Why Does College Cost So Much?
reviewed by Joshua T. Brown - January 20, 2012
As college prices have increased over the past few decades, so has the frequency of books seeking to explain the phenomenon (Ehrenberg, 2002; Hacker & Dreifus, 2011; Vedder, 2004). As such, Archibald and Feldman attempt to distinguish their work within this vein of scholarship by offering an argument grounded in a comparative macro perspective they refer to as aerial where their unit of analysis is situated at the industry level rather than the school level.
The book is composed of four parts, the first of which situates higher education within the service industry. Through a progression of ordered diagrams Archibald and Feldman compare higher education to other industries such as durable goods, non-durable goods, and other services. Based on the inter-industry comparisons, the authors argue that similar price trajectories have also been experienced in other industries, namely physicians, dentists, lawyers, bank service charges, and life insurance. Because the costs of service industries often increase at rates greater than the costs of most goods, and because the productivity of service industry labor faces constraints, those industries are frequently subject to cost disease. While the first part aims to establish the inter-industry pattern, the second proposes an explanation.
In part two, a comparative analysis of higher education and a set of kindred industries reveals three major forces of technological progress functioning in the broader economy. First, although technological progress constrains costs related to labor input, it is unevenly distributed across industries. Consequently, service industries such as higher education, are limited in their ability to control input costs related to labor. Second, technological progress favors persons with greater levels of educational attainment. Because educational attainment has not equaled demand, the wages of highly educated workers have increased. Consequently, most service industries have maintained significantly higher labor costs due to their dependence on highly educated workers. Third, technological advancements can raise costs rather than lower them. As labor market needs continue to require a particular level of technological competency, colleges have accommodated these needs by providing students with access to the latest technological advancements and thus becoming equipment intensive institutions. Maintaining this up-to-date technological standard has resulted in increased costs. Ultimately, Archibald and Feldman assert that the principal drivers behind rising college costs are the combined effects of these three technological forces.
Part three, the undeniable strength of the book, illuminates the obscure and often incomprehensible world of higher education subsidies. Here, the authors painstakingly tackle the myriad public and private subsidies and their disproportionate effects on college list-price. They describe that the affordability of college is influenced by three variables: family incomes, college costs, and available subsidies. Their new measure of affordability, income left over rather than the traditional measure of budget share allows them to conclude that, for most individuals, college has actually become more affordable. That is, except for persons in the bottom fifth of the widening American income distribution.
Archibald and Feldman seek to create access and improve educational attainment with the education policy suggestions in the final part of the book. They propose two broad initiatives reforming the federal financial aid system and transforming funding relationships between the state and institutions of higher education. The first initiative is modeled on principles of Georgias HOPE Scholarship program that aim to achieve simplicity and universality. Here, universal savings accounts to be provided to all American citizens become the sole basis of financial aid. The authors refer to the second initiative as the New Compact, which is comprised of two pillars. Pillar one advocates that state supported universities require financial and operational sustainability independent of the states erratic budget cycles. The ability to set prices should rest with the individual institutions. Pillar two advocates for the implementation of direct subsidies to students where funds are distributed to individual students rather than through appropriations to the college or university. This direct funding model would result in a shift from state-funded institutions to state-affiliated institutions.
A significant shortcoming of the book is a series of inherent discrepancies between the argument and solution. The first part of the book adopts a macro-level perspective that argues the driver of college costs is technological change while simultaneously offering a critique of micro-level explanations that focus on incentives and actions of institutions and their leaders. However, the proposed solutions focus on changing the structure of financial aid and the relationships between schools and states, the point of which is to change incentives and behaviors. Consequently, the authors switch from a macro argument to micro solutions as the first part of the book argues that increasing costs are not driven primarily by individual actions, while the corresponding solutions focus on changing incentives and thus student and institutional behavior. A second resultant discrepancy is that the solution does not explicitly address the problem. The proposed solutions are aimed at increasing educational attainment, yet it is not clear as to what extent or how this would impact rising costs. This corresponding logic extends to a third discrepancy that pertains to whether resources are the principal driver of educational attainment. When they advocate for changes in individual and institutional behavior, the authors do not present any evidence that educational attainment is better than other possible solutions.
An additional shortcoming pertains to the authors critique of the micro-level explanations. After summarizing various aspects of the dysfunctional narrative, specifically its prestige games, inefficiencies, and rising revenue streams, Archibald and Feldman argue that their macro-level perspective is better situated to explain cost trajectories. However, it is not clear as to what the authors are really disputing as they rely on summary and anecdote to construct their argument. For example, they do not evaluate any cost or price data that supports the propositions of the dysfunctional narrative. Rather, they offer some selective statistics that seem to support their point, concluding that the dysfunctional perspective is unable to fully explain their longitudinal data and thus insufficient. Here, and in previous chapters, statistical specificity is missing. Because there is no detailed methodological appendix that describes how many of the claims are derived, the reader is left deliberating whether to trust the authors or not as there is no way to engage in a conversation regarding the presented evidence.
In sum, Archibald and Feldman have provided a text that gives diligent attention to a complex social issue. They bring attention to macro-level processes that deserve consideration and which afford possible opportunities for future scholars. Part three, which demystifies the multifaceted and convoluted processes associated with tuition, fees and financial aid is unquestionably worth the price (and cost) of the book.
Ehrenberg, R. G. (2002). Tuition rising: Why college costs so much. Cambridge, MA: Harvard University Press.
Hacker, A., & Dreifus, C. (2011). Higher education?: How colleges are wasting our money and failing our kids and what we can do about it. New York, NY: Times Books.
Vedder, R. (2004). Going broke by degree: Why college costs too much. Washington, D.C.: The AEI Press.