The Economist's Cookbook

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  • "The curious task of economics is to demonstrate to men how little they know about what they imagine they can design."

    - F.A. Hayek

Why College is So Expensive

Posted by The_Chef On 4:28 PM 0 comments

This is an interesting article from the Wall Street Journal Editorial Page about the cost of college and why it has been increasing at a faster rate than inflation.

Here's in interesting tidbit:

"...government handouts are creating the tuition problem. Tuition has risen about three percentage points faster than inflation every year for the past quarter-century. At the same time, the feds have put more and more money behind student loans and other financial aid. The government is slowly becoming a third-party tuition payer, with all the price distortions one would expect. Every time tuition rises, the government makes up the difference; colleges thus cheerfully raise tuition (and budgets), knowing the government will step in.
As a result, "colleges have little incentive to cut costs," says economist Richard Vedder, the author of "Going Broke by Degree: Why College Costs Too Much." Mr. Vedder explains that there are now twice as many university administrators per student as there were in the 1970s."

It would be interesting to see if the pressure for the increase in Gov't. funding is coming from the Public schools or the Private ones. I would suspect that the Private ones are filling a niche market that will increase in line with inflation to kep their prices competitive. And that the Public ones are fighting over funding allocations to grow their own budgets.

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