6 ms·

And the reason is.... drumroll Supply and demand! Wow. Insightful.

anonjon 17y ago
But it isn't supply and demand. and the powerlessness of the market to control higher-education costs due to limited supply One of the biggest problems for a young academic is that there is an oversupply of young academics and grad students. That fact, and the way that they set their tuition prices (based not only on what the families will pay, but in conjunction with a price-fixing arms race), leads me to think that this article is indicating a higher education bubble, not a case of basic supply and demand.
philwelch 17y ago
Tempered with a big fat dose of price discrimination (oh, wait, I meant "financial aid").
- jimbokun 17y ago
  Or you could call it "price segmentation" like Joel does: "All from the power of segmentation: separating your customers into different groups according to how much they are willing to pay, and extracting the maximal consumer surplus from each customer." http://www.joelonsoftware.com/articles/CamelsandRubberDuckies.html http://www.joelonsoftware.com/articles/CamelsandRubberDuckie...
  - philwelch 17y ago
    No, they're separate things. Price segmentation is selling marginally different products, but making each product available to everyone. So you have Windows 7 Ultimate and Windows 7 Professional and Windows 7 Home and Windows 7 Home Professional and Windows 7 Ultimate Home Datacenter Server at separate prices, and even though the only difference is that you run a different build script, it's not the same as price discrimination because you let the consumer choose. I interviewed at a company once that made a home-architecture CAD tool. They sell about 20 different versions of the same software, all at different price points, each generated by different build settings from the same codebase. Price discrimination is when you sell the same thing to different people for different prices. It's technically illegal, so universities get around it by sending you a $50,000 tuition bill and a $40,000 need-based scholarship instead of just sending you a $10,000 bill. Other forms of price discrimination include student discounts and senior discounts. Health care in the US thrives on price discrimination--the simple words "I don't have insurance, can we talk about arranging payment" can knock off 50% or better of your bills with some doctors. Price discrimination at elite colleges means "rising tuition costs" are really much ado about nothing. The nominal tuition only represents what they charge rich people, which is often independent of what they charge not-rich people.
    - nazgulnarsil 17y ago
      if you regard effort on the part of the student as part of the pay, then colleges are segmented. hard sciences and humanities educations don't really resemble each other much.
      - philwelch 17y ago
        I'm not talking about cheaper vs. more expensive colleges, I'm talking about poor kids and rich kids paying different prices for the same college.
        nazgulnarsil 17y ago
        right, humanities degree at the same college as an engineering degree is cheaper in terms of effort.
barnaby 17y ago
"Given the nonprofit, tax-exempt status of colleges and universities, and the powerlessness of the market to control higher-education costs due to limited supply".. Sounds like sub-optimal supply/demand to me. If we dropped the charade that universities are anything other than for-profit corporations then we might get more supply and/or less demand. If there were more market _competition_ then I suspect we'd see prices drop significantly.
- albertsun 17y ago
  Why do you think that's a charade?
- wallflower 17y ago
  > If we dropped the charade that universities are anything other than for-profit corporations Is Harvard really a big hedge fund? However, even if they were a Corporation, they might still dodge corporate taxes. http://www.theamericanscene.com/2008/05/12/is-harvard-just-a-tax-free-hedge-fund http://www.theamericanscene.com/2008/05/12/is-harvard-just-a...
roc 17y ago
"Supply and demand" doesn't explain anything until you recognize that what universities sell, is prestige. That's the key point of the article.
- nazgulnarsil 17y ago
  I'd generalize this further: economics doesn't explain anything until you realize that money is only one sort of accounting of wealth and status transfer.
- kokofoo 17y ago
  I can see the opposite side too. Prestige isn't worth much if nobody willing to pay for it. But the fact is there are people willing to pay for it. EDIT: I guess that's what you're saying as well.
  - Qz 17y ago
    And why are people willing to pay for it? Because universities have marketed said prestige as something that is absolutely essential to success in the modern world. So of course people will buy it.
- bradbeattie 17y ago
  I won't deny that prestige is part of the package, but I feel I got my money's worth out of the education portion. YMMV.

