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Why does college cost so much?

August 18, 2010

This Forbes article is making the rounds of legislators and offers some thoughtful insight. We all know that the unrelenting increase in the cost of higher education is extremely painful for students, families and governments alike, but it’s interesting to read this valuable perspective that adds depth to the dialogue.

I readily accept the gentle but genuine critique that I have a tendency to aggressively push, prod and agitate against institutional bureaucracies that I feel often seem to lose their connection to real people living real lives. I also hope that I’m seen as a passionate advocate for a world class education system from early learning through K-12 and higher education. Yet I believe in tough love in the most gracious sense of the term. We must push ourselves to seize the opportunity of this crisis by reforming our systems and approaches.

The time for meaningful systems reform in higher education is now, when we can seize the opportunity of this crisis by working together, and not when the pressure relents and the status quo returns.

This article is an important, humble reminder to me, and to many others, that there are compelling (and legitimate) reasons why it costs a lot of money to create a civically-engaged, educated community of citizens. Education is not free. And it is our moral obligation as a society.

As we go into the toughest budget season in generations in Olympia, I feel more strongly than ever that we must have the courageous honesty to acknowledge that higher education cannot sustain the continued attacks without suffering extraordinary harm to students, families and the institutions themselves.

Why does college cost so much? What do you think? I’m sorry to repost another long article but this one is worth the read.

(Beginning of article)

Why Does College Cost So Much?

By Robert B. Archibald and David H. Feldman.

At this time of year many rising high school seniors are visiting college campuses, trying to determine which schools interest them. Their parents are busy figuring out what they will have to pay.

Here are three salient facts about tuition and fees. Over the last 30 years, the average sticker price at public and private American universities has accelerated upward. Since 1981 the list price level of tuition and fees has risen sixfold while the consumer price index has only increased two-and-a-half times. This fact is well-known, and it fuels much of the talk about a crisis in higher education.

The other two facts are less well known. The average family bill for a college education has been increasing faster than the overall inflation rate for much of the past century, so rising inflation-adjusted college tuition is not a new issue. And lastly, higher education is not alone. There is a set of important industries with price behavior that is remarkably similar to what college students and their families have experienced.

In a forthcoming book we attempt to explain all three of these facts in a way that ties higher education to the broader development of the economy.

Most of what is written about rising college costs places primary blame on a dysfunctional university system. The culprits are things like wasteful prestige games among elite schools, gold plating of amenities for students and a lax workplace culture that breeds both inefficiency and a stiff resistance to innovation.

Like many large organizations, American universities could be made more efficient, but our review of the evidence convinces us that the primary forces that are driving up costs are not to be found by scouring the account books of colleges for examples of waste. For starters, the dysfunction stories have trouble explaining why inflation-adjusted college costs were flat or falling for over a decade in the 1970s and early ’80s, or why the rate of cost increases is so high today, but was not nearly as high in the ’60s, when baby boomers began flooding into school.

Instead of holding up a magnifying glass to the industry, we take an aerial view. The view from above shows us different things. Rising college costs are an important byproduct of broad economic forces that have reshaped the entire economy, and in particular of the technological progress that has so dramatically raised living standards over time.

Our technology story rests on three strong pillars. First, like many personal services, including much of health care, the law and banking, higher education remains essentially an artisanal industry. These are industries in which technological progress has not reduced the number of labor hours needed to “produce” the service. By contrast, labor productivity in basic manufacturing has soared, and this is why the cost of a year of college has gone up compared with the purchase price of a basic car or a basket of groceries.

Students interacting directly with professors and other students in small groups remain a benchmark of quality in education. Ask any family if they want their son or daughter to learn in small group seminars taught by tenured professors, or if they prefer giant impersonal lectures or online chat rooms monitored by adjunct teachers who answer lots of e-mail questions.

Secondly, higher education shares with many other personal services a reliance on an extremely highly educated labor force. Starting in the late 1970s, the cost of hiring highly educated people began a sustained rise. This has driven up costs in any industry that cannot easily shed expensive labor.

