Lack of competition makes college expensive

After a Cal State Fullerton associate math professor was recently chastised by university officials for assigning a cheaper textbook than the one mandated by the department chair — which was also conveniently written by the department chair — the debate regarding textbook prices and other associated costs of college and what actions universities can take to alleviate them has been reignited. While the debate may seem to encapsulate a very small portion of what makes college expensive, the sources of the problem reflect a greater structural flaw in America’s higher education.

While the cost of tuition itself is an issue, the real problem with the cost of higher education stems from a lack of market competition. The government may try and step up to cover the growing costs of and associated with college, but if those costs are exacerbated by the choices of universities, professors and even legislators themselves, then we would be better served by targeting the problem at its sources. In multiple aspects of higher education, companies and universities conspire to drive out market capitalism in favor of crafting powerful and magnificently inefficient oligopolies which inevitably become monopolies.

However, no aspect of higher education shows the absolute failure of the education industry’s ability or willingness to embrace market competition more than the textbook industry.

The textbook industry is considered a broken market because the product is chosen by either a university or a professor, while the consumer is the student. Knowing that the demand for textbooks is essentially inelastic or unresponsive to price changes because textbooks are mandatory for most classes, textbook publishers can mark up prices far past the point of a reasonable profit margin. In a normal market, this could be combatted by competition with other producers; however, the number of textbook publishers has dwindled down into single digits, allowing them to collude to keep prices high. Professor Mark J. Perry of the University of Michigan argues that the rampant collusion has created a textbook “bubble,” similar to the housing bubble and dot-com bubble.

The interplay of school boards, universities and textbook publishers continually fails to take into account consumer preference and ability to pay. This lack of competition is the very antithesis of capitalism as it fails to respond to the laws of supply and demand. Textbooks are not an isolated incident of a corrupted market in the education industry; they are simply a microcosm reflecting a greater problem.

For example, the act of simply getting into college has been structurally designed to quash competition and, thus, supplier responsiveness to consumer preference. The largest — and one of the only — suppliers of college entrance exams, College Board, was not a firm that entered a market and had to prove its products’ efficacies to various universities. Instead, it was created as a product of 12 universities trying to make a standardized test. And though this seemed practical at the time, today Advanced Placement exams cost nearly $100 each and the SAT exam costs over $50. The SAT’s only other competitor, the ACT, acts with College Board to collude in a duopoly, which keeps prices high and responsiveness to consumer satisfaction low.

Since either the SAT or the ACT is a requirement for applying to most nationally ranked universities, our generation has directly felt the price of universities choosing shortcuts over effectiveness and efficiency.

However, as the world becomes increasingly paperless and market barriers to entrance gradually dwindle, empirical evidence dictates that there may be hope after all, but only if universities start taking  note of consumer — in this case, student — preference. Students across the country begrudgingly use Blackboard Learn to access course materials, assignments and grades. Complaining about Blackboard is so common that it has become cliché. Yet in 2006, Blackboard had 90 percent of the market share. Luckily, the tech market has far fewer barriers to entry, especially considering that there are no government standards to pander to when creating a website for hosting course content. After a recent insurgence of competitors, many universities listened to the complaints of students and professors alike and adopted new learning management systems. EdSurge reports Blackboard’s market share as of March of this year as 44 percent. Hopefully this success story indicates that change can be made in even the most antiquated and broken markets.

The cost of college is not just about tuition. It includes entrance exams, textbooks and materials needed to succeed in the classroom as well as the software included as part of tuition. If we really want to talk about doing what is best for students, we must recognize that there is currently an absence of consumer choice and voice, so professors and universities must make choices to reflect the preferences and maximize the well-being of students.