Posts Tagged ‘Norm Ornstein’
June 12th, 2012 at 2:20 pm
Colleges and Car Dealerships
Posted by Print

Following on to Tim’s excellent post earlier this week about the cost of higher education, this observation by the American Enterprise Institute’s Norman Ornstein bears noting:

Colleges have become a bit like car dealers, where the sticker price does not reflect the actual cost to most buyers. Some can afford to pay the full boat, helping the colleges maintain their budgets, while others can get deep discounts.

And colleges, under this theory, keep their prices up to match their competitors because a lower tuition would be seen by many prospective students and parents as a reflection of lower quality compared to their peers.

Many economists also point out that federal subsidies for higher education are themselves a contributing factor in increasing college costs.

The economic prescription for reforming higher ed is the same that could be applied to health care, k-12 education, or any other sector of the economy that is co-mingled with the government: greater price transparency, fewer subsidies, lower barriers to entry, and more competition. This isn’t terribly complex stuff. In fact, it should be intuitive to anyone who’s ever studied basic economics. Alas, the dismal science is about the only component of a college education that’s not getting a fair shake these days.