High tuitions … and “Baumol’s Cost Disease”

Previously, we posted What do high healthcare costs and high tuitions have in common?

A loyal reader reminded me of the connection between high tuitions and “Baumol’s cost disease”

To that point …

The NY Times ran a piece by Harvard Prof Greg Mankiew summarizing his views re: high and increasing college tuitions.

One of Mankiw’s identified causes is “Baumol’s Cost Disease”

Many years ago, the economist William Baumol noted that for many services — haircuts as well as string quartet performances — productivity barely advances over time.

Yet as overall productivity rises in the economy, wages increase, so the cost of producing these services increases as well.



Education is a case in point …

According Mankiw:

How we teach and learn has benefited from some technological advances, such as PowerPoint presentations, online courses and the innovations of outfits like Khan Academy.

But after 30 years as an educator, I am convinced that the ideal experience for a student is a small class that fosters personal interaction with a dedicated instructor.

In other words, best practice remains the approach that Socrates used to teach Plato 2,500 years ago.

But because society over all is now richer, today’s Socrates expects a reasonably high standard of living, and that implies hefty tuition.

English translation: The best learning occurs in small classes taught by increasingly highly-valued, highly paid teachers.

Sounds a bit “old school” in the age of the internet and very self-serving for a guy trying to rationalize his paycheck …



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One Response to “High tuitions … and “Baumol’s Cost Disease””

  1. Maureen Kickham James Says:

    Prof.– I’m of the mind that a great deal of the cost of higher education is driven by the availability of resources to pay for it in the forms of federal student loans. If the credit to pay astronomical tuitions wasn’t there, would colleges even consider trying to charge them?

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