Principles (and Practices) of Economics

by Henry on March 4, 2008

Since I’ve already been giving grief to prominent economists today, I might as well annoy one of our regular commenters (whom I actually quite like) still further, by linking to this Harvard Crimson article on the political economy of the textbook market (many thanks to the correspondent who sent it to me).

Since N. Gregory Mankiw returned to Harvard to teach the College’s introductory economics class, 2,278 students have filled his weekly lectures, many picking up the former Bush advisor’s best-selling textbook, “Principle of Economics” along the way. So, what has professor of economics Mankiw done with those profits? “I don’t talk about personal finances,” Mankiw said, adding that he has never considered giving the proceeds to charity. … With textbook prices sky high, some professors feel an obligation to donate the proceeds they receive by assigning their own textbooks for their classes. Kenneth A. Shepsle, the professor of government who teaches Social Analysis 46: “Thinking About Politics,” allows students to e-mail suggestions for where the charity money should go. … Similarly, the professor who introduces thousands of Harvard undergraduates to what is just finds it unjust to profit from textbook sales.

… Like many introductory textbooks, Mankiw’s book has seen frequent republication. Retailing for $175 on Amazon.com, “Principles of Economics” has come out in four editions since its first publication in 1998. Economics chair James K. Stock is known for complaining in class about this practice, although not about “Principles of Economics” in particular. “New editions are to a considerable extent simply another tool used by publishers and textbook authors to maintain their revenue stream, that is, to keep up prices,” Stock wrote in an e-mailed statement. He said that while he requires his own book for his class, he encourages students to buy older editions and international copies, and said one student bought a Korean copy for 15 percent of the domestic list price. “Some new editions really do make substantial intellectual improvements, but I would suggest that is the exception not the rule,” Stock said. … Mankiw asserts that “Principles of Economics” has been the bible of Harvard economics concentrators since before he took over “Economics 10.” … “The textbook chose the professor, the professor didn’t choose the textbook,” Mankiw said.

If he’s being quoted accurately, Mankiw seems unduly defensive. If I were him, I’d take a much more pro-active stance. I’d claim that I was teaching my students a valuable practical lesson in economics, by illustrating how regulatory power (the power to assign mandatory textbooks for a required credit class, and to smother secondary markets by frequently printing and requiring new editions) can lead to rent-seeking and the creation of effective monopolies. Indeed, I would use graphs and basic math in both book and classroom to illustrate this, so that students would be left in no doubt whatsoever about what was happening. This would really bring the arguments of public choice home to them in a forceful and direct way, teaching them a lesson that they would remember for a very long time.

The alternative – that a benevolent and all-seeing regulator named Gregory Mankiw has chosen the very best textbook available for the students, and that any rents flowing from the $175 cover price were completely irrelevant to his decision making process – seems to be closer to Mankiw’s preferred explanation, and I see no reason whatsoever to doubt his sincerity (really – I’m not being sarcastic here, even if, like Stock, I generally consider the frequently updated textbook game to be a very fishy business). But it’s a claim that’s surely rather hard to reconcile with the usual political lessons we’re expected to draw from econ 10, econ 101 and their cousins.

{ 2 trackbacks }

An Excellent Argument
03.05.08 at 10:19 am
Club Troppo » Missing Link Daily
03.06.08 at 10:39 pm

{ 76 comments }

1

Aaron Swartz 03.04.08 at 10:59 pm

Which commenter is this supposed to annoy?

2

notsneaky 03.04.08 at 11:24 pm

Me possibly. But I actually agree with this one. Mankiw’s book is pretty good but it’s not that good. In fact I prefer John Taylor’s PofMacro book (for one thing it has freakin’ inflation on the y-axis of the standard AS/AD graph rather than prices (what was last time prices fell?))

And pretty much all PofMacro textbooks suck when it comes to treating development/growth issues.

But anyway. I digress. Like Prof. Stock above I also encourage students to purchase old editions and the like (hope my publisher’s rep isn’t paying attention).

3

PHB 03.04.08 at 11:28 pm

I didn’t bother to buy the book after I found the YouTube video posted on CT the other day. Much better.

4

notsneaky 03.04.08 at 11:29 pm

BTW, while we’re in the business of giving grief to prominent economists I gotta just mention that Paul Krugman’s PoMacro textbook (with Robin Wells) in my opinion is pretty bad. There are some parts which start out promising but then it just switches quickly to hand waving and pretty much assuming that the students are too dumb to understand something even a bit more complex.

I was actually very disappointed by it, particularly since his International Econ book with Maurice Obstfeld is pretty good.

5

Colin Danby 03.05.08 at 12:05 am

This might be a moment to mention these people:

http://www.freeloadpress.com/booklist.aspx

who have a free principles text with ads.

It’s also surprising how many good free resources there are on the web. What we need is a pedagogy wiki where people can post problem sets, exercises, examples, case studies and other teaching materials.

Does anyone remember the Penguin Education series? Two-buck paperbacks: I have a shelf of their econ books, all of which seem to date from the late sixties and early seventies. Excellent monographs and sets of readings.

6

Stuart King 03.05.08 at 1:11 am

I once took a first year course in political philosophy taught by Jim Flynn. ‘Defending Humane Ideals’ was on the recommended reading list and any one who bought a copy could go to Flynn and he’d give them what he made in royalties from the sale of that book. He explained in class he didn’t believe it right for an academic to make money from his students. Just thought I’d throw in that anecdote for what it’s worth.

7

harry b 03.05.08 at 1:21 am

He’s not a powerful regulator. Students could choose not to take his course. Or, and this is true of most students at Harvard, they could choose to go to a different university which does not facilitate flagrant expliotation of students by professors.

8

Colin Danby 03.05.08 at 1:28 am

Do any universities have policies on this?

This has come up from time to time on IHE. There are also instances of publishers offering instructors direct inducements to adopt.

9

Henry 03.05.08 at 1:34 am

Harry – I think he is a regulator. His course is a required credit for many students (there was some kerfuffle over this when it was being taught by his predecessor, Martin Feldstein, in ways that some students perceived as right wing propagandizing; they managed to get Marglin to teach an alternative econ 101, but the alternative doesn’t provide the required credit). Doubtless students could indeed go to other universities – but then firms affected by economic regulation in an advanced industrialized democracy can similarly decamp to other jurisdictions (and sometimes do). So I think the analogy holds up quite well.

