Technology Alone Can’t Curb College Cost Inflation

Steven Pearlstein writes up a promising application called Aplia that helps teach introductory economics to college students. I can’t judge independently whether or not Pearlstein is right about the program’s merits, but I can say that he’s too optimistic about this: “For me, however, what’s really exciting about Aplia is that it finally holds out the possibility of bringing to higher education the same productivity revolution that has lowered costs and improved quality in almost every other industry over the past two decades.”

I used to think this way. I used to think that cost inflation in higher education was driven by a lack of productivity improvements. Therefore, I thought, when people invented productivity-enhancing technologies that made undergraduate education cheaper, we’d be on the road to curbing cost inflation. Then I read this eye-opening article by Kevin Carey in The Washington Monthly. Kevin points out that we actually have seen a bunch of things like Aplia that are making aspects of undergrad education more efficient. They’re just not making it any cheaper for students and their parents:

For the most part, colleges would just rather spend it elsewhere. The nonprofit Delta Project on Postsecondary Education Costs recently found that tuition and fee revenue per student at public research universities increased by 34 percent, in inflation-adjusted dollars, from 2000 to 2005. At the same time, spending per student on instruction and academic support declined. This is nothing new — overcharging for introductory courses is standard operating procedure in higher education, and has been for a long time. Colleges routinely use the excess revenues generated by huge, inexpensive lecture hall classes to support other, money-losing activities. Freshmen have always been cash cows — technology just made them more so.

You should read the whole article. But suffice it to say that the larger issue is that colleges and universities don’t face incentives to deliver cost effective undergraduate education. They face incentives to use undergraduate education as a profit center with which to finance other status-seeking endeavors like sports and research and higher salaries for administrators. If you want productivity enhancements to bring tuition down, you need to change those incentives.