Should new editions of intermediate microeconomics textbooks be banned?

The basic content of intermediate micro - choice theory, theory of the firm, market equilibrium - has not changed for decades. The latest Intermediate micro textbooks cover substantially the same material - indifference curves, budget constraints, cost curves- as do 20 year old texts.

Sure, there are some differences across editions. Take, for example Eaton, Eaton and Allen's intermediate microeconomics textbook. The application “Why Everyone Loves Britney Spears” in the 6th edition was changed to “Why Everyone Loves Christina Aguilera” in the 7th edition (the page number, p. 272, is unchanged). 

Or consider Browning and Zupan's Microeconomics. Previous editions focused on the inefficiency of food stamps and the virtues of school vouchers. The latest one (11th edition) has a new discussion of ObamaCare: "We have no expertise in constitutional law, but it is easy to use our consumer choice model to show that a mandate combined with the subsidy can make some recipients worse off than they would be with no subsidy at all."

Publishers produce new editions of undergraduate textbooks every three years for one reason: to kill the second hand market.

The Carleton bookstore is charging $134.50 for a used version of Browning and Zupan (11th edition), $179.25 for a new one. Prices on Amazon are only slightly lower.  Prices at this level are only sustainable if there is a relatively small number of used texts available - if there were 10 or 20 years worth of used textbooks on the market, the increased supply would drive down the price of both old and new texts. 

Now there are 10 year old copies of Browning's Microeconomics available - a 2001 version sells for $1 plus shipping and handling through abebooks.com. The reason that there is such a huge price disparity between old and new editions - although the books have substantively similar content - is network externalities. Textbooks serve a coordination function; they allow students and professors to be "on the same page", both metaphorically and literally.

Professors generallly assign readings by chapter, for example, "Week 2: chapter 4, consumer theory." But chapter 3 in the current edition might be chapter 2 or chapter 4 in the old edition. Professors often require students to complete end-of-chapter problems, and problem numbering or wording may differ across editions. When a professor says "Study Figure 3.4 carefully, I'll be asking a question about it in the final exam", the student with an older edition of the text, where Figure 3.4 is labelled 2.4, may end up studying the wrong thing. 

It's just like software upgrades - an old version of Microsoft Word might do everything the user needs, but if Microsoft introduces a new .docx file format, old versions are rendered useless, because they are unable to read files generated by other users.

The whole process disgusts me. New editions destroy value, by making old editions worth less. They hurt students, who face high prices for texts. Any pedagogical benefit from having a slightly more updated text is more than offset by the increase in the number of students who decide to save money by reading Wikipedia instead of a textbook. Ultimately, it is a collosal waste of resources - all the effort that goes into producing a new edition that differs little from the old one; all of the perfectly good older textbooks that end in the recycling bin.

But what is the alternative? One possibility is banning new editions - or limiting publishers to one every six years.

Alternatively, professors could force publishers to compete on price by giving their students a choice of texts (e.g. Readings - pp. x-y, Varian OR pp. y-z, Eaton OR pp. a-b, Browning). The obstacle this solution faces is that professors like to rely on publishers' add-ons, for example, end-of-chapter questions, and it's impossible to require students to complete end-of-chapter questions if every student has a different textbook. Coordinating with students when every one has a different textbook is difficult.

There are a couple of micro textbooks available free (legally!) on-line, e.g. David Friedman's price theory text, or Rittenberg and Tregarthen's Principles of Micro. Neither of these are ideal for the type of intermediate micro course I teach, but the Rittenberg and Tregarthen model - where the text is provided free, and revenue is generated by the add-ons - seems to me to have considerable promise. 

Comments

[Ryan]

Banning seems a bit much. Why don't professors just opt to use inexpensive older editions and solve the problem themselves? For the cost of a single semester's class fees, professors could buy a whole classful of old-edition micro textbooks that they could loan to their own students free of charge. For a second semester's class fees, a student teaching assistant could be paid to convert a single copy of one such ediction to epub format, which could be added to the university library and loaned out to students also free of charge.

Professors who want to use the knew books could do so, but students will stop paying for those intermediate courses when they discover that they can save hundreds of dollars by taking Frances Woolley's class instead.

[Frances Woolley]

Ryan - action is possible at the level of the university, but not at the individual professor level,because the average prof doesn't have 80*175 to devote to buying new texts, or the means to force students to return borrowed texts. In fact there's one university in the States that has signed a contract with a publisher that allows all students at the university unlimited access to that publishers' e-texts for a reasonable annual fee. This kind of solution is unlikely to happen in Ontario, however, because any "compulsory" fees are deemed to be tuition.

(Interestingly, The new edition problem is much less pervasive in high schools, where school boards will buy a bulk order of, say, math texts, and use them until they fall apart.)

" a student teaching assistant could be paid to convert a single copy of one such ediction to epub format, which could be added to the university library and loaned out to students also free of charge."

Sure, the new edition problem can easily be solved by ignoring copyright laws, but that cure may be worse than the disease.

[Chris J]

There is a mechanism for fixing this.

A department chair could speak to a prof who is great at teaching but maybe not quite as active in research any more and say, "Here's the deal: If you write an intro micro text under creative commons at a rate of a chapter a month, I will keep you away from any and all committee grind with the understanding that you will produce something any English-speaking University can use."