10

Donald A. Coffin 03.05.08 at 1:35 am

When I was in grad school, more than 30 years ago now, our most famous faculty member had an intro econ book on the market, which was used there. He told us that the ethics of the situation prevented him from accepting royalties on a book he had the authority to require his students to buy, and so he donated those proceeds to charity.

I have, since then, heard similar stories about many textbook authors whose books are used at their home institutions, whether they, personally. assign the book or not. I have also heard of textbook authors who decline to use their own books, preferring that students get an additional point of view in classes they are teaching.

Mankiw’s position seems to me to be somewhat insupportable.

11

Slocum 03.05.08 at 1:45 am

I’d claim that I was teaching my students a valuable practical lesson in economics, by illustrating how regulatory power (the power to assign mandatory textbooks for a required credit class, and to smother secondary markets by frequently printing and requiring new editions) can lead to rent-seeking and the creation of effective monopolies.

Yep. My daughter took micro last term and used Mankiw’s book. I actually encouraged her to bring up the subject of rent-seeking in the class in the context of the text (we bought her an international version for about $35).

But, really, that’s the least of it. The class is a lecture format with a couple hundred students, bringing in revenues of something on the order of $100K for the semester (even at a state university — not counting the financing from the state government), while the non-tenured lecturer teaching the course is making just a tiny fraction of that. What a cash cow!

And the material is bog-standard economics, which students could have learner very well on their own. So why are they paying so much for so little added value? Pure rent-seeking behavior on the part of accredited universities who hold a shared monopoly on parchment printing.

12

Thomas 03.05.08 at 5:40 am

I’m not sure I get this.

I mean, of course you find it fishy–it is. And of course Mankiw, in this situation, is sincere. But sincerity and pure intentions don’t overcome the interest, do they? That lesson is as important as the more obvious one you proposed.

13

Eli Rabett 03.05.08 at 5:41 am

You don’t know the half of it. College textbooks in the US are a market where the publishers pay the piper and collect from the students

the General Chem program at Really Large State U, can get slobbering reps and more. The economics are simple. At RLSU the GChem course might have ~5000 students or more. At $140 for the book (more if the students are offered the “package”) that is ~ 0.7M$, about 75% of which goes to the publisher and the rest to the bookstore. . . English and math are the 1000 pound gorillas in the textbook business, but chem ain’t bad.

14

Gabriel M. 03.05.08 at 5:44 am

Oh, my… again with the secondary markets…

I recommend this paper by Austan Goolsbee:

Are Durable Goods Consumers Forward Looking? Evidence from College Textbooks,” (with Judy Chevalier, Yale University), revised and resubmitted, American Economic Review

15

John Emerson 03.05.08 at 6:06 am

Economists are mostly shits. Even the relatively nice ones have to be enablers in order to preserve their status within the profession. Very smart people. probably know a lot of stuff, but just nasty people.

This isn’t slander because they think it’s OK to be as nasty and selfish as possible. And as smug and self-satisfied as possible.

16

Scott Hughes 03.05.08 at 6:33 am

You wouldn’t think he would be allowed to choose his own textbook. Maybe he could give his students the royalties he gets for their purchases?

17

Robert 03.05.08 at 7:19 am

18

Robert 03.05.08 at 7:22 am

I thought I continued 16 with:

Mankiw presents himself as oblivious to the power differentials between a tenured professor and a graduate student. Could he give an intelligent presentation of the material that Henry suggests?

19

dsquared 03.05.08 at 7:34 am

I would think of Mankiw as being the lucky recipient of a statutory monopoly (and therefore a producer interest with a strong incentive to lobby for the maintenance of that monopoly). I think Henry is correct that the fact that students have other choices doesn’t alter that – aftr all, people can eat things other than baked beans, but if the UK government gave me a monopoly on baked beans, I could probably make some money out of it. You could actually use a couple of diagrams to show how Mankiw’s textbook monopoly would, if he could perfectly price-discriminate, allow him to extract the entire consumer surplus from his economics class; ie the entire value to students of studying economics at Harvard compared to their next favourite non-Mankiw option could be monetised and trousered by GM.

And I think Henry does have a quite serious point here; if Mankiw’s (utterly defensible) view is that there are obvious and significant benefits from standardising on a single textbook, that the Harvard authorities are competent to select what that textbook should be, and that the obvious conflicts of interest and opportunities for self-dealing can be managed with reasonable rules and a modicum of honesty, then that’s a very, very different view of economics from the one that he emphasises in his textbook (and don’t even get me started about that blog of his).

20

notsneaky 03.05.08 at 7:40 am

What exactly is wrong with Mankiw’s reaction, Robert (yeah, I know I gotta play my part in this, just like John Emerson does his)? He says that apparently there’s a critique of his book, he – of course – doesn’t agree with the critique, and since this guy was once in his class, he wishes that they would’ve talked more about the whole PAE thing.

I can think of many other people who are much worse at responding to criticism than that.

21

notsneaky 03.05.08 at 7:53 am

As far as who gets to choose the textbooks and why; Sometimes (usually small) schools have policies. Sometimes the department chooses the book. Sometimes the teacher gets to choose.
Is there a payola going on here? Nope. There’s advertising and publishers calling you to ask what classes you teach and free copies of all sorts of books and maybe even if a publisher sends you book after book and you never adopt any of them they’ll stop sending them (I don’t know – I haven’t been at this long enough) but there’s pretty much no credible promise here, ‘sfar as I can tell.

I don’t know, maybe in some places and in other disciplines it works differently and there’s more sketchy stuff going on. Personally I have yet to adopt a single textbook that has been sent to me as promo (again, I hope the publishers aren’t listening since I like the free books) but if a good one comes along I might do it.

In regard to using your own text… like I said i tend to agree with the spirit of this post, though I think it’s more a matter of manners than morals. Usually you write a textbook because you think you can do a better job than others. So of course you’ll want to adopt it – that’s why you wrote the freakin’ thing. Should you expect your students to pay for it, just like all the students at all the other schools that adopt it pay for it? If yes, then fine. Though I think the nicer thing in this case – since you can – is to provide free access to the book online or something and make the paper copy available for purchase for those who really want it (this is what several of my ol’ profs did. And some of their texts were worth buying in hardcopy anyway).

