« China raises reserve requirements... again | Main | Free markets and the law »
April 30, 2007
What can be done about those rising textbook prices?
The NY Times editorial staff has a slow day...
The State of Washington is looking out for students and their families by passing a law requiring textbook companies to disclose prices and other relevant information when they market books to college professors in the state. Lawmakers hope that professors who learn the costs upfront will opt for reasonably priced textbooks that cash-strapped students can afford.
This law, along with similar measures pending in several other states, is a response to intense lobbying by student groups, who have complained for years about the bankrupting cost of college textbooks. A 2005 study by the Government Accountability Office found that book costs had nearly tripled over some two decades, thanks in part to pricey but marginally useful CD-ROMs and instructional supplements, as well as the constant issuing of lucrative but little changed new editions — publishing’s version of planned obsolescence.
Of course, no student wants to spend more than absolutely necessary on books. We complained about it when I was a student. It is part of the order of things. But it is true that prices of textbooks have gone up faster than the rate of inflation. I paid roughly $50 for a calculus text (new) in 1990. I think my intermediate macro text in 1992 was around $50 (also new). I pile of used books for a history or philosophy course could generally be had for under $50. My campus job paid minimum wage ($3.95 in 1990 as a freshman in Minnesota). Ignoring taxes, a calculus book took me roughly 12.5 hours to work off. Call it 14 hours once taxes are added in.
Today, comparable books are in the $100-$150 range. Currently at the Illinois minimum wage of $6.50, a $150 book will take about 23 hours to pay off. When students arrive on the campus of WIU in the fall, the minimum wage will be $7.50 and they will need to work 3 fewer hours to pay for that book. More than I had to do, but in the cost/benefit calculus of a college education, still small potatoes.
This is especially true when you consider that you generally do get something back when you sell the book at the end of the semester. I think most students get back approximately 1/2 of the used book price. Hence the number of hours of labor needed to pay for a used calculus book after netting out the resale value is almost certainly in the single digits. Over the course of a 15 week semester, it's less than an hour per week. Yes, it adds up, but not exactly "bankrupting".
But a lot of people think that we need a law. Would it help if publishers were required include the student prices in the marketing materials they send to us professors? I doubt it. Most of us know the average cost of textbooks in our field anyway. Is a marginal $5 or $10 difference in the student price going to cause us to choose one book or another? Probably not. More importantly, is a marginal difference in student price something that should cause us to choose one book over another? If I choose a textbook based on the fact that the style of presentation is similar to my own presentation style for that material (such compatibility has benefits for the student), should I feel guilty for making them pay an extra $10? What is the purpose of the law if not to make professors feel guilty? Is this where the attention needs to be focused?
Now would be a good time to hoist a paragraph from the archives. Almost a year ago, the NY Times ran an editorial on the same topic. I speculated on how the availability of free or low cost alternative texts might affect the market. I stand behind my prediction.
I predict that textbook prices will continue to outpace inflation. There are alternatives to the traditional textbooks. Preston McAfee and Roger McCain are two notable examples of freely available on-line texts in economic principles. The change is slow in coming, but it is happening. But there is another side to this development. There will, I think, always be a substantial market for traditional texts. As some professors leave the market for freely available texts, that leaves a more inelastic demand curve facing the publishers. The effect on the revenues of the publishers will necessarily depend on how many customers leave the market and how much they are able to recoup with price increases. But if, as I suspect, those professors most likely to use the free texts are those who are most price sensitive (on their students' behalf), we should see textbook prices continue to rise.
Posted by William Polley at April 30, 2007 11:21 PM
Trackback Pings
TrackBack URL for this entry:
http://www.williampolley.com/cgi-bin/mt-tb.cgi/727
Comments
The more interesting question would be whether textbook prices have outpaced tuition and fees.
Regards, Don
Posted by: Don Lloyd at May 1, 2007 02:48 AM
When I was at university, we were told to go out and buy certain text books, about 20% of which were completely unnecessary. I'd would have been happy paying up for a text book if I knew it was going to be put to good use.
Also, while the second hand market in older editions was thriving, lecturers definitely overemphasised the need to have the latest versions.
Posted by: Caravaggio at May 1, 2007 04:01 AM
"It is part of the order of things."
I would translate this statement to "The system is gamed."
In order to obtain a degree, a student is *forced* to purchase a book. The publisher and retailer are both well aware of this fact, and price it accordingly. I'm just a guy with an Idaho high school education, but I believe this is called market power.
I suspect the same thing applies to patented life-saving medications and one-block ambulance rides.
Posted by: Idaho_Spud at May 1, 2007 07:40 AM
Don,
With a sample size of one (my alma mater), I would say that the growth rates are roughly the same. Both have nearly tripled since I was a freshman. I suspect that there is some variation across disciplines and schools.
Caravaggio,
I totally agree. Students in my courses use the text all the time. I choose books that fit with my approach and use them. As it should be. As for the revision cycle, in macro it is about right as it is if you want to stay current with the data and political/current event issues. Same story for international econ. When I teach micro, I could probably use a text from 1985 and it wouldn't make much difference. (I would supplement it with recent items on game theory and network economics.)
Idaho_Spud,
It is also part of the order of things for us to complain about gas prices. I get the same response. Yes, there is market power. I never said there wasn't. But low cost alternatives are there. And in 5 to 10 years, I will probably be switched over to a combination of cheaper e-books and my own lecture notes. Thus, one more price sensitive professor will leave the market leaving a more inelastic demand curve for the next generation of students. My students will thank me, but I will also be giving the publishers a tiny, tiny bit more market power.
Posted by: William Polley ![[TypeKey Profile Page]](http://www.williampolley.com/blog/nav-commenters.gif)
at May 1, 2007 06:26 PM
Dear Polley;
I am a postgraduate of Nankai University in China. I major in "International trade".
Recently, I found the abstract of one your, titled "Outsourcing on a Continuum of Intermediate Goods: Implications for Trade and Welfare" . I am really interested in it, but I can not find it in the full text.
I wonder if you would consider sending me one copy by Email. Thank you for your kindness.
My email address is: gaoyue@mail.nankai.edu.cn
Sincerely: Paul
Posted by: Paul at May 30, 2007 09:55 AM