Tuesday, March 3, 2015

If President Obama Wants to Make Community College Free, Here's a Way to Begin to Make It Happen ... Costly College Textbooks Provide a Great, Albeit Unintended, Lesson in Both Needlessly Expensive Education and Government

Now that government backed student loans have made a huge mess of too many young people's financial situations, President Obama wants to address that issue in part by making attendance at community colleges 'free.' Of course, he doesn't really mean 'free.' What he wants is for taxpayers to pay the bill, and that's not free.

So here's another idea. How about cutting the high cost of college instead? Let's enter the digital age on campus, get serious about providing value for money, and stop spending so many dollars in a wasteful manner on excessive on site faculty, administrators and other unnecessary items. In fact, we can begin the path to a low cost high quality education by radically reducing the cost of textbooks.

College is needlessly expensive these days, and the cost of textbooks offers a great cost reduction opportunity. Then we can move on to eliminating the butts in the seats approach and take advantage of the internet and distance learning. But let's start with books.

Putting a Dent in College Costs With Open-Source Textbooks tells the story succinctly:

"The Student Public Interest Research Groups, state-based advocacy groups that promote affordable textbook options, analyzed open-source pilot programs at five colleges and found that the savings for students can be significant. . . .
Textbook costs are particularly burdensome for students at two-year community colleges; the cost, more than $1,300, is about 40 percent of the average cost of tuition, according to the College Board. . . .
Open-source textbooks are created under an open license, so they can be downloaded free or printed at low cost; instructors can even rearrange the sequence of material, to suit their preference. There’s a movement to make faculty-written, peer-reviewed open-source textbooks available to professors and students, to help keep a lid on the cost of textbooks."

Now let's listen to what a college economics professor has to say in The $250 Econ 101 Textbook:

"I’ve been teaching economics for 25 years, and yet I’ve routinely missed a perfect opportunity to explain how markets fail to deliver efficient solutions. It isn’t just me. During our first day of class in introductory economics, thousands of economics professors begin with a key lesson: how to make better decisions by carefully weighing benefits and costs. Yet we professors are shockingly blind about what our students pay for the textbooks from which we teach these valuable lessons. Even on Amazon, the average price of a new copy of one of the best-selling economics textbooks, “Principles of Economics” by Greg Mankiw, can be more than $250 (and retail for a hardcover edition is about $360).

Think about it: For a student working at minimum wage, it would take him about 35 hours of work after taxes to afford this book. Not to pick on Mr. Mankiw, since he has written a fine book, but $250 for a new textbook? Really?

In 1982 I took principles of economics for the first time and I believe I paid about $20 for a wonderful textbook by Richard Lipsey and Peter Steiner, “Economics.” Minimum wage was $3.35 then so it took about six hours of work for me to pay for the book, which I did with cash earned over the summer. (The textbooks haven’t changed all that much, by the way.)

So what is going on? Since 1985, prices of all consumer goods have about doubled, but textbook prices have risen sixfold, according to the Bureau of Labor Statistics. The reason is such an interesting one that it’s surprising it doesn’t find its way into the first chapter of every economics textbook. The cardinal lesson is that prices rise unchecked if the people who order the goods aren’t paying the prices.

Publishers routinely hide the suggested retail prices of their textbooks from the book cover and most of us never bother to ask what they cost. After all, we’re not paying for them, right?... Instead of engaging in cost-benefit analysis, we only pay attention to the benefits to us before ordering the outrageously expensive books that we ask our students to pay for.

There’s more to this story. During the past 30 years, there has been an explosion of student-loan debt. Students rarely pay for books out of pocket and instead roll it into their financial-aid package. So a $250 textbook is now being paid back over decades. It’s a bit like the prospective car owner who pays $400 for optional floor mats when it only adds a few dollars to her monthly payment, yet would never pay cash out of pocket for the same mats. The easy access to financial aid has meant there is no natural binding mechanism on price increases, since the pain of rapidly rising prices is scarcely felt by years of student-loan payments.

So here is the $250 economics textbook, a creature of government-subsidized student loans, professors who pay no attention to prices, and students who strive to push the costs down the road. It seems like a natural end of chapter one question, doesn’t it?"

Summing Up

If President Obama is serious about reducing the cost of college (and he isn't), he should start with the absurd cost of books.

And he should also recognize that the current 'invisibility' of the cost of college textbooks is similar to that of our unnecessarily high health care costs.

So here's my plan. Let's make the prices highly visible and then reduce the costs to a level consistent with providing a first class education (and health care), which community college leaders (and the medical system) currently don't do.

Today we lie to ourselves and label something as free which isn't free at all. And when it's government controlled and subsidized, it isn't even well managed. And that's in large part because what we don't see clearly isn't immediately recognized by us for the cost that it truly represents.

Sooner or later the bills inevitably come due, and need to be paid by somebody, but by then it's generally too late to do anything about the costs incurred.

Aren't We the People fortunate to have President Obama's government officials, along with other bureaucrats such as our nation's college and health care officials, taking care of us and seeing that we get good values for the money we spend? Or are they instead hiding the truth from us for their own selfish reasons and to the detriment of We the People?

Here's my take --- I think the words government and obfuscation are redundant.

Thanks. Bob.

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