Textbooks are the latest abuse in predatory consumer business. As the economy remains mired, both young people and middle-aged workers have returned to school in record numbers. What they find, in the form of textbook pricing, is enough to shock a subprime mortgage broker.
Let’s start with utilitarian textbooks: basic workplace skill training. Microsoft Office 2010 Introductory, a “textbook” by Cengage Learning, costs $132.06 at Amazon. In contrast, Microsoft Office 2010, Plain & Simple, by Microsoft Press – the same Microsoft that created the software – costs $16.73 on Amazon. Granted, the Cengage textbook is 1,176 pages whereas Plain & Simple comes in at a svelte 448 pages. Assuming institutions of higher education require that much more to learn to use a word processor Microsoft Press also offers the 960 page tome Microsoft Office 2010 Inside Out for $30.68 in paperback or $25.07 on the Kindle. I doubt the extra 216 pages justifies the $101.38, 430% price difference. Cengage is not unique. Pearson publishes Go with Microsoft Office 2010, which lists for $154.20 but sells for $130.32 on Amazon, almost the exact same price as the Cengage book. A coincidence, I’m sure.
Students can buy the book published by the creator of the software, plus a Kindle to read it on, paying $94.07 total. They’d end up with a backpack that is 4.9 pounds lighter, $37.99 fewer crippling dollars of student loan debt, and no need to purchase another Kindle for future textbooks. Cengage or Pearson may argue that their books include interactive study software but their argument is nonsense because Microsoft offers free high-quality interactive training for all versions of Office online.
Let’s look at another example, from a textbook author writing in a field where he knows the pernicious effect of overinflated book prices. Microeconomics, by Krugman and Wells, 3rd Ed., is used for introductory microeconomics classes. This 595 page paperback, published by Worth Publishers, lists for $191.25 though is discounted at Amazon to $162.18. There are older editions of Krugman’s first edition Microeconomics textbook, published eight years ago, on sale at Amazon for $.50 plus $3.99 shipping. Students who rely on private student loans, at 6.43% interest, an average rate, will owe $208.09 after they graduate for Krugman’s book. If they pay back the loan over a ten-year period, at the same interest rate, Prof. Krugman’s book will cost $282.65, total, if purchased from Amazon or $333.32 if purchased at list price from the college bookstore.
Less than two months after publishing the third edition of his textbook, which prevents students from purchasing the inexpensive used editions, Krugman bemoaned the burden student loan debt has on the economy. “Household debt is the big ball and chain on this economy, and student debt is a big part of it,” Prof. Krugman told PBS Newshour. Maybe the Nobel Laureate, Pulitzer Prize winning, New York Times columnist can explain exactly what changed so much, in eight years, in introductory microeconomics, that justifies three book revisions. As a bonus he could even elaborate on the micro and macroeconomic effects needless revisions of overpriced textbooks have on the students forced to take loans and government grants that could fund more scholarships.
As an alternative to Prof. Krugman’s $162 book there is Principles of Microeconomics, v. 1.0, by a publisher called Flat World Knowledge. Students can read that text online for free, buy a downloadable e-reader /tablet version that includes additional study aids for $34.95, purchase a black & white version for $39.95, or buy a color one for $129.95. Given that the charts are available in color online I think that it’s safe to assert this book costs $122.23 less than Krugman’s text.
This fall, 3,600 classrooms use Flat World’s peer-reviewed textbooks, according to co-founder and CEO Jeff Shelstad. “When faculty become aware of our solution and give it a pilot, we perform great,” said Shelsted. “[Faculty] like it, students like it, and administrators like it: it works quite well.” Shelsted clarified high quality texts demand time and that the Flat World business model compensates authors. “We have a compensation model for our authors that we think is very fair and potentially very lucrative,” Shelsted continued. “Our authors write not only as a social cause but also for economic reasons; they believe in our model.”
While I’m sure many might argue that there is a quality gap. I think the cost differential is best summed up in the Flat World microeconomics book Chapter 14, Imperfectly Competitive Markets for Factors of Production, which allows colleges to require Professors to require specific versions of specific books regardless of cost. Federal guaranteed student loans likely fuel the ability to charge these exorbitant prices, as explained in Ch. 15, Public Finance & Public Choice. Finally, if the federal government wasn’t busy chasing down licensed foreclosure defense lawyers and worrying about Google selling ads for reduced priced imported pharmaceuticals they might instead focus on whether there is price collusion for mainstream text publishers, addressed in Ch. 16 of the Flat World text, Antitrust Policy & Business Regulation. I haven’t read Krugman’s book because my research budget for this piece is about $162 short, though don’t imagine the information is materially different.
In a January, 2005 article Why Are Textbooks So Expensive?, published by the Association for Psychological Science, textbook author Prof. Henry Roediger, III bemoans that college bookstores oftentimes end up with more money than textbook authors. Prof. Roediger points out that on a textbook he co-authored, Experimental Psychology, sells for $73.50, and that the three co-authors split the 15%, $11 royalty. In the intervening years their publisher, Wadsworth Publishing, figured out a clever fix: the latest edition of their book has a list price of $230.95, the price it likely sells for at the college bookstore, and $194.62 at Amazon. In seven years the price of this book tripled, so each author is now presumably paid triple the royalty. Prof. Roediger’s book is apparently a real-life collection of examples of psychological research. I did not find a table of contents online but, for a future revision, I can think of a great example addressing greed and empathy or, more specifically, lack thereof.
“Since the peak in household debt in the third quarter of 2008, student loan debt has increased by $293 billion, while other forms of debt fell a combined $1.53 trillion,” noted the Federal Reserve in a May 31, 2012 report. Student loan debt soaks the life out of students, but also the overall economy because the steep debt burdens divert graduates income from starter homes, new cars, and local businesses to the coffers of the federal government and private lenders. Congress tried addressing the issue in the Higher Education Opportunity Act of 2010, though the section related to textbook regulation ends “No Regulatory Authority. The Secretary shall not promulgate regulations with respect to this section.” Needless to say, the law did not exactly scare the academic world into compliance.
Textbook authors are paid a royalty of about 15% to 30%, depending on the popularity of a book so you’d think that they’d sell the books directly. Assuming that Prof. Krugman’s economics book addresses disintermediation, and that his personal brand is more familiar than Worth Publishing, he could sell his $162 book for $48.60 directly, the amount he is paid assuming he’s towards the top of the royalty scale, benefitting students at no cost to himself. With permission Amazon and other services will print his book, or any other, on-demand for a small fee for those who prefer paper. Of course thinking, rather than selling, is about the last thing that interests the modern textbook industry.