One of the most contentious ideas of recent years is that young people today are the victims of systematic intergenerational injustice. In this version of events, the villains are the babyboom generation, who have spent all the money and consumed all the resources, leaving their children and grandchildren with growing debts and rising costs.
In a post for the American Enterprise Institute, Mark Perry has produced a chart which lends some credence to this theory. What it shows is how various prices have risen in the US since 1978. A general measure of inflation indicates an overall rise in prices of 250%. However, over the same period, house prices have gone up by 325%, while the cost of medical services has risen by 575%. Both of these forms of inflation discriminate against the young: house prices for the obvious reasons and healthcare costs because the money borrowed by governments to provide services to the old will have to be repaid by the working age population.
Furthermore, as the chart shows, there's an even steeper upward trend in the cost of being young:
- “The 812% increase in the price of college textbooks since 1978 makes the run-up in house prices and housing bubble (and subsequent crash) in the 2000s seem rather inconsequential, and the nine-fold increase in textbook prices also dwarfs the increase in the cost of medical services over the last three decades. Compared to the 250% increase in the Consumer Price Index (CPI) over the last 34 years, college textbooks have risen more than three times the amount of the average increase for all goods and services.”
You might think that college textbooks are a relatively trivial expense, but (in America, at least) the costs are eye-watering, with many standard texts priced at $200 to $300 each. Furthermore, textbooks are only part of the escalating cost of higher education.
There are all sorts of reasons why getting a degree is getting so expensive. But, if you want a textbook example of what has gone wrong, then you need look no further than the example of textbooks. The argument is taken up by Kevin Carey in an article for Slate:
- “The college textbook market is unusual in that the person deciding what people should buy—the professor—isn’t the one actually doing the buying. It’s akin to prescription drugs and suffers from many of the same excesses, with large companies vying to protect highly-profitable blockbuster products and employing legions of salespeople to influence the relatively small number of agents who decide what millions of consumers will buy.”
Some might call this a textbook example of ‘market failure’. It is, in fact, more accurately described as market distortion – in that external factors result in a misalignment of incentives and the suppression of competition.
Carey describes how attempts to provide much more affordable access to academic knowledge (much of which is in the public domain) has resulted in a legal counter-attack from the big textbook publishers. Whatever the rights and wrongs of individual cases as the law currently stands, it is clear that policymakers have some important decisions to make more generally.
Governments can either maintain existing legal and regulatory frameworks that preserve the position of the higher education establishment or they can make it easier for new models of provision to breakthrough and drive down prices.