My students are wont to complain about the price of textbooks. A typical book costs in the region of €50. As a parent I am not immune from these problems. In Spain you have to pay for all school textbooks, although some local governments do offer means-tested grants. Between €300 and €400 is a typical amount. What’s more having to cart all these books around may well have a negative effect on our children’s backs when they grow up. So far no solution has emerged to the latter problem, but there is one in the former. At the end of the year many parents swap the used books, with no money changing heads.
But it is the United States where we see this problem in its purest state. A report issued earlier this year noted that just five textbook companies control more than 80% of the $8.8 billion publishing market. The graph below illustrates what has been happening to university textbook prices in the last 15 years or so.
And I came across this list of the highest priced college textbooks:
- Acta Philosophorum The First Journal of Philosophy: $1,450
- Encyclopedia of International Media and Communications: $1,215
- Management Science An Anthology: $850
- History of Early Film: $740
- Biostatistical Genetics and Genetic Epidemiology: $665
- Companion Encyclopedia of Psychology: $600
- Feminism and Politics: $600
- Concepts and Design of Chemical Reactors: $593
- Advanced Semiconductor and Organic Nano-Techniques: $570
- Ethics in Business and Economics: $550
- Environment in the New Global Economy: $510
- Solid State Chemistry and Its Applications: $500
I though that these might be the kind of factoids that do the rounds on the internet so I typed in Acta Philosophorum the First Journal of Philosophy into Amazon. It actually cost $1,566. I did the same with the Encyclopedia of International Media and Communications. Admittedly, it is a four-Volume set, but the listed price was actually $2,125! Luckily those chaps at Amazon offer a reduction and you can get it for just $2,018. Indeed, both books came with this enticing offer:
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Why are the prices of textbooks so out of control? This is the question that Planet Money wanted to look at in a recent podcast. In the US the profit margins on high school books are around 5-10%, whereas the university ones are 25%.
The starting point has to be the anomalous nature of this market. In particular we have what economists call a principal-agent problem. This happens when someone (the principal) hires someone else (the agent) to carry out a task and the interests of the agent conflict with those of the principal. In this case the principals are the students and their agents are their teachers. The professor chooses the book, but he is not the one paying for it. This can create very bad incentives. According to the programme many professors do not even know the cost of the books that their students will have to buy. The sales reps do not seem to emphasise the price when showing their wares. What you get instead is a kind of arms race in which the books compete not on price but by adding new components and features. It rather reminds me of the regulated airline industry in which airlines used to compete on frequency or the quality of their meals but not on prices.
For me the most interesting part of the podcast is when they interview Greg Mankiw, whose book Principles of Economics, 7th Edition costs on Amazon $289.25, or $69.50 if you want to rent it. I don’t know if it’s possible to sublet it, but that might be worth looking into. As the book mentions the principal agent problem in chapter 22 his students may want to think of it as a practical, if somewhat expensive case study on its application. Mankiw does defend himself arguing that for students what is most valuable is their time. He wouldn’t want to “skimp” on quality. Well Mr Mankiw, I think we can safely say that there is no danger of that.
In fact, I do realize that this kind of textbook is not like your common-or-garden bestseller. Their print runs are more limited and they require a lot of research. As the price of books goes up, students look ways to beat the system. There has always been a second-hand market in academic textbooks, but new solutions are emerging. As I mentioned above, you can now rent the books. Or worse for the publishers, they can now be illegally downloaded. And those students with moral qualms are just skipping the books altogether. All this means that the window for making money on a textbook is getting shorter. Consequently, publishers increase the prices making students even less willing to fork out their money. Prices, as shown in the graph, may have gone up, but what we are seeing is flat to declining spending.
The problem is that the value of a textbook is subjective. As another economist, Timothy Taylor, pointed out in a recent blog post, there has not been an experiment in which students were randomly assigned different textbooks but were subsequently taught and evaluated in the same way. If they kept time diaries, we would see if higher-priced books, as Mankiw claims, save time or improve academic performance. It is not obvious that a lower-cost book would be less effective than a higher-cost book from one of the big five publishers.
Mr Taylor has put his money where his mouth is. The third edition of his Principles of Economics textbook is available through Textbook Media. There are distinct prices. $25 gets you online access, but there are other bundles, the most expensive of which includes the paperback and the online version. Such “skimping” must make Mankiw apoplectic.
What about the future? I am hoping that e-readers and tablets will help to bring the price down I have used Amazon’s look inside feature to take a peek inside Mankiw’s book. I think it looks well-written, but I fail to see $300 of value there. We don’t need to reinvent the wheel every time. I also had a look at Amazon’s Spanish website and they also had books that require you to take out mortgage, including a bilingual dictionary of economic and financial terms which cost more than €1000. we need to look for alternatives. As well as Taylor’s textbook, I can thoroughly recommend the CEE Encyclopedia, which you can find online here I would like to see open source textbooks. But my idea goes much further than this. I see textbooks as one way of learning but we need to take advantage of other sources of knowledge. I think the internet is a wonderful tool, of which we have scratched the surface.