Over the last two decades, the rise in prices of college textbooks as measured by the FRED have vastly exceeded the general inflation level. With more students resorting to digital piracy, second hand, or even forgoing the purchase of books altogether, it is clear the price of college texts are overpriced and increasing. There is a simple explanation for this disconnect: the Principal-Agent Problem. When another actor selects a product to be used by a separate actor there is a disconnect between an ideal benefit to cost ratio. Since all one can hope for is to approximate the preference of another
The costs of textbooks professors select is born by the students. If a professor selects a book that is excessively expensive, the cost of the purchase will be too much for some students who forgo the book altogether. Other students could be served just as well with a comparable less expensive book. In either case, the disconnect between the price and the quality is a disservice to the students.
An understanding of the process that selects textbooks is required to solving this problem. For the most part, it’s not the students who choose their chemistry textbooks. Rather it is either an instructor or a department-wide selection. Then the students pay for (or forgo) books that others have selected. This has clear benefits, as professors with more experience in a given field might know what textbooks are best. The upward pressure on the price of textbooks has no opposing force and while professors might recommend the most comprehensive textbook they don’t have to balance the benefits with an increased cost.
To have money be spent in the most efficient way, whomever uses a product also purchased and selected it. This creates the ideal balance between costs and benefits since whomever makes that decision has more information on their specific preferences and budgetary constraints. Deviation from this configuration creates inefficiency where a balance between cost and reward is more difficult to achieve.
Buying gifts is a prime example of this imbalance - whoever is buying does not have as great an understanding of what the receiver wants and could buy something that might be of less use than another product of comparable cost. The gift giver has a very clear understanding of the cost of a product and has to do their best to approximate the amount of value the receiver would get out of it.
Using another’s money to purchase a product for oneself also suffers a similar problem. If cost is of no issue then one might buy a $45 steak rather than a $20 salmon if one were paying the cost. Whenever textbooks are paid for by a third party, such as with textbook specific scholarships, then quality is maximised at the expense of an inflated cost.
Using another's money to buy for another is even more disconnected. Niether quality or cost is watched as closely as with the ideal relationship. Since whoever is buying the product has to approximate the tastes and budget of the receiver they spend less efficiently than when one buys for oneself.
This is the mechanism at work when a textbook is selected. Since professors select the textbooks and the students purchase them, professors attempt to approximate the proper ratio between cost and benefits for different texts. Since there is are different ratios between different students there is no textbook could be selected that would be ideal for every student. Professors have to approximate and do so in the face of upward pressure on the price.
Of note, there is no malice in this system. Professors with the best of intentions, cannot select a perfect book as it would be different for each student. Scholarships can hardly be assumed to have malevolent intentions.
Books that are excessively comprehensive with inflated prices fit perfectly into this market.
Professors with the best intentions recommend what they view as the best book while externalizing costs onto students who, trusting in their recommendations, buy blindly.
Even through the private purchase of textbooks carries some level of disconnect, there are some unfortunate, though well intentioned, perverse incentives that exacerbates this problem.
Such as programs that pay for any specific item that another selects. This is the case with the private Goedeker’s Appliances Annual College Book Scholarship which offers money just for the cost of books. This clearly well-intentioned program has an unnecessary and easily solvable problem that students (while staying below the $500 limit) have no incentive to buy a book that they could spend $150 with all its unnecessary extravagance even though the $100 copy would be just as useful. Quality here is prioritized to the neglect of keeping costs reasonable. An easy solution is to give the money to those with educational costs to spend as best they see fit so creating a grant for general school supplies rather than just textbooks. This would cause the money to be spent where it would go the furthest.
Rectifying the break between the selection and the cost of textbooks is difficult. Efforts could be made to make professors more cognizant of the cost to their students. The perverse incentive to pick expensive books would have to be removed. This selection is in what textbook a department chooses. When there is a bookstore on campus that makes a profit from selling books to students, the school itself has an incentive to maximise costs regardless of quality. This could be solved for by having the decision of what textbook be delegated to individual professors instead of departments.
Grants for books from both government and private organizations could be costlessly changed to general schooling grants, or, even better, as conditionless cash grants to students. As a condition to receive these funds attendance at school, since the the same amount of money would have to be spent regardless this would provide for more autonomy and efficiency in scholarship dollars. Granted, this might be difficult to push for as a picture of undergrads buying alcohol on the school's dime might prove unpopular.
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