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July 20, 2004

Eco Prof Rips College Costs

FROM ACADEME comes a book on why the cost of college has seen a steady rise.

Ohio University Economics professor Richard Vedder has written a new book, "Going Broke by Degree: Why College Costs Too Much," in which he methodically spins a free-market explanation for why the price of a diploma has been rising faster than the Consumer Price Index for the past two decades.

Vedder points out that, unlike for-profit businesses, which spend according to revenues coming in, colleges typically make up a budget, figures out how much revenue it has coming in and how much more it needs, and then sets tuition to cover the difference.

Colleges have been able to get away with upping prices due to escalating demand. But Vedder cites an even bigger factor: third-party subsidies such as scholarships, low-cost loans and tax credits.

So while the dollar cost of education is rising, the actual cost--once tax credits and subsidies have been factored in--has actually declined.

Vedder claims that these artificial price adjustors interfere with the economic law that higher prices mean lower demand. When tuition rises, causing concern that lower-income students will be shut out, political pressure mounts to provide more subsidies.

Ultimately, universities are not obliged to compete as aggressively on price as business firms do.

All this would not be so bad, if the increasing amount of money US society puts into higher education was going mainly to educate students better.

Further, Vedder argues that substantial amounts of monies raised from donors and legislators are used to subsidize other areas, including athletics, research, bigger administrations, less-productive faculty, and higher salaries all round.

Vedder’s conclusions will not make him popular with administrators or fellow professors.

His research suggests that the educational product being offered to students is eroding in quality, as more money goes to non-educational areas, and faculty are allowed to teach fewer and smaller classes, and slough more work onto growing staffs of assistants.

Vedder believes a general trend is clear, "It takes more people to teach a given number of students than it (once) did."

Along the way Vedder takes shots at tenure—even though he himself is a tenured professor—and administrative bloat.

The prescription Vedder recommends for U.S. higher education includes such reforms as demanding higher teaching loads from professors, cutting administrative staffs, reducing non-essentials like athletics, and shifting state subsidy monies into higher education vouchers.

(this 396 word excerpt—with attendant commentary—was distilled from a 1030 article in the Athens [GA] News of 7-19-04)