Fri 29 Apr 2005
Professor of Economics Emeritus Gordon Winston has a nice quote in a story about rising tuition at NYU.
Though few deny that the cost of attending a major private university like NYU is growing increasingly expensive, most economists and school administrators downplay the idea that escalating tuition prices signal a crisis. As they see it, the annual tuition hikes reflect the ballooning costs of providing a top-tier education in an industry where the competition for the best students and faculty is cutthroat.
The bottom line, said Gordon C. Winston, a political economist at Williams College and the director of the Williams Project on the Economics of Higher Education, is this: that private universities operate in the free market.
“If you’re talking about a bunch of schools that are charging $40,000 a year and have five people eager to buy the product for every spot, then it’s really, really hard to say that the price they’re charging is unconscionably high, or higher than it should be,” he said.
Indeed, economists note that high tuition is nothing new. Rather, the nature of higher education as an industry and the increasingly competitive college market have steadily driven prices up.
“Higher than it should be” is an interesting way to think about the issue.
April 29th, 2005 at 7:07 am
I would be really interested to see what true market pricing of higher education would look like. After all, there is simply no way B.U. and Williams and Harvard and Hampshire (and pretty much the bulk of private institutions in the northeast) would all cost around the same if the market truly reflected demand for particularly institutions. I would imagine that Harvard could easily charge 100,000 a year, and promise need blind admissions and financial aid, and still find a healthy percentage of students paying full fare given the wealth of many of its applicants, and still achieve fairly similar admissions results. I think most colleges are run by liberals (in my mind a good thing, because we need something to counterbalance the prevailing trends in basically every other arena of our society it seems!) who would swallow really hard at seeing an already hefty sticker price rise much above a typcial middle class annual income, no matter how high demand rose.
In any event, I think there may be some downward price pressure, especially at second-tier schools, arriving in around 5-10 years, once the high school age population boom levels off a little. I think it is supposed to peak around enterring class 2008. Which is why I think Williams is really positioning itself well by making enormous investments to the center of campus over the next five years, possibly at the cost of some short term losses due to the destruction of Baxter, Sawyer, and pretty much tearing up the middle of campus.
April 29th, 2005 at 10:33 am
There are lots of interesting papers at the Williams Project on the Economics of Higher Education, but none of them address this directly. I sent an e-mail to Professor Winston to see if he might have thoughts on the topic.
We covered related topics last Winter Study.
April 30th, 2005 at 8:56 pm
Does the extreme excess of supply of ready, willing and able prospective consumers of “top tier” college education over supply tend to suppress efforts to improve that education?