Another thing to consider about college costs is the strange way that we’ve fused the instruction and credentialing functions. The supply of prestigious credential-bestowing institutions is necessarily constrained because that’s what it means to be prestigious. But there’s no reason to think that it’s necessarily expensive to operate a prestigious credential-bestowing institution. MIT isn’t prestigious because its TAs are unusually competent at grading problem sets. Teaching by contrast seems expensive to do properly but also in principle open to unlimited competition.
But right now a lot of our conventional practices are upside down. For example, Paul Krugman and Greg Mankiw are both high-profile economists attached to prestigious institutions (Princeton and Harvard) who both have introductory economics textbooks. One is a liberal and one is a conservative. Now suppose that instead of having competing economics textbooks they came together to collaborate on creating the Mankiw-Krugman Introduction to Economics Certificate. The MKIEC would be a test, basically, administered on regular dates and it would say “hey, these famous guys say people who get a good score on this know introductory economics.” Of course you’d have a problem with regulatory and accreditation cartels. But even so, there could be some value. Personally, I sometimes need to admit in a slightly embarrassed tone that I’ve never actually taken an intro economics course. The best I can say is that I have read both the Krugman and the Mankiw textbooks and I think I understand the material well enough to be taken seriously by economics bloggers with PhDs and everything. But if I had a test blessed with the good housekeeping seal of approval of an ideologically diverse set of famous economists, that would have some value to me.
But what’s more, if you could somehow persuade Harvard and Princeton to both start giving the MKIEC test to their own undergraduates the ball would really be rolling. Suddenly any institution in the country—an accredited college or otherwise—could compete on a level playing field with fancy ivy league schools in terms of teaching introductory economics. Then instead of a buch of institutions competing to recruit the most famous economists to teach their intro classes or competing to recruit the students with the highest SAT scores, you’d actually be competing to deliver skills in a cost-effective manner because the prestige factor has been outsourced to MKIEC.