Locked in lecturers and out-of-control textbook prices

Yesterday I wrote a post about the upcoming change to our first-year economics papers at Waikato, where we will be adopting the CORE curriculum. One of the material considerations in our choice was the cost of textbooks, which have clearly gotten out of control. A recent Quartz article notes:

Seven Rhode Island universities, including Brown and Rhode Island College, will move to open-license textbooks in a bid to save students $5 million over the next five years, the governor announced Tuesday (Sept. 27).

The initiative is meant to put a dent in the exorbitant cost of college and, more specifically, college textbooks. Mark Perry, a professor of economics and finance at the University of Michigan Flint, and a writer at the American Enterprise Institute, estimated last year that college textbook prices rose 945% between 1978 and 2014, compared to an overall inflation rate of 262% and a 604% rise in the cost of medical care.

That is not the result of a general trend of higher costs in publishing, he notes: the consumer price index for recreational books has been falling relative to overall inflation since 1998.

“It begs the question, are we getting 1,000% more value?” asked Richard Culatta, the chief innovation officer for Rhode Island who was the director for the office of educational technology in the Obama administration.

On that last question, the textbook sellers would argue that yes, we are getting more value. However, it isn't clear to me that the 'we' that is getting the extra value is the students. Textbooks have barely changed in the last twenty years. The 'extra value' that the textbook providers believe they are generating is not through meaningful improvements in the quality of the textbook material. Instead, they have increasingly concentrated their efforts on creating supplementary online offerings, tying the textbook to additional online resources for students, but selling the value of those additional resources for lecturers. For instance, textbooks from the big publishers will often include online testing systems that automatically link to university learning management systems (not to mention those that work like learning management systems themselves), extra exclusive multimedia and online content that can be used in lectures or made available to students or used as part of assessment tasks, online data visualisation tools, and so on.

Call me cynical, but I see all those online extras as simple attempts to create and capture value through customer lock-in - exactly one of the things we discuss in ECON100 (and soon ECONS101). Customer lock-in occurs when customers (in this case the lecturers) find it difficult (costly) to change once they have started purchasing a particular good or service. In this case, the lecturers aren't purchasing anything, but the principle remains valid. Once a lecturer starts using these online 'extras' that are tied to a particular textbook, it is difficult for them to change because that would mean losing all of the work that they've put into designing their course around those extras, and starting over afresh with the extras available with the new textbook. That time and effort constitutes a switching cost, which lecturers would obviously try to avoid, thereby locking them into their current choice of textbook. Having lecturers locked in to using a particular textbook allows the publishers to raise prices, which has led us to where we are today, where the Australia-New Zealand edition of the Mankiw textbook Principles of Economics now costs about NZ$185.

Obviously, I'm keenly aware of the switching costs and try to avoid being locked in. So, I've always been reluctant to rely too heavily on the bonus material available from the textbook suppliers. I don't even use their default Powerpoint slides, but that's more because I see the textbook as just one resource among many that I use in my teaching, and not the centrepiece of each course.

Despite my efforts, we were somewhat locked into using the Mankiw textbook in ECON100, since part of the test bank we used was from that book (albeit an earlier edition) and our resources pointed its chapters. Changing to a new textbook would mean we had to develop a new test bank (although we could keep our own questions from the previous one), and re-writing the paper outline and other resources to link to the new textbook.

When we decided to renew and redevelop ECON100 into ECONS101, we were going to face a cost anyway, so the switching cost of adopting a new textbook at the same time was relatively lower. Our ECONS101 students will be the beneficiaries, since as I mentioned yesterday it means that we can adopt the new CORE curriculum. However, it's worth noting that the CORE textbook is free for students, but if we as lecturers want to change textbook, we will face another switching cost.