College Guide

Blog

February 21, 2011 5:47 PM Justified Excess

By Daniel Luzer

At an average $27,293 a year in tuition (for private colleges) higher education costs a lot. And as most people know by now, the cost of college increases at about twice the rate of inflation.

Why does that happen? Is it all those fancy buildings? Is it professors and their cushy benefits packages? Maybe it’s those sports teams and all of their costly accessories.

Or maybe it’s none of these things. Robert Archibald and David Feldman are economists at the College of William & Mary. They’ve recently written a book Why Does College Cost So Much?, arguing that focusing on academic waste and overspending is the wrong way to look at college costs. Of course tuition increases faster than inflation.

In an interview conducted by David Leonhardt of the New York Times, Archibald explains:

The biggest reason that these services have experienced prices that rise more rapidly than prices in general is that increasing productivity in many services is very difficult. The service often is the time of the service provider, and you cannot use less of the provider’s time without compromising the quality of the service. Also, the service providers in many of the relevant industries — doctors, lawyers, dentists and college professors — are highly educated, highly skilled workers. In the last quarter of the last century, economic forces generated rapidly increasing wages for highly educated, highly skilled workers. The combination of these two factors, slow productivity growth and rapidly expanding wages, results in rapidly rising prices. This should not be a surprise to most economists.

The services of doctors, lawyers, and dentists have also increased more than the rate of inflation would suggest might be appropriate. But then, couldn’t universities cut costs through increasing the use of technology, as many suggest?

Well a little, suggests Feldman, but it’s important to put that in perspective. As he explains,

Higher education certainly is affected by technological change, and this can indeed reduce cost. For instance, like most industries, we no longer use an army of typists to process paperwork. But the primary effect of technological change in higher education is not cost reduction. Instead, new technologies and techniques change what we do and how we do it. In many ways, colleges and universities are “first adopters” of new technologies because our faculty needs these tools to be productive scholars and teachers. Our students need these tools because they are used in the labor market they will be entering. In a sense, universities must meet an evolving standard of care in education that is set externally.

This doesn’t offer much in the way of solutions but one of the very interesting things he points out is that the rapidly increasing cost of tuition is not some weird anomaly of education; the prices of lots of things increase faster than inflation.

Still, just because the price increase is justified doesn’t mean it’s acceptable. Americans get priced out of medical and legal services. Should they get priced out of higher education, too? And does it matter much if its factors that “should not be a surprise to most economists” that cause this to happen?

Daniel Luzer is the news editor at Governing Magazine and former web editor of the Washington Monthly. Find him on Twitter: @Daniel_Luzer