But seriously, the problem here is not that Mankiw or whoever is asking students to use his own book. If he asked them to use an alternative text it would be roughly the same really high price (Mankiw’s PoMacro book 125$, Taylor’s 120$, Case and Fair 125$ – so it’s more or less “market price”). The problem is that the damn things cost so much in the first place (which is why I think niceness means you should provide free access if you can)

22

notsneaky 03.05.08 at 7:57 am

“I would think of Mankiw as being the lucky recipient of a statutory monopoly”

But if he’s got a monopoly over his students why ain’t he charging them monopoly prices (or at least above market prices)? Like I point out above his books costs the same as all the other close substitutes. Of course the answer is that he (or his published) doesn’t get to discriminate between his own students and not his students so he has to charge the market price.

There is monopoly power going on here but it’s a much more aggregate level than a single professor and his book. It’s at the level of the publishing industry – and the deals they got with colleges – as a whole.

23

dsquared 03.05.08 at 9:00 am

But if he’s got a monopoly over his students why ain’t he charging them monopoly prices (or at least above market prices)?

Oh come on! You’re reading too many blogs there mate! The term “market prices” in your comment there just means “the price that it sells at, in the market”. Textbooks are sold at “market prices” which represent a huge markup over what they would sell for if they didn’t have substantial monopoly protection (proof; the existence of international editions).

It can’t remotely be controversial that Mankiw has a monopoly on textbooks on that course; you’re not allowed to use a different textbook on it. That’s what “monopoly” means. There’s a certain amount of contestability to that monopoly which restricts how rapacious he can be, but you can show that by diagrams and equations.

There is monopoly power going on here but it’s a much more aggregate level than a single professor and his book. It’s at the level of the publishing industry – and the deals they got with colleges – as a whole.

No, there’s single-professor monopoly power here too. The level of rents in the industry might be established at the industry level, but the division of those rents depends on the specific single-textbook deals struck, and it seems unarguable to me that Mankiw gets a benefit from having the Harvard deal (both in simple terms of the actual royalties on the books sold, and as a prestigious “anchor tenant” for marketing to other colleges).

24

Kevin Donoghue 03.05.08 at 9:14 am

Usually you write a textbook because you think you can do a better job than others.

That’s a good explanation for the first edition, but if you’ve churned out four editions of an introductory textbook since 1998 you need to ask yourself: just what is it about your latest exposition of the Slutsky equation (or whatever) that is such a big advance on your earlier efforts that it justifies asking students to fork out the difference between the price of the new book and the price of a secondhand 3rd edition.

I recall reading a textbook many years ago where the usual “Preface to the umpteenth edition” began with the author explaining that the main purpose of a new edition is to squeeze more revenue out of the hapless student – pretty much the approach Henry recommends, but without the diagrams. The effect it had on me was precisely the one Henry predicts. You don’t forget it when an author says: monopoly power is real and please note that I am exercising it at your expense.

25

notsneaky 03.05.08 at 9:33 am

Yeah of course there’s monopoly power at the industry level. But

“There’s a certain amount of contestability to that monopoly”

is exactly the point – it’s not Mankiw who’s got the monopoly power, it’s the entire industry. Contestable markets are not monopolies no matter how many sellers are in’em.

“it seems unarguable to me that Mankiw gets a benefit from having the Harvard deal”

Sure. But – given that there’s already monopoly power at industry level – there’s no additional inefficiency here. All it is is a pure transfer of 125$ per student from Mr. John Taylor or Mr. Karl Case to Mr. Mankiw (or their respective publishers). The students’d get ripped off no matter whose textbook they had to buy.

26

notsneaky 03.05.08 at 9:39 am

“That’s a good explanation for the first edition, but if you’ve churned out four editions of an introductory textbook since 1998 you need to ask yourself”

Again. I agree that the constant churning out of new editions to kill the used book market is ridiculous. But if you’re gonna choose between Nth edition of your book, and the Nth edition of someone else’s book, you’ll probably still think yours superior.

As an aside. Lots of students are lazy and have (their parents’) money to burn. It’s not that hard to obtain a cheap old edition of the required textbook and it’s a pretty close substitute – usually you just gotta pay attention to how the chapter numbers have changed or something. Hell, usually the library has’em. It’s what I did as an undergrad and I hardly ever bought a book. So some of the blame here needs to go to the students who are not willing to arbitrage these opportunities.

…….
Ok. I’m just waiting for Stata do to its thing. It’s always enough time to get into arguments on blogs, but never enough time to sit down and do anything substantial.

27

dsquared 03.05.08 at 10:03 am

But – given that there’s already monopoly power at industry level – there’s no additional inefficiency here. All it is is a pure transfer of 125$ per student from Mr. John Taylor or Mr. Karl Case to Mr. Mankiw (or their respective publishers). The students’d get ripped off no matter whose textbook they had to buy

This isn’t obvious; there are free textbooks, out-of-copyright textbooks etc, not to mention that it would be possible to teach the course from an off-the-run edition.

28

Tom T. 03.05.08 at 10:50 am

How much does Mankiw make off the sale of each textbook? What’s a professor’s typical cut?

29

Kevin Donoghue 03.05.08 at 10:55 am

notsneaky: So some of the blame here needs to go to the students who are not willing to arbitrage these opportunities.

As a defender of economic orthodoxy (unless I’ve been misreading you very badly for quite a while) don’t you feel a little uncomfortable falling back on an explanation of that sort?

30

Katherine 03.05.08 at 11:08 am

Is this unusual? At university 10+ years ago, maybe a third of my course texts were written by the lecturer doing the course. And whilst there was a fair amount of selling on of books from one year to the next, there were enough new editions that at least half of your books each year had to be new (this was law, so out of date books were a no-no). There wasn’t much we could do about it.

31

John M 03.05.08 at 11:28 am

I am a bit baffled by this. Is it the case that in the US, unlike the UK, students on a course are required to buy a particular textbook in order to pass the course? If not, what’s the fuss about? Obviously most will prefer to use the recommended textbook, beacause that sort of recommendation is part of what they are buying when they sign up, but they needn’t if they see no real benefit.