[Peter]

I'm shocked to see the proposed solution is regulation - especially for an economist. You have neatly laid out the problem as one of transaction costs (the student has to struggle to get the "correct" questions for the homework assignment). Based on how you presented the problem, there are two issues #1 - every professor imposes these constraints on their students; #2 - the cost of the textbook is less than the cost of a cross-reference with older-versions/ other textbooks.

You might as well regulate printer cartridges, battery sizes, and phone chargers because these all have the same problem.

However, I disagree it is a transaction cost problem but rather an asymmetric information problem. This is an example of market failure because the professors do not pay the cost of the textbook and the students assume the professor knows something important about the text they recommend. (Many patients avoid generic drugs because the physician prescribed the brand-name.)

If the professor really didn't like all the new editions, they would choose texts:
a) based on price (including combinations of free texts and journal articles)
b) which were edition neutral by maintaining numbering and questions across editions (every NIV bible has chapter and verse on the same page number regardless of size, commentaries, or other cosmetic differences)
c) or provide a set of approved texts (and approved editions) but this would mean making their own exercises - and that might be the real barrier - the cost is imposed on the professor, not the student. I leave it to the professionals to decide if the "cost" for the professor exceeds the sum cost of the students demonstrating that it is a transaction problem and not asymmetric information. ;)

Or alternatively, the real barrier may not be the extra time / cost the professor has to put in, but the incentive for professors to maintain a high-turnover text book industry. Text books are written by professors - and those books are bought by students. Talk about being able to control your own demand... maybe regulation is required; a maximum of one text book per professor. (They better get it right in the first edition!)

[Kailer]

I always liked it when we got the course packs that would combine excerpts, or entire articles, from other sources. I felt like I was getting material that was directly relevant to the course, as opposed to some courses where you'd buy a 1000 page book for two bills, but only ever use the first 100 pages. Better still was when the professor would just give us photocopies of his/her course notes, and throw a couple of books on reserve at the library.

[Ryan]

Frances - This textbook discussion came up on another blog last week, and I believe it was Greg Ransom who said he has amassed a small collection of old-edition economic textbooks from used bookstores for ~$5 each. (I myself have such a collection of pre-1950s math textbooks because I prefer conceiving of mathematics from its geological roots, rather than learning procedural algorithms that arrive at the correct numerical answer, aka "the new math.") I've been the used bookstores in Ottawa. You can get great old-edition textbooks for not much money at all. Certainly less than $175.

The epub thing is not necessarily a violation of copyright law. Libraries have been archiving material via microfiche for a hundred years or more. Same deal: buy the book, scan to pdf, keep on file, archive the book, lend the file en masse as is current practice in libraries (and supported by copyright law).

Anyway, it's all a moot point if the department heads don't allow for that much professorial discretion at the individual level. I didn't realize that.

Still, banning new editions seems like the most difficult of all available options. Definitely a tough problem, though. Best of luck.

[Frances Woolley]

Peter: "You might as well regulate printer cartridges, battery sizes, and phone chargers"

All excellent ideas. Non-rechargeable batteries have been standardized for years, and I would love to see standardized rechargeable batteries (I have a drawer at home that is filled with chargers for various cameras, all of which have slightly different sized batteries - and, yes, they're all from the same manufacturer). I'm thrilled that North America has followed Europe's lead, and is requiring mobile phone manufacturers to adopt standard phone chargers.

"the cost of the textbook is less than the cost of a cross-reference with older-versions/ other textbooks." These actually quite time consuming to do - even a cross-reference between the old and new edition of the same text takes a while to prepare. I have one for my public finance course, but it's not practical to do one for intermediate micro, given the multiple editions and texts avaialble.

"If the professor really didn't like all the new editions, they would choose texts:
a) based on price (including combinations of free texts and journal articles)"

There are so few academic publishers that they act like oligopolists, and don't compete extensively on price. If you go to amazon.ca, you might find Varian's intermediate micro selling for $70 - that's an international student edition, it's not readily available here.

I agree that some professors aren't concerned about the price paid by the students, but many are. Unfortunately it's really not easy to find out what the prices are - it takes a lot of research. Moreover, the effective price faced by the student depends upon a lot of other factors, e.g. the state of the second hand market. Students are better served by an expensive book with a high re-sale value than a slightly cheaper book that has no second hand market.

Chris J: Excellent idea, and there's no need for it to be done at the department level. The Ontario government could find a prof who writes well, buy them out teaching for a year, and get them to write a text to be used in all intermediate micro courses across the province. Alternatively, a group of profs could coordinate, each writing a chapter of, say, a Canadian public finance textbook, that could be used for free in all their courses.

The killer is doing pretty graphics - that needs a professional typesetter.

[Frances Woolley]

Ryan, yup, I collect old texts too. I agree that epubs don't necessarily violate copyright, but I suspect that the model you suggest would.

Kailer - I have mixed feelings on course packs. I think they've become less relevant now that it's possible for profs to post material on course websites. I agree that putting a copy of the text on reserve in the library makes a big difference to students.

[Michele]

If the real problem is compