College textbooks prices are unhinged

One of the biggest ways college students are ripped off is getting out of control

More below.

"Since 1977, the price of college textbooks has more than tripled the rate of inflation, meaning a 1,041% rise, according to NBC News, which cites Bureau of Labor Statistics Data."

A captive market, and the publishers frequently make changes to text, and format making it difficult to use older books. 

"Some publishers contest the idea that textbook prices have risen exorbitantly, claiming that what may look like stark increases in percentages actually represent more modest increases in whole dollars."

Professor Perry disputes this with some quality data.

Chart of the day: The astronomical rise in college textbook prices vs. consumer prices and recreational books

"The huge divergence in book prices over times — college textbooks getting significantly more expensive while recreational books are getting significantly less expensive — would suggest that the college textbook publishers can’t really blame rising publishing costs for the exponential rise in college textbook prices. Rather, a better explanation would be that the college textbook market is insulated from the normal market forces that would lead to falling, not rising, book prices over time, like the recreational book market.

One way the textbook market is insulated from competition and market forces is that the professor, not the student, makes the decision on the textbook for a course, and it’s probably the case that many professors are unaware of the retail cost of the books they assign for their students. And once the professor decides on a textbook, there are no substitutes for the new edition of the book assigned. If a professor assigns Mankiw’s Principles of Economics textbook, students can’t substitute McConnell’s Principles of Economics textbook."

 I still have The Western Experience 2nd Edition, from 1982, it is marked $22 when new, and $16.95 used. Today the 10th Edition costs 204 new. The book new translated into 657% of the $3.35 minimum wage of 1982, and 169% of my $13 per hour wage of the day. Today the book is 2813% of the 7.25 minimum wage, or 4.28 times more expensive today then in 1982. Ouch!

As we can see from the data above other books have become even more expensive. 

Minimum Wage - Wage and Hour Division (WHD) - U.S. Department of Labor

​Professor Perry ends on a high note:

"As far as college textbooks, the new era of $300-400 textbooks seems to be clearly unsustainable in the face of a growing number of competitive, low-cost alternatives like free/low-cost online textbooks from Open Stax College (about $40 for a printed version) and Boundless ($30 online textbooks in 25 subjects). Here’s my economic forecast for the college textbook market: Expect continued and very strong hurricane-strength gales of Schumpeterian forces, with a high likelihood of creative destruction and market disruption for traditional textbook publishers selling $300-400 college textbooks, accompanied by huge tsunami-level tidal waves of increased consumer surplus for college students in the future.

In conclusion, it’s a great time to invoke Herbert Stein’s Law: “Trends that can’t continue, won’t.” The rising trend in college textbook prices has to qualify as one of those trends……"

Nothing like a little Schumpeterian creative destruction to bring prices back to earth!