32

Doug T 03.05.08 at 1:55 pm

You are not required to buy the text, but:

1. The bookstore doesn’t stock textbooks except those listed by professors.

2. In most cases, homework problems are taken directly from the problem sets in the textbook, often just by referencing a number. (“Chapter 5, problem 2.”) So it’s tough to do the homework without the correct book. (And I think this is the main incentive to buy the updated editions.)

3. In most cases, the class organization is modeled after the chosen textbook (or, in the case of texts written by the prof, the reverse.) And often the specific derivations and treatments in the lectures are the same as those in the textbook. Which makes it much easier to use the required text to study from than an alternate text that does things in a different way and in a different order.

33

Slocum 03.05.08 at 2:16 pm

We have this small case of regulatory power establishing an effective monopoly (textbooks) that enables rent-seeking. But this is a derived, secondary effect of the big case of regulatory power establishing an effective monopoly (credit hours, university degrees) that enables rent seeking on a much greater scale. Yes, textbook prices are outrageous, but it’s really small potatoes — no students spend a decade of their lives trying to pay off loans for textbooks (nor, at least, are taxpayers called on to subsidize textbooks in addition to the prices students are paying, which is the case with tuition).

And yet everyone seems all lathered up about a few hundred dollars in textbook rents rather than tens of thousands of dollars in tuition rents. Odd.

34

harry b 03.05.08 at 2:31 pm

Henry (and dsquared) — yes, I think the analogy is good. I was joking, except that I was trying to add blame — the colleges and universities that give lecturers this power are collusive at best. I was anticipating slocum’s point (in both senses of anticipating), which I guessed he’d make in full detail. Not that I’m calling you predictable slocum. Universities do a lot of rent-seeking, and within universities there is a lot of rent-seeking behaviur both by individuals and departments, which are facilitated, eg, by complex ‘breadth’ and other requirements.

Obviously no-one should benefit financially from requiring students to read their own books. I have never done it — in one co-taught class the other instructor required one of my books, and I did give my permission. It was an inexpensive book, and I calculated the small royalty and added it to my Oxfam donation. Its absolutely fine to make money on one’s books, but not because one has required them. Only a cretin wouldn’t see that, surely?

35

John M 03.05.08 at 2:31 pm

And yet everyone seems all lathered up about a few hundred dollars in textbook rents rather than tens of thousands of dollars in tuition rents. Odd.

What are you talking about? If you don’t like the price of university courses you needn’t buy one. If you don’t want to pay the premium for a top course, you can buy cheaper ones all the weay doen the scale. It’s got nothing to do with rents. Nobody is captured.

36

John M 03.05.08 at 2:37 pm

“Its absolutely fine to make money on one’s books, but not because one has required them. Only a cretin wouldn’t see that, surely?”

harry, it rather depends on what you mean by ‘required’. If you use your position to force someone to read your book, then that is, of course, wrong. But if you advise them that your book is, in your opinion, their best bet, then why shouldn’t you benefit financially if they choose to acept your advice and buy it. After all, they are likely to be pre-disposed to rate your advice havioing decided to study on the course. Why is it wrong that they should pay for your tuition but not for owning a copy of the book that you wrote?

It may be that I am not quite understanding the US system, though. In the UK you are not, in my experience, required to read any one text to pass a course, you’re simply offered a list of recommended texts. It seems strange if a tutor has bothered to write a coursebook, in that context, which he or she does not think good enough to recommend.

37

John Emerson 03.05.08 at 3:04 pm

The most important product of the econ industry is Econ 101 students, and normally Econ 101 is taught in a tacitly ideological way and moves students toward market conservativism.

There are all sorts of perspectives within which Mankiw’s behavior is reprehensible, but as Notsneaky cogently points out, neo-classical economics and free market conservativism are not among these perspectives. A large part of the social function of economics consists of weakening the other perspectives and strengthening the neoclassical/freemarketer perspective.

Textbook costs are the straw that broke the camel’s back for many students who thought that they had successfully budgeted their education. The big widely used textbooks in required courses are real cash cows.

The obsoleting of math textbooks with new editions every 3 years or so is especially reprehensible. The first year of calculus has been stable for God knows how many decades. (Special applications of calculus, e.g. for engineering, are taught with different textbooks.)

Econ is the worst case by far, because while econ textbooks are indeed updated regularly in order to maximize return, and while economics is in fact changing (the way calculus isn’t), the new textbook editions do not introduce the new ideas in economics.

(Sources: Coyle, “The Soulful Science”; Rosser, Holt, and Colander, “The Changing Face of Economics”. These two books estimate that it takes 20 years or so for new ideas to reach the advanced undergrad level, and anywhere from 40 years to forever for them to to filter down to the “Principles” level.)

Contrast what happens in genuinely scientific, non-ideological sciences whose PhDs don’t consult for banks, for example biology. From time to time P.Z. Meyers will mention adapting his undergrad lesson plan to take an exciting just-published paper into account.

I’m sympathetic to Slocum for once here, as I am one of the rare liberals with doubts about Education.

38

John Emerson 03.05.08 at 3:12 pm

The credentialization system as a whole is the rent-collection scheme, not just Mankiw. Students who choose cheaper textbooks and cheaper classes will lose out on ever getting in on the action. Various enforced monopolies enable rent-collection and punish those who choose the cheaper courses. Mankiw collects the rents and offers his students hope of cashing in themselves, but a lot of his students just lose their money. Struggle for survival.

For obvious reasons I support the credentialization of MDs, dentists, electricians, airline pilots, etc., but even in these best-cases there can be abuse, and there are a lot of credentialization rackets out there.

39

Henry 03.05.08 at 3:14 pm

thomas – what I am saying is more or less that I imagine that Greg Mankiw sincerely believes that his is the best textbook on the market – it would be rather odd if he didn’t – and thus it’s very likely that he would assign it even if he didn’t get substantial rents from it. This doesn’t change the fact that as dsquared says:

Mankiw’s (utterly defensible) view is that there are obvious and significant benefits from standardising on a single textbook, that the Harvard authorities are competent to select what that textbook should be, and that the obvious conflicts of interest and opportunities for self-dealing can be managed with reasonable rules and a modicum of honesty, then that’s a very, very different view of economics from the one that he emphasises in his textbook

40

John Emerson 03.05.08 at 3:16 pm

Lots of students are lazy and have (their parents’) money to burn. It’s not that hard to obtain a cheap old edition of the required textbook and it’s a pretty close substitute – usually you just gotta pay attention to how the chapter numbers have changed or something. Hell, usually the library has’em. It’s what I did as an undergrad and I hardly ever bought a book. So some of the blame here needs to go to the students who are not willing to arbitrage these opportunities.

