large, federally funded, computerized surveys of Harvard College over a 5-year period in out research. Among the variables were family income and type of secondary school attended.

To some extent the Harvard administration seemed to explain this bias as a conscious reflection of an educational philosophy. Harvard was to train the leaders of tomorrow. Its glory was partly its mix of gentlemen and scholars. There was the expression of a conscious attempt to maintain the University's institutional power and prestige by placing itself at the service of the American ruling elite.

But the administration offered another, not unrelated, justification: Harvard can not financially afford to do it any other way, and is therefore forced to rely on those people who can afford both to pay for their own education and to contribute heavily later on in life. If this claim is true--if in fact Harvard cannot afford to lower its fees--then there is little hope for a more heterogeneous student body in the future. Obviously, our attention should shift to the University's financial state.

WE CONCLUDE that Harvard could indeed afford to lower its fees. A condsensed form of out argument follows. It shows that:

* The rate of increased costs of Harvard has been misrepresented.

* Harvard's endowment is growing faster than rising costs.

* Much of the income on the endowment is not spent.

* Much more income is available than is now supposed because of unused or unregistered capital gains, partly explainable by Harvard's accounting system.

* Abolition of tuition is a possibility.

To begin, an often quoted figure is that the University's expenses have tripled in the last ten years. This is misleading because during their period government contracted and funded research rose eight-fold to 55.4 million dollars. This cost Harvard virtually nothing but it makes the budget look much bigger and distorts how much costs have really risen. Delete this amount and the real (non-governmental) expenses increased by 122 per cent, not 200 per cent (from 43.2 million dollars to 96.0 million dollars).

What are the funds that cover each budget, whatever its size? The total market value of Harvard's general investments on June 30, 1967 was about $1,038,000,000. The "book value" was about two-thirds that amount. Each year the Corporation votes to distribute to each of the funds participating in the general investments account (which means mostly the endowment funds) income from this account at a fixed rate of the book value of each fund. In 1966-67 this rate was 5.2 per cent and thus $34,000,000 was distributed, of which $30.5 million went to endowment funds and paid for 32 per cent of the University's expenses for the year. Meanwhile, $33.1 million was collected from student fees. Of course, the real rate of distribution was not nearly as high as 5.2 per cent.

The market value of general investments in June, 1966 was $974 million. So the usable rate of return established by the Corporation was actually more like 3.5 per cent. Yet this figure doesn't even approach the return the Treasurer is really receiving on his investments. According to both Treasurer Bennett and President Pusey, Harvard's investments net about 10 per cent a year computed on their market value. This figure includes both dividends and interest and value appreciation on the market.

What this means, in short, is that Harvard is only spending about one-third of the income from its endowment. The bulk of the income is reinvested, or more precisely, remains invested in the form of unregistered capital gains. Why is the Corporation so stingy wiht its money, while students fees are having such a dramatic effect on the makeup of the student body?