Better understanding of tuition increases

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December 3, 2010

12:29 AM

In the past few weeks, certain people at the College William and Mary have created quite a buzz in the national media — and I don’t mean the football team. Economics professors Robert Archibald and David Feldman recently published a book entitled “Why Does College Cost So Much?” The book takes a look at the economics behind the rising cost of college tuition, and the authors provide some original and thought provoking answers.

Feldman and Archibald begin by acknowledging that tuition prices have outstripped the consumer price index and income growth for the better part of three decades. This has led many observers to declare a “tuition crisis” and search for harmful university practices that are contributing to this trend. One popular argument is that universities engage in a wasteful “prestige game.”

For example, Harvard could install hot tubs in student dorms to one-up Yale and attract more of the best students. Yale would have no choice but to respond, and so Princeton would also feel that it should provide students with these expensive amenities. This pattern repeats itself until every competitive college feels it must provide similar facilities. Other arguments used to explain rising tuitions are a workplace culture that fosters inefficiency and profiteering by universities.

Feldman and Archibald take a much broader view of the problem. Rather than looking specifically at universities to find the causes of tuition increases, they survey the economic environment in which American higher education rests. They come away with two important explanations for current tuition rates.

The first is based on somewhat obtuse economic logic, but the main thrust of the argument is as follows. Tuition has increased because innovations have made labor more productive in manufacturing. Meanwhile, similar fields have not drastically increased productivity in services that utilize highly skilled labor — higher education, health care and law are prime examples. Therefore, productivity growth has increased the price of college education vis-à-vis other goods like cars or televisions. Furthermore, these increases in productivity lead to wage increases in highly skilled labor, including professors.

At the same time, other college costs have increased. More advanced technology and machinery are being developed each day, and colleges — if they are to prepare their graduates to enter the job market — must provide them with the newest technology to study. Consider the recent upgrade made to Small Hall, which provided the physics department with expensive, but important technology. Advanced technologies are necessary to provide students with an excellent education, but they also raise the cost of that education.

These arguments are interesting and well researched. One would think such observations would lead to a sober academic debate concerning the economic realities faced by institutions of higher learning. The media and the public, however, seem to have had a violent reaction to such insight. Although the book received accolades from academics, news outlets and comment boards are full of criticism for the authors. Some believe that Feldman and Archibald are at best misguided in their analysis, or at worst, complicit in some sort of cover up, using economic mumbo jumbo to hide the failings of the university system.

I believe this tells us two things. First, the general public — and most journalists — do not understand economics. Because of this, they easily dismiss such analyses in favor of explanations supported by personal anecdotes. Second, the participants in the conversation about the “tuition crisis” need someone to blame. They approach the issue having already decided that tuition should be lower. High tuition, therefore, must be the result of some flaw in higher education. Because Feldman and Archibald’s analysis has no bad guys, it does not conform to this narrative and is attacked, not for any analytical failure, but simply because it doesn’t provide the right answers.

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