Other students are poor, from poor families, and do not have the knowledge required to arbitrage effectively. They may not be aware that Prof. M**** is a blood-sucking leech, or that the 4th edition isn’t much different than the 3rd edition. And often they drop out of school because of costs, including but not limited to textbook coats.

41

harry b 03.05.08 at 4:08 pm

emerson — glad you left lawyers off your list of professions that obviously need to be certified.

john m — yes, I think you’re not getting it (I was raised in british higher ed, but have spent my career in US higher ed). Textbooks in Econ, Psych, Chem, Physics, Engineering survey courses are required reading, in the sense that you really cannot do well in the course without reading that precise textbook, or something very like it indeed. Homeworks are often assigned out of the book, tests test what is in the book. Of course, students can do as some have suggested, and bet on an old edition, and they can, if the prof has arranged for there to be a library edition on reserve (a big if) bet on being able to check that out at the moment they need it (but suppose 3 copies are on reserve, there are 300 students in the course, and you have 48 hours to do the homework, during some of which you have to sleep and attend other classes). When I teach I assume that students have immeidate and daily access to the texts I am requiring, otherwise they are not going to learn what the coourse is about (its a it different, because I don’t use textbooks). For that reason I think carefully about the cost of the texts I assign. Admittedly, I probably have more students for whom cost is a real issue than Mankiw does. Not many, but (as emerson says) the not many for whom it is a real issue are precisely those who are most at risk from budget shocks.

42

c.l. ball 03.05.08 at 4:37 pm

An excellent post.

Do any universities have policies on this?
The Iowa publics said that profs who assign their own texts have to return the profits to the school.

How much does Mankiw make off the sale of each textbook? What’s a professor’s typical cut?

This really depends on the publisher and the market. In the 1980s, I was told — but never confirmed — that Jeff Berry’s American Politics text earned him a 6-figure income; Samuelson reportedly made millions off his text. Those days, however, are long gone unless your text happens to dominate your field since so many have gone into it. Nowadays the first year is when the money is made for most books; the used market cuts deeply into new sales after that.

The publisher margins are quite good. McGraw-Hill’s margin was 15% in 2007 on its Education division (operating profit over revenue). The National Association of College Stores claims a 4.4% pre-tax profit off sales. As many universities — even public ones — force their division to pay for themselves, bookstores jack up their prices. NACS also puts the author’s cut at 11.6%. The usual arrangement is still an advance followed by royalties if the advance is covered, and some publishers only issue the advance in tranches as revenue comes it (a colleague found his $30k “advance,” split with his co-author, coming in very slow stages).

I only used a text on a regular basis when teaching intro to comparative politics. Otherwise, I don’t use them. Good edited volumes are cheaper, more thoughtful, have a real debate going, and can be supplemented by extensive on-line material. Want to know how the IMF or WB work? They have a really good explanation at their website for free.

The exception is Oxford’s Very Short Introduction series. My students have loved McMahon’s on the Cold War and Steger’s on globalization.

43

robertdfeinman 03.05.08 at 4:39 pm

There is a technological solution to the overpriced textbook problem – post it online as a series of PDF chapters.

That this isn’t done (and thus eliminate the profit requirements of a commercial publisher) shows that the motives of capitalists like Mankiw aren’t as “pure” as they would have you think.

If professors should be paid for the effort that they put into producing the book then charge a fee for the course which approximates the royalty that is normally received for selling a physical copy. I would guess that would be about $5 for a book like this. Mankiw makes as much money as before, and the only ones to suffer are the middlemen who are not performing any useful service.

44

Lee A. Arnold 03.05.08 at 5:08 pm

Nice rent if you can get it! But the web appears poised to destroy this publishing model. A lot of people want to get into it. In the U.S. there appear to be many teachers and professors beginning to upload their own course materials, in many subjects for both Kindergarten-12 and college. So it seems unlikely that in the future even a well-known text will be used at more than a handful of schools, if it continues to be priced exorbitantly. This is going to end the hardcopy markets, due to the cost of production.

And web-based materials may not see much profit, after that. Ultimately web-based supply will overwhelm demand, for two reasons that are actually opposed to each other: some suppliers are in search of profits, while for many others, teaching is in some respects a non-profit impulse.

K-12 and college are slightly different markets. K-12 curricula need some sort of editor to organize the offerings into the graded, comprehensive schemes required by the states (California and Texas, mostly.) This could be done in the process of gathering everyone with the ability to write a good text into some sort of larger scheme of accreditation or a listing service — but again it is likely to be a non-profit service, or with rents pared to nothing.

At the college level, a consortium of friendly professors of a subject-matter might put together a “brand” of courses written by multiple contributors and locked behind paywalls, but even here I think competition is going to drive it down. Perhaps big universities themselves will form name-brand consortia, and lock the stuff behind paywalls — but that seems to me to be unmanageable and even counterproductive.

I’m not sure there’s going to be any money in it at all for new textbook writers, except for Google AdSense or the like — and at the elementary level, so far, advertising is condemned by most parents. If I were in the textbook publishing business, I’d be looking for another line of work.

45

John Emerson 03.05.08 at 5:38 pm

There is a technological solution to the overpriced textbook problem – post it online as a series of PDF chapters.

This would solve the problem for the prey, but the predators hold the copyrights, and for them there is no “overpriced textbook problem.”

46

Barry 03.05.08 at 6:05 pm

Lee: “Nice rent if you can get it! But the web appears poised to destroy this publishing model. A lot of people want to get into it. “

The whole point here is that it’s not the publisher, but a professor requiring the text, while profiting from it.

47

notsneaky 03.05.08 at 6:30 pm

“As a defender of economic orthodoxy (unless I’ve been misreading you very badly for quite a while) don’t you feel a little uncomfortable falling back on an explanation of that sort”

But this is orthodox economics, Friedman style! When you purchase a good using someone else’s (your parents) money, you don’t care much about price.

