Angela’s Reviews > Why Does College Cost So Much? > Status Update

...higher education is distinctive among most state programs in having a potential source of handy revenue of its own, namely tuition. Despite complaints from families that have periodically brought pressure on state legislatures to hold the line on tuition, this revenue potential seems to have shifted the state budget over time toward those activities that cannot help fund themselves.

Despite the fact that most students don't actually pay [the college's tuition and fees] sticker price, the 2008 renewal of the Higher Education Act imposes burdens on colleges and universities if their published list-price tuition rises too fast. Basing a policy on a price faced by only the wealthiest families seems odd indeed.

...shifting to an online educational industry would be like the shift from artisan production of goods to factor production of goods in the early nineteenth century, with one big difference. The workers who produce college education also produce knowledge gains to society that corporations and entrepreneurs can use for free, and it is this research that has been an engine of economic growth.

As long as colleges and universities retain their basic nature as artisan-type institutions in which large numbers of highly trained professionals engage in deep personal interaction with small numbers of students in a face-to-face setting, then the pressures of cost disease will remain.

If positional arms races and excessive emphasis on research were powerful causes of college cost increases in excess of the inflation rate, one would expect to see costs in public four-year institutions rising at a much faster clip than costs at public two-year institutions... Cost disease, changes in wage rates..., and the need to keep higher education current... are forces that affect both [types of schools].

To be convincing, the higher education-specific arguments have to do more than show that colleges and universities are inefficient. They also have to demonstrate that they have become increasingly inefficient and that this... can explain [the cost pressure]... We are willing to grant the first point, but we do not think the notion of increasing inefficiency does a very good job of explaining the evidence.

We don't deny that there are people in charge. College administrators, members of boards, legislators, and governors are certainly responsible for decision that affect costs in higher education. Rather than denying these agents their role, our analysis highlights a set of constraints these agents face when they make the decisions that result in higher costs.

...the great pause of the 1970s actually reinforces our main contention that economic growth itself is the driving engine of cost in the still artisan-like higher education industry. When the growth at the national level slows down significantly, as it did during the turbulent decade of the 1970s, we should expect a moderation in cost pressure in any industry that is prone to the cost-disease phenomenon.

If new technologies seem to increase the quality of care, patients and physicians alike will want to use them. As a result, the new technologies are adopted despite the fact that they increase the cost of providing care.

...we will argue that the primary impact of technological progress in higher education has been to change what we do and how we do it rather than to lower the cost of the existing "output" or the current way of doing things.