Textbook Costs: Looking at Market Forces to Understand High Prices

As if tuition, fees and cost of living weren't high enough, college students spend hundreds of dollars every year on textbooks. And book costs are rising fast - prices for new textbooks are climbing much more rapidly than inflation rates. The Education Insider explores the market disconnect that may be at the root of this problem.

By Megan Driscoll

textbook prices HEOA

Skyrocketing Prices

Few 'sticker shock' experiences compare to looking at a student's textbook bill.

According to a study conducted in 2004 and 2005 by the State Public Interest Research Groups (State PIRGs), 'Ripoff 101,' the average student's textbooks come to about $900 per year, or 17.5% of tuition and fees at a 4-year public college and 43% of tuition and fees at a 2-year public college. And while most students use grants or loans to cover other major college costs, those books typically come straight out of their - or their parents' - pockets.

In fact, the cost of textbooks has been climbing rapidly over the last few decades. According to the State PIRGs, the U.S. Bureau of Labor Statistics' Producer Price Index shows that textbook prices are increasing at over four times the inflation rate for all other finished goods. Between 1994 and 2005, the overall prices for finished goods climbed 14% while the prices for trade books (such as novels, non-fiction and other books outside of education) increased about 19%. By contrast, textbook prices shot up by 62% in that same time period.

The State PIRG study found a number of factors driving this rapid climb. For example, many publishers frequently come out with new editions. Students are typically required to acquire them even when they contain relatively little new information, and these editions tend to make used copies scarce and drive prices up higher: a new edition typically costs 12% more than the last edition did when it came out, and 45% more than a used copy of that previous edition.

Furthermore, many textbook publishers have started bundling books with extras like DVDs, dictionaries and study guides. These bundles are typically about ten percent more expensive, and while 65% of professors told the State PIRG's that they 'never' or 'rarely' use the extra materials, few bundled books are available 'a la carte' (book only).

And even more shocking is the fact that publishers are charging American students more than overseas students for the same materials. The State PIRGs found that the average textbook costs 20% more in the U.S. than it does in the U.K., and some publishers are charging as much as 72% more to American students.

A Captive Market

The disconnect between American and overseas textbook prices underscores what may be the root of this problem: a runaway market. The prices of most goods are kept under control by such basic economic forces as competition between producers and supply and demand. There's a limit to what consumers will pay for most things, and most goods producers have to keep costs within that limit in order to compete for those dollars.

However, some commentators have pointed out that the textbook market has more similarities to fields like healthcare than regular consumer goods. There's relatively little competition and, unlike trade books, the person who chooses the book is not the same as the person who consumes it.

To makes the problem more clear, Charlotte Allen of Minding the Campus draws the following analogy between healthcare and the textbook market: There is one entity who chooses the good or service (professors for textbooks, physicians for medicine), one entity who consumes it (students for textbooks, patients for medicine) and, often, a third entity who pays for it (parents or loans for textbooks, insurance companies for medicine).

Even when students pay for their own books, eliminating the third entity, you can see how the usual market forces that keep prices in check don't apply. As with healthcare costs, which also seem to be rising uncontrollably, textbook prices are able to skyrocket unchecked because, like a medical patient, the consumer (or their creditor) has no choice but to pay.

Seeking Solutions

Congress has acted to try to reduce this problem. The Higher Education Opportunity Act (HEOA) of 2008 included a textbook affordability provision that went into effect in July 2010. Key provisions include requiring textbook publishers to disclose prices to professors so they can make cost-conscious choices for their students, making all bundled books available a la carte and requiring colleges to provide a list of required and recommended texts for each course in the catalog during registration.

The act also encourages colleges to provide information to students on cost-saving measures such as textbook rental and buyback programs and calls for a new Government Accountability Office (GAO) report to track the effects of the HEOA by 2013.

Some professors may be driving up prices by assigning their own textbooks.

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