48

notsneaky 03.05.08 at 6:35 pm

“Other students are poor, from poor families, and do not have the knowledge required to arbitrage effectively”

I said Lots not All. So I’m blaming the rich, spoiled students for allowing the prices to remain high, costing all, including the poor students, money.
I don’t think we disagree here, though of course you gotta put your own vicious twist on it.

49

Aeon J. Skoble 03.05.08 at 6:38 pm

People keep referring to a “conflict of interest,” but I don’t see the conflict. One of my interests is in supplementing my income. If I go to the trouble of producing a textbook, I obviously will want to be paid for my efforts. Ok, another one of my interests is in ordering the best available textbook for a particular course. As several commenters have noted, if I’ve produced a textbook, it’s almost surely the case that I think it’s better than the alternatives. I don’t see how these two interests “conflict” — unless I actually think my own textbook is crap, and order it anyway so I can make a buck. Otherwise, no conflict: I’m ordering what I think is the best available textbook, and I’m being compensated for my labor. (And FWIW, most are not being compensated “millions”: I make under a hundred a year on my textbook. I’m sure others do better than _that_, but surely not in the millions.)

50

robertdfeinman 03.05.08 at 7:32 pm

As I said above in my suggestion about posting textbooks online, the author could set up a situation where he loses no money.

Right now the author gets a few dollars per copy sold. He gets no income from used copies or pirated editions. By charging student’s a class fee equal to the royalty on the textbook the author would come out the same or better than presently. He would collect even from those who don’t buy the book currently.

The only ones who lose out are the publishers. They no longer provide a service that is needed. Most authors have to deliver “camera ready” copy or a PDF file anyway, so there is no typesetting, proofreading, etc. involved.

For those who want a hard copy they can print out the PDF at their own expense, or the author can post the book on a site like lulu.com which offers cheap print-on-demand publishing.

51

Ingrid Robeyns 03.05.08 at 8:36 pm

I’m late to the party, but just wanted to say: great post. Made me smile – whereas most posts about economics departments and the people who teach there make me remember so many anger I’ve experienced there that I tend not to finish reading the post…

Where I did my undergraduate in economics (Katholieke Universiteit Leuven in Belgium — admittedly uncomparable with the glitter of Harvard), most professors wrote their own course text on computer, gave one copy to the students organisation, who then sold them at cost price. If any profit was made at all, it went to a students party or some such thing.

52

Barry 03.05.08 at 8:51 pm

“As several commenters have noted, if I’ve produced a textbook, it’s almost surely the case that I think it’s better than the alternatives. “

An analogy for those having comprehension difficulties might be a hospital not liking doctors prescribing drugs from companies in which that doctor has a signficant business interest.

53

Aeon J. Skoble 03.05.08 at 9:10 pm

Barry, that’s not a good analogy: the doctor would have to have _invented_ the drug. Also, what do you mean “significant” business interest? 80 bucks a year is significant? Another reason it’s not a good analogy is that no one dies from reading a poorly organized textbook.

54

John Emerson 03.05.08 at 9:11 pm

Aeon J. Skoble: authors and publishers of widely-used intro texts make lots and lots of money, not the less than a hundred dollars you earn. Also, “conflict of interest” doesn’t mean what you think it means. It refers cases when someone’s private interests conflict with their public responsibility, not to conflicts between two different private interests of theirs.

Someone’s financial interest in his own textbook might create a conflict of interest by causing him to exaggerate the superiority of his textbook over cheap generic second-hand textbooks.

Notsneaky, I don’t delude myself into thinking that my vicious little twists actually ever hurt anythone. These people are invulnerable. I’m throwing eggs at a wall.

55

Aeon J. Skoble 03.05.08 at 9:39 pm

John Emerson- I am (sadly) aware that my textbook earnings are on the low end of the scale, but even if one is making a lot of money, it’s still the case that (a) you almost certainly think your book is better than the alternatives and (b) the money you’re making from _your class_ will be insignificant. The folks who are making 20K from their textbooks must be getting adoptions all over the place, but they themeselves are still only selling 20-50 copies per semester, so that’s not where the 20K comes from.

Also, I get the revised definition of “conflict of interest” you propose, but I still deny that this is an instance. I don’t have a public responsibility to order what I think is a second-rate textbook for my course. Ordering what I think is the best book _is_ my public responsbility. If I’ve produced a textbook, chances are I think that’s the best one. (I don’t mean for that to be a tautology: I recently served as a referee for a textbook in my field, and one of my comments to the publisher was that it was indeed better than mine – which means I’ll be ordering that one, not mine, the next time I teach that class. I’d have to be six kinds of moron to use my second-choice textbook just so I could make an extra $8.50.)

56

Righteous Bubba 03.05.08 at 9:44 pm

What’s the effect of having your textbook used at Harvard as opposed to Oklahoma State?

57

John Emerson 03.05.08 at 9:57 pm

As far as I know, my definition is not the revised definition, but the standard definition.

The conflict of interest would especially be a self-serving judgment of the value of your own textbook, but there’s also an enormous conflict in putting putting out revised editions (for revenue-maximizing purposes) which do not bring the science up to date.

The conflict involved for an individual intro class “taught” in sections by a full professor (say, intro econ at a large university) could add up: 200 students a term and $3 per copy would be as much as $2400. However, I agree that the use of one class by one man to make this point is somewhat rhetorical; it puts Mankiw personally on the scene of the crime, though the actual crime is scattered over many classes in many schools.

58

Aeon J. Skoble 03.05.08 at 10:06 pm

“The conflict of interest would especially be a self-serving judgment of the value of your own textbook” — I think this doesn’t accurately reflect how professors think about their work, either as authors or as teachers. By the same reasoning, it would be a conflict of interest for me to get paid to teach _at all_, since I’d have a self-serving judgement as to the quality of my presentation, interpretation, and organization. More deeply, I guess I don’t even think there’s anything wrong with a self-serving judgement unless it’s false – for instance, in the case I cited in my previous comment, say I deluded myself into using what I had previously claimed was a second-best book.

As to revised editions, I haven’t done any, but if I did, it would be to rectify some weakness in an earlier edition. Outdated examples in the text and problems would be an example of a weakness. It’s worth going to a new edition, IMO, even if _all_ the material is the same, as long as the problem sets and examples are updated. It’s really annoying to teach from a text book where all the reference points are to the Reagan administration.

