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Commentary

Royalty Plan Would Ease the Surge in Textbook Prices


     
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The prices of college textbooks rose by more than twice the rate of inflation between 1986 and 2004, according to the Government Accountability Office.

Students (and their parents) understandably are alarmed by that trend, which accompanies across-the-board increases in the out-of-pocket costs of attending college, including tuition charges, which have tripled at Mississippi’s public institutions of higher learning over the past two decades.

Under mounting external pressure, the board that oversees Mississippi’s eight public colleges and universities recently approved policies intended to control textbook-cost inflation. Among other things, faculty members would be required to use the same edition of the texts they assign in lower-division undergraduate courses for three consecutive academic years, and for two years in their upper-division courses. Academic departments would be encouraged to adopt the same textbook for all sections of the same course and to make those adoption decisions earlier.

If only it were that simple!

Attempts to regulate the prices of any commodity, including textbooks, are bound to fail if they ignore the realities of the commercial marketplace.

The fundamental cause of ever-rising textbook prices is that authors and publishers earn income only on first-time sales. Once a new book is sold, it ends up in the second-hand market, after the buyer sells it back to the bookstore. The author and publisher do not benefit no matter how often a used book is resold. Profits from used textbook sales are earned only by college bookstores and the wholesalers who supply them.

The blunt fact is that the income streams of publishers and authors dry up about six months after publication.

Authors and publishers therefore have strong incentives to issue new editions, many of which incorporate only cosmetic changes—a new cover, a new layout or a few new applications. The market for the old edition is thereby eliminated (wholesalers will not pay anything for an out-of-print edition and the purchaser thus will be offered little or nothing for reselling it). When the new edition is published two or three years later, the author and publisher therefore can expect income from sales for the next six months or so, and the cycle begins anew.

Short timelines for revising and publishing new editions of existing textbooks are driven by the profit motive. That is the only way authors and publishers can justify the investments necessary to write, print and to market educational materials.

Students are asked (and are willing) to pay higher prices for new textbooks because they can resell them at semester’s end. Used textbooks are worth less at resale, depending on the book’s condition, which deteriorates over time. Planned obsolescence (cheap bindings and not-very-durable covers) is another predictable consequence of the economics of college textbook marketing.

What is to be done? One impractical option would be to ban sales of used textbooks, which would reduce the prices of new ones, since they then would have no value in the secondhand market. Another would be to create an institution for authors and publishers of textbooks similar to ASCAP, the clearinghouse for royalty payments to the composers, artists and publishers of music, which provides them with royalty income for every performance of their work from the copyright date until 75 years beyond their deaths.

If the authors and publishers of college textbooks earned income on secondhand sales, there would be less incentive to issue new editions, the used-book market would flourish and prices would not rise so quickly. That objective is laudable but certainly will not be reached by regulatory fiat.


William F. Shughart II is a Research Director and Senior Fellow at The Independent Institute, J. Fish Smith Professor in Public Choice in the Jon M. Huntsman School of Business at Utah State University, and editor of the Independent Institute book, Taxing Choice: The Predatory Politics of Fiscal Discrimination.

Taxing ChoiceFrom William F. Shughart II
TAXING CHOICE: The Predatory Politics of Fiscal Discrimination
So-called “sin taxes”—the taxing of certain products, like alcohol and tobacco, that are deemed to be “politically incorrect”—have long been a favorite way for politicians to fund programs benefiting special interest groups. But this concept has been applied to such “sinful” products as soft drinks, margarine, telephone calls, airline tickets, and even fishing gear. What is the true record of this selective, often punitive, approach to taxation? Learn More »»






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