Last week, I discussed the butchering by Stanley Fish of an economic explanation for why college costs are high--and, as importantly, where all of that money goes. Robert Archibald and David Feldman offer a good response to their critics in The NY Times, but this is the key point (italics mine):
We would like to thank Stanley Fish for allowing us to respond to reader comments regarding his column about our new book. Reading them felt like working through the worst set of course evaluations a professor ever received.
The power of the dysfunction narrative was on full display in the responses. Stories of waste and inefficiency in higher education have a strong appeal, and they are deeply embedded in our public understanding of rising college cost.Many who wrote took issue with us based on their personal experience. Although this is perfectly natural, generalizing from experience is not always sound. We need to stand back and take a broad look at the economic landscape of higher education.
At the core of the dysfunction narrative you will find a college-centric view of the world. If something unpleasant is happening, like rising cost, then the reasons must lie within the institutions themselves. We take a different approach, and the diagram below helps explain why we argue for a broader aerial view of the higher education industry.
As they illustrate, the real price of higher education has risen at the same rate as the real price in dental services. In other words, specialized service industries costs increase faster than inflation for a variety of reasons.
I would note that at the non-profit research center kinda associated with two universities at which I work, outside industry salaries do factor into our personnel and salary practices. Like Archibald and Feldman describe, universities are often in competition with the private specialized service sectors, and their costs will keep pace with inflation in those sectors.
Or we can engage in morality narratives that make us feel virtuous, and ignore the larger structural issues, such as runaway inflation in many specialized service sectors and income inequality which directly and indirectly leads to higher college costs*.
*Directly, as I noted before, a huge fraction of college attendees (who are far wealthier than the rest of the country) can actually pay these costs; the more they can afford to do so, the more the costs will increase. Indirectly, as some 'knowledge workers' see their salaries explode (e.g., finance), others who have equal or more comprehensive training and who lack commensurate income want higher salaries (people compare up, not down the income ladder).
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And both have risen as a result of a lack of commitment by society at large to the idea that poor people should be able to get decent education and dentistry.
The Archibald and Feldman (A&F) justification for tuition cost increase is 'Baumol's disease, that is that personal services' cost increase more compared to the price of e.g. cars, where technological advances and increases in productivity drive costs down; so as prices for cars etc. drop, a higher income share used for personal services is justified, that is justified as a fact of economics, the working of the 'invisible hand' of the 'free' market, and give as comparison the increase in the price of dental services.
The premise of this argument is that indeed the cost of professors and teaching staff and materials has gone up. This assumes that the product of colleges is education, But as many noted, professors have largely been displaced by low-paid adjuncts, and the cost of new teaching materials/technology has gone up with inflation, not above it, and the share of teaching cost fell as share of college budgets.
So the proper comparison of the price of college should be to the cost of teaching, but A&F do not provide such comparison (unless it is in their book). It seems that tuition increased well beyond the cost of education, and many commentators observed that correctly (although there are many red herrings, such as new buildings [paid for by alumni donations], expensive research equipment [paid for by grants, with overhead actually subsidizing the rest of the university], professor who don't teach [their research time is paid for by grants, again with overhead..]...). So it is a legitimate question, where the difference went. A&F seem to dismiss this question as 'disfunction[al] narrative' and 'generalization from experience.' (even if they are right on many comments, and indeed I believe that most colleges are well-run and try not to waste money).
Then, A&F have a problem of averaging: If you average over the whole population, with most not going to college, or to community college or other lower-priced state schools, then indeed the average share of tuition is just 3.73 percent of all expenses, and an increase to 4.65% seems no big deal. But what do you get if you only consider families with kids in college? ....
Then, they berate commentators for confusing cost and price.
Right. There is a difference. And list price and actual price. But while indeed the price is heavily subsidized by state grants, and more so in Europe and Canada, in those places still the cost, not just the price, of education is still less there than here in the U.S. (Same with healthcare).
(And of course, 'economists' tell us that the state has to cut subsidies to higher education, so as to keep taxes low).
I think that there are many relevant questions one can pose about the cost and price of U.S. higher education, but it seems that A&F seem to rather justify the system, as it is, as a kind of best of all possible worlds, or at least as ordained by 'economics.'
A better explanation of the rapid increase in tuition in the context of ever-worsening income inequality is the observation, that the product of the 'elite' colleges is not education, which undoubtedly can be gotten cheaper elsewhere, but an entry into the upper classes, access to other rich people, connections and exclusivity. Many parents perceive dimly that that big success in U.S. society depends on access and connections more than education itself, and you get that only in an elite college. Hence upper middle-class parents want their children to go to the most famous college they can get admitted to, no matter the cost. This college now can and must charge a high tuition, it must, so as to demonstrate exclusivity. Then, of course, such a college has to cater to the children of the spoiled rich, and offer first-class amenities, as plush dormitories, weight rooms, sports facilities. From there, this effect filters down to other colleges, who now are under pressure to offer facilities comparable to those of the best, in the race to attract wealthy students. As the excessive tuition of the elite colleges set the comparison point, so other schools can also increase tuition, and still find students, as they are still cheaper than the elite colleges.
I'd think that is a better explanation for the rise in college tuition than that provided by A&E. But then I am not an economist, and am tired of 'economists' justifying the state of affairs where the increase of productivity of the workforce over the last 30 years is captured as increased income by just 0.1% of all households, telling us that we in the U.S. live in the best of all possible worlds, with the free market and low taxes making us all rich.