EARLIER this month, Virginia's General Assembly passed HB 1478, which would require public colleges and universities in the Commonwealth to develop guidelines to combat the rising cost of textbooks. This bill comes on the heels of the Textbook Market Fairness Act passed last year, which required schools to post their reading lists online to facilitate comparison shopping. Although well-intentioned, both laws are only token measures against a much larger problem. Short of price controls, only concerted effort by consumers -- students and parents -- can stop the skyrocketing costs of education.
Rising textbook prices are only the tip of the iceberg. According to the College Board, private and public four-year institutions jacked up tuition by 5.9 and 7.1 percent, respectively, at the start of this current school year. By contrast, the nation's inflation rate was, and historically has been, less than four percent. This is nothing new. In an article for the National Public Radio Web site, Ohio University economist Richard Vedder points out that annual tuition hikes have far exceeded inflation for at least four decades.
The problem with the market for educational services is that sellers can charge whatever consumers are willing to pay, which in turn depends on what consumers expect to gain. The College Board estimates that, compared with high-school graduates, those holding a college degree will earn over $1 million more (adjusted for inflation) over their lifetime. Thus, colleges could theoretically charge up to $1 million for tuition and a perfectly rational economic actor would still pay.
Just because schools can charge a ransom doesn't mean they should, however. If the subjective benefit I get from an iPod is $500, I can't complain if Apple charged $499. According to economists, everyone benefits from this transaction. On the other hand, with few exceptions, most colleges and universities are not set up as profit-making businesses. Thus, if they can deliver the same educational experience at a lower cost, society is better off. Conversely, if they fail, there is a deadweight social loss.
Assuming that the national inflation rate roughlyapproximates the annual increase in schools' basic operating costs, the sharper rise in tuition stems from either more frills or more waste. Vedder points the finger at bloated student support services and lavish recreational facilities, among other things.
While the University justifies the new $130 million John Paul Jones arena by arguing that it will provide a venue for broader arts and entertainment in the local area, this is probably more the exception than the norm. Generally, investments in athletic facilities and programs do not pay off. According to a 2003 NCAA study, spending on athletics is, at best, budget-neutral and does not raise revenue or alumni giving, contrary to what administrators would have us believe.
Of course, declining state funding is also a large factor for public schools. The University's tuition hike for this academic year was 8.8 percent for in-state students and 6.2 percent for out-of-state students, which compensates for far greater funding cuts enacted by the General Assembly. Moreover, University spokesperson Carol Wood stated that the legislature had artificially frozen tuition for many previous years. The University's financial situation, however, isn't true of private institutions. Thus, it seems that academia's own uncontrolled spending is still a culprit.
Colleges and universities are quick to point out that most students do not pay the full retail price because of financial aid. While true, this is like throwing more life jackets at passengers on a sinking ship. At some point, academia's exponential spending will outstrip its ability to give more aid.
What can students do? For starters, college applicants must be smarter shoppers. They must place a greater priority on basic educational services and less emphasis on bells and whistles. They should also demand that publications like the over-hyped U.S. News & World report rankings give more weight to bang-for-the-buck value.
Alumni can also help. Right now, donors who throw more money at schools are like people who give money to winos on the street. Last month, I advocated in this column that alumni take greater control over their contributions. To that end, a more effective form of giving would be to fund task forces at each institution for the sole purpose of holding the line on spending while not hurting the quality of learning. In the long run, this benefits the school far more than building a new athletics facility.
As for textbooks, despite the fact that most publishers are profit-making businesses, they do respond to consumer pressure. Students must starve the demand for newer and costlier materials by putting the heat on professors. Course evaluations should rate how cost-effective the assigned reading is; I generally do in my comments. From personal experience, I have been able to get along fine with older editions and publicly available Internet materials, of which professors are often unaware.
In the end, higher education is and is not a market like any other. While schools are not out to make a buck, like any other seller, they will keep raising prices until consumers put their feet down. It's time we stamp out academia's uncontrolled costs.
Eric Wang's column appears Mondays in The Cavalier Daily. He can be reached at ewang@cavalierdaily.com.
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