Lastly, technological change affects higher education directly. But unlike steel or autos, where the primary impact of new techniques is to reduce the amount of labor or energy it takes to make the product, new technology in higher education tends to change what we do and how we do it. Colleges must offer an education that gives students the tools they need to succeed in the modern economy. The contemporary chemistry student, for instance, needs to be familiar with current laboratory tools, and they are more expensive than the chalk-and-test-tube world of the past. As in modern medicine, there is a standard of care that higher education must meet, and that standard is set in the labor market that hires our graduates.

Our story of rising cost is devoid of bad people making bad decisions. This means that there are no simple fixes, like price controls, that would not also reduce the quality of the education we offer.
Yet there are indeed significant problems to solve in American higher education. As the national income distribution has skewed toward those with ever more years of schooling, children from families with wage earners that are less well-educated find a college education, especially from a selective four-year institution, harder to afford. This is a problem for our financial aid system, and that system is part of the problem. It is needlessly complex, and it increasingly fails to provide access to many students who could succeed in college. We need to streamline this system and rewrite the funding relationship between public universities and their state sponsors.

Two final thoughts. First, a productive approach to solving the real problems of higher education requires a ratcheting down of the rhetoric. And secondly, we need to fix what can be fixed. Overheated rhetoric about the supposed ills of higher education often leads to counterproductive policy ideas that confuse symptoms with causes and which over-estimate what government can do.

David H. Feldman is a professor of economics and public policy at the College of William and Mary in Williamsburg, Va. Robert B. Archibald is chancellor professor of economics at the College of William and Mary. Their book Why Does College Cost So Much? will be published by Oxford University Press this fall.

(End of article)

I look forward to reading the book and learning much more.

Your partner in service,

Reuven.

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5 Comments leave one →
  1. August 18, 2010 8:40 pm

    A college degree 40 years ago had value for the amount of money you had to pay to get it. In today’s new economy, a degree just doesn’t have the same value for the debt people rack up to get it that they have to carry with them the rest of their lives. College costs will come down as people find alternatives to brick and mortar institutions by going online and taking courses.

    It’s experience and skillset that have value to employers. What do you bring to the table besides a degree? Besides internships? Besides a good reference?

    So to all you seniors in high schooler out there who may be reading this, consider a trade school after high school unless you are going to be a doctor, lawyer, scientist or some other seriously professional white collar trade.

    Oh, and while were on the subject, if you’re a female and your five-year plan is to be married with kids by the time you are 25, save yourself and your parents the agony of the amount of money they’d have to spend on you and don’t go to college until you are 30 and deciding to re-enter the workforce. You’ll thank me later.

  2. Amy Kinsel permalink
    August 19, 2010 10:59 pm

    I’m glad my daughters won’t be listening to your bad advice. Even if they do hope to be married and have children by the time they are 25, they’ll need to be employable. A large and growing majority of married women with preschool-aged children in this country are in the workforce. An even larger majority of single women with young children are working mothers. The latest labor force data from the U.S. Census Bureau show that between 65 and 70 percent of women with children under the age of six are employed.

  3. August 20, 2010 6:53 am

    Amy I’m beyond surprised at your comment. What in the world does the post have to do with suggesting, in any way whatsoever, that this is about women and their educational attainment associated with marriage, etc.? As the father of 3 daughters I’m more than unclear how you’ve somehow claimed I’m making any such statement.

    Reuven.

  4. Amy Kinsel permalink
    August 20, 2010 10:51 am

    Hi, Reuven, I was responding to the reply above from FreshThought, not to your blog post. I should have made that clearer. My apologies.

  5. August 21, 2010 7:34 am

    @Amy: “A large and growing majority of married women with preschool-aged children in this country are in the workforce.”

    What fields are these majority of women in?

    Since I can be blunt here, I will. I see married women with children mainly in part-time service-oriented rolls like cashiers, waitressing, telemarketing, and light administrative duties. I do not see many married w/children women in high profile professional careers and if they are they are more dedicated to their careers than to their own children’s lives. Granted there are some exceptions, but don’t discount the fact that the majority of what I just described is what you generally see out there. You might be one that falls into this exception area.

    So I will agree with you that there may be a large number of women in the workforce, but because most of the positions most of them probably get hired for do not require a college degree, I suggest to them they avoid college. My wife was forced to go to college by her parents for a degree she never finished and 15 years later her debt has doubled and because of the low paying positions she is qualified for she will never be able to pay of those 15 years student debts.

    This is of course is just my advice.

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