But it isn't supply and demand. and the powerlessness of the market to control higher-education costs due to limited supply One of the biggest problems for a young academic is that there is an oversupply of young academics and grad students. That fact, and the way that they set their tuition prices (based not only on what the families will pay, but in conjunction with a price-fixing arms race), leads me to think that this article is indicating a higher education bubble, not a case of basic supply and demand.

philwelch 17y ago

Tempered with a big fat dose of price discrimination (oh, wait, I meant "financial aid").

jimbokun 17y ago
Or you could call it "price segmentation" like Joel does: "All from the power of segmentation: separating your customers into different groups according to how much they are willing to pay, and extracting the maximal consumer surplus from each customer." http://www.joelonsoftware.com/articles/CamelsandRubberDuckies.html http://www.joelonsoftware.com/articles/CamelsandRubberDuckie...
- philwelch 17y ago
  No, they're separate things. Price segmentation is selling marginally different products, but making each product available to everyone. So you have Windows 7 Ultimate and Windows 7 Professional and Windows 7 Home and Windows 7 Home Professional and Windows 7 Ultimate Home Datacenter Server at separate prices, and even though the only difference is that you run a different build script, it's not the same as price discrimination because you let the consumer choose. I interviewed at a company once that made a home-architecture CAD tool. They sell about 20 different versions of the same software, all at different price points, each generated by different build settings from the same codebase. Price discrimination is when you sell the same thing to different people for different prices. It's technically illegal, so universities get around it by sending you a $50,000 tuition bill and a $40,000 need-based scholarship instead of just sending you a $10,000 bill. Other forms of price discrimination include student discounts and senior discounts. Health care in the US thrives on price discrimination--the simple words "I don't have insurance, can we talk about arranging payment" can knock off 50% or better of your bills with some doctors. Price discrimination at elite colleges means "rising tuition costs" are really much ado about nothing. The nominal tuition only represents what they charge rich people, which is often independent of what they charge not-rich people.
  - nazgulnarsil 17y ago
    if you regard effort on the part of the student as part of the pay, then colleges are segmented. hard sciences and humanities educations don't really resemble each other much.
    - philwelch 17y ago
      I'm not talking about cheaper vs. more expensive colleges, I'm talking about poor kids and rich kids paying different prices for the same college.
      - nazgulnarsil 17y ago
        right, humanities degree at the same college as an engineering degree is cheaper in terms of effort.

barnaby 17y ago

"Given the nonprofit, tax-exempt status of colleges and universities, and the powerlessness of the market to control higher-education costs due to limited supply".. Sounds like sub-optimal supply/demand to me. If we dropped the charade that universities are anything other than for-profit corporations then we might get more supply and/or less demand. If there were more market _competition_ then I suspect we'd see prices drop significantly.

albertsun 17y ago
Why do you think that's a charade?
wallflower 17y ago
> If we dropped the charade that universities are anything other than for-profit corporations Is Harvard really a big hedge fund? However, even if they were a Corporation, they might still dodge corporate taxes. http://www.theamericanscene.com/2008/05/12/is-harvard-just-a-tax-free-hedge-fund http://www.theamericanscene.com/2008/05/12/is-harvard-just-a...

roc 17y ago

"Supply and demand" doesn't explain anything until you recognize that what universities sell, is prestige. That's the key point of the article.

nazgulnarsil 17y ago
I'd generalize this further: economics doesn't explain anything until you realize that money is only one sort of accounting of wealth and status transfer.
kokofoo 17y ago
I can see the opposite side too. Prestige isn't worth much if nobody willing to pay for it. But the fact is there are people willing to pay for it. EDIT: I guess that's what you're saying as well.
- Qz 17y ago
  And why are people willing to pay for it? Because universities have marketed said prestige as something that is absolutely essential to success in the modern world. So of course people will buy it.
bradbeattie 17y ago
I won't deny that prestige is part of the package, but I feel I got my money's worth out of the education portion. YMMV.