Why is College Expensive?
First, higher education is a service industry. From 1947 to 2009 the average annual price increase for services was 4.0 percent, while for goods the average annual price increase was only 2.4 percent…
Higher education also shares with many other personal services a reliance on a highly educated workforce. In the late 1970s, the wages of highly educated workers began a sustained rise.
instead of reducing the number of labor hours it takes to produce a class, new technologies alter what we teach and how we teach it…Just like modern medicine, colleges and universities must meet a standard of care, and that standard is set in the labor market that will employ our graduates.
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There is a chicken-and-egg problem with cost-disease stories. That is, do we subsidize health care and education because their costs are rising relative to other good? Or are their costs rising because we subsidize them?
As you know, I think that credentials bottlenecks are at the root of much evil here. What if it were easier for a non-accredited university to compete? What if it were easier for an accredited university to fail? Why are some careers (I’ll use my favorite example, physical therapy) only available via a classroom path rather than an apprenticeship path?
I think that if the problem were just that college education uses a highly-educated labor force that is in limited supply, we would see different economic behavior. When you have a scarce resource, you try not to waste it. But it seems to me that professors waste most of their time engaged in status competition, meaning the attempt to publish.