59

John Emerson 03.05.08 at 10:56 pm

Aeon, let me spell it out. This argument would not be happening if anyone believed that Mankiw’s textbook was significantly better than a lot of other, cheaper textbooks, including earlier editions of Mankiw’s own textbook. Mankiw may seriously believe that his textbook is the best, but no one agrees with him.

Not mentioned so far, but relevant: Does Mankiw really teach the class he’s paid to teach, or is the work all done by grad students. Likewise, did Mankiw really write the textbook he’s requiring and collecting royalties on, or did flunkies write the textbook for him too?

The context here is a widespread suspicion of the intro textbook market, indexed to Mankiw. Outside that context some of your arguments are reasonable.

All this has nothing to do with you and your textbook. It specifically refers to overpriced textbooks required for essential intro classes.

60

CalDem 03.05.08 at 11:42 pm

The real sh)(*_ thing about Mankiw’s book is that he stole a ton of problems and text from a pre-existing Ec 10 manual and put them in his book without citation or of course, any financial consideration. Since many other grad students, including some I know quite well, put lots of effort into constructing the prior manual, some were more than PO’ed.

Pretty typical high-end conservative economist behavior.

61

Kevin Donoghue 03.06.08 at 12:10 am

notsneaky: But this is orthodox economics, Friedman style! When you purchase a good using someone else’s (your parents) money, you don’t care much about price.

That makes sense if the parent opens an account with the bookshop which the student can tap to buy textbooks and nothing else. If however the student is provided with cash it makes no sense at all; the utility-maximising response is to move down the budget constraint from one brand-new textbook and no beer to one used textbook and many beers. Or do American parents demand receipts? If not, I think my point stands.

62

CalDem 03.06.08 at 12:19 am

The real bad thing about Mankiw’s book is that he stole a ton of problems and text from a pre-existing Ec 10 manual and put them in his book without citation or of course, any financial consideration. Since many other grad students, including some I know quite well, put lots of effort into constructing the prior manual, some were more than PO’ed.

Pretty typical high-end conservative economist behavior.

63

Elliot Lake 03.06.08 at 1:18 am

It sounds like a conflict of interest to me: the instructor is not foremost interested in teaching the subject but in teaching the subject in a way that results in more profit than the salary does. If you really wanted to instruct your students to the best of your ability, you would see to it that they got the concepts, no matter which texts were available, and you wouldn’t participate in augering your students in the process. The blackboard, the lecture, can convey those things without extracting royalty fees.

(And, add to your list the cost of Art History books, some of mine 30 years ago were near $100). And no, not all students have big piles of money laying around, to effortlessly spend on royalty producing texts.
Once again, directing back to the issue–even if they did, the point is the rent-seeking behavior of the prof/author.

The comment that economics teaching is training its students in a specific political theory sounds spot on; there is a distinct ladder-pulling-up theme there, and if the hoi polloi can’t afford the text, it is a way to weed them out and they don’t ever know that it’s personal.

There is a weak reflection of this behavior going on where I am; our local farmers market after 30 years & a lot of growth voted in a board–and the board members immediately decided to drop their own fees by a huge amount, raise them on the small fry vendors, and said at first it was because they needed the money for operation, when pressed finally owned up to wanting to give themselves a discount, and felt the newbies should pay for it, because they felt there’s too much competition now.
You might be tempted to say that they had some kind of point if they were founders or long time workers (as above: authors of definitive texts) but these folks aren’t either. They’re just in a position to extract money from others.

64

notsneaky 03.06.08 at 1:28 am

“If however the student is provided with cash it makes no sense at all; the utility-maximising response is to move down the budget constraint from one brand-new textbook and no beer to one used textbook and many beers. Or do American parents demand receipts? If not, I think my point stands.”

Yes, that is indeed the utility maximizing response, and admittedly it might have had something to do with me searching out old editions in the library. But for most students it actually works more like having an account. In my experience, usually the parents buy the student a “plan” which includes daily meals and purchases at the book store. The number of daily meals is fixed though you can vary their quality somewhat, but there really isn’t much of a margin there. So the real trade off isn’t “more beer” vs. “new textbook” but something like “new textbook vs. more ball point pens”.
Of course there’s a principal-agent problem here(parents can’t trust students not to blow their allowance on beer rather than textbooks) which the college/bookstore is exploiting, since ostensibly these “plans” are supposed to be a way of limiting your offspring’s expanses (which they might, but the side effect is that they create a captive consumer base and create monopoly power, so net effect could go either way). In fact I knew a guy in college who would offer something like 60 cents on the dollar for students with a “plan” to buy his textbooks. They’d get cash (more beer), less ball point pens, and he’d get a 40% discount on his books. And he never had trouble finding takers.

So yeah. The hypothetical situation you describe is not all that hypothetical.

65

Slocum 03.06.08 at 3:22 am

“For obvious reasons I support the credentialization of MDs, dentists, electricians, airline pilots, etc., but even in these best-cases there can be abuse, and there are a lot of credentialization rackets out there.”

But what really needs to be measured and certified is what specialists know and know how to do, not what accredited courses they paid for and sat through (or mostly didn’t bother to show up for except for exam days).

My wife is in medicine, and I know for a fact there are some real clowns practicing out there — I am not reassured by the fact they graduated from medical school sometime way back when.

Imagine if universities were in the education business but not the credentialing business and had to justify themselves by being the most cost-effective way to acquire the skills and knowledge necessary to pass the certification exams (which the universities did not administer or control). Wouldn’t that be fun?

66

salientdowns 03.06.08 at 3:47 am

Or do American parents demand receipts?

You have it backwards (understandably).

Students go buy books, tell parents how much it was, get reimbursed. Plenty of my fellow students did this when I was an undergraduate.

Of course, they could have bought cheaper books and then lied about the cost to get more money for beer. But that’s kind of irrelevant, because they could also buy new books and then lie about the cost to get more money for beer.

67

Slocum 03.06.08 at 3:59 am

harry b: “I was anticipating slocum’s point (in both senses of anticipating), which I guessed he’d make in full detail. Not that I’m calling you predictable slocum.”

So one of your thoughts on this subject was what Slocum would have to say about it? Excellent.

68

Nick Barnes 03.06.08 at 10:35 am

The whole idea of required reading is bogus. Recommended reading, fine. But why should a student be required to read, let alone to own, a particular text?

69

Nick Barnes 03.06.08 at 11:33 am

Following-up on my own comment is bad form, but to head off the obvious reply at the pass:

Yes, I understand that required reading makes the course easier to teach. In fact, it removes much of the need to teach, because the student can learn the material from the textbook, do exercises set by the textbook, make notes on the textbook instead of your lectures, revise from the textbook, get angry and confused at the textbook, and have her misconceptions set straight by the textbook.

She can even fall asleep over the textbook instead of in your lecture.

So can we deduce that required reading is a tool used by lazy academics to shirk their responsibilities?

70

trialsanderrors 03.06.08 at 3:14 pm

One of the most important lessons of a college education is that anyone who makes themselves dependent on a single information source suffers for it. I’m not quite sure that this lesson is on Mankiw’s syllabus, but at $175 per, there’s a chance a few of his students pick it up on the way.

71

Gilgamour 03.06.08 at 4:39 pm

Required reading is a tool used by lazy academics…oh my.

Far be from me to seek to disabuse a student of it’s ignorance. And the good Lord knows most students don’t read what is required anyway.

But I will put your case to a test.

I will teach a course, say, in chemistry by requiring students to read a standard chemistry textbook. I will compare test results with a chemistry class where students were not required to read a chemistry textbook. I will then compare the test results of both of these with chemistry courses where students are required to read book on kitchen remodeling and another in which students are given the option or urged to read about kitchen remodeling or any title they wish documenting the fate of pre-dreadnought battleships.

Which one of these would you like to see as a tax accountant?

72

c.l. ball 03.06.08 at 7:37 pm

The whole idea of required reading is bogus. Recommended reading, fine. But why should a student be required to read, let alone to own, a particular text?
In most cases, they are not required to purchase it, but in many cases, neither is the school required to put one on library reserve, or too few are on reserve for those not willing or able to purchase them to have sufficient access to the text.

73

c.l. ball 03.06.08 at 7:51 pm

200 students a term and $3 per copy would be as much as $2400.

Well, I guess if he really needs a new Prada suit and Brunori loafers, it would be worth it.

74

Nick Barnes 03.08.08 at 10:24 am

Which one of these would you like to see as a tax accountant?
Do you mean “graduates of which of these chemistry courses would you like to see as tax accountants?”?

Probably the second, possibly the fourth. Those courses will give high grades to fewer students, but the high-graded students will have shown the ability and motivation to find any necessary supporting texts for themselves, and to use them in a self-directed fashion. Whereas a high grade on the first course simply indicates an ability to open one’s mouth as each spoonful of pap approaches.

For some courses, especially at a higher level, there are very few if any textbooks, or there is a single text which defines the subject matter. On those cases, one can reasonably expect students to read those particular texts. J.P.Serre’s Linear Representation of Finite Groups is the first example which comes to mind from my own long-ago first degree. But one can learn introductory economics from hundreds of different sources.

75

ScentOfViolets 03.08.08 at 4:49 pm

The whole idea of required reading is bogus. Recommended reading, fine. But why should a student be required to read, let alone to own, a particular text?

I’m guessing it comes down to an assumption of responsibility in an easy, standardized way. I don’t know how many times I’ve had a student come up to me after the test complaining that I didn’t teach some specific point that they were being tested on. I can haul out my lesson plans and show that, yes, this specific point was covered, and have them say that it’s not in _their_ notes for that day, and that I must have skipped it.

Or I can simply assign reading, and then point out in the text (that they should have read) where the material concerning the question I asked is located.

This is important, especially, I have found, in the lower-level classes: for some reason parents are very apt to leap to their kids defence at this stage, and the name of the game with the administration is documentation, documentation, documentation. You’ve got that, and they (my superiors, at least) will back you to the hilt. You don’t have that, and in the name of ‘good relations’, they’ll make a big show of ‘correcting’ this injustice, forcing you to let the kid take the test over, and in some cases, going so far as to drop a nasty little note into your file. With said parents watching as you’re forced to sign off on the damn thing.

76

ScentOfViolets 03.08.08 at 5:07 pm

Textbook costs are the straw that broke the camel’s back for many students who thought that they had successfully budgeted their education. The big widely used textbooks in required courses are real cash cows.

The obsoleting of math textbooks with new editions every 3 years or so is especially reprehensible. The first year of calculus has been stable for God knows how many decades. (Special applications of calculus, e.g. for engineering, are taught with different textbooks.)

This strikes me as _the_ market for ebook readers. Don’t focus on NYT bestseller titles, or Amazons subpar Kindle. Go after student textbook market. With a ‘good’ reader and a workable proprietary scheme, the student could load up his reader with the recommended titles every semester for perhaps a third or a quarter of the current cost, and the publishers would still make a profit. Plus, the dead-tree introductory books are _heavy_. We weighed our 13-year-old daughter’s rather intimidating looking backpack at the beginning of the fall semester and the thing weighed almost fifty pounds. A good reader would certainly weigh less than a tenth that. And would bulk far less as well.

Econ is the worst case by far, because while econ textbooks are indeed updated regularly in order to maximize return, and while economics is in fact changing (the way calculus isn’t), the new textbook editions do not introduce the new ideas in economics.

(Sources: Coyle, “The Soulful Science”; Rosser, Holt, and Colander, “The Changing Face of Economics”. These two books estimate that it takes 20 years or so for new ideas to reach the advanced undergrad level, and anywhere from 40 years to forever for them to to filter down to the “Principles” level.)

Contrast what happens in genuinely scientific, non-ideological sciences whose PhDs don’t consult for banks, for example biology. From time to time P.Z. Meyers will mention adapting his undergrad lesson plan to take an exciting just-published paper into account.

I’m sympathetic to Slocum for once here, as I am one of the rare liberals with doubts about Education.

Now, I’ll agree with you in the main about introductory-level books, especially the math ones, as I have some familiarity with them.

But.

While the math may be stable, the pedagogy most definitely isn’t. You may disagree with the necessity, but math people are constantly looking for better ways to teach the subject. Myself, I tend to the theory that you can lead a horse to water, but you can’t make him drink. But I’m open to the notion that there are better ways to teach the subject, and … not so good ways.

Comments on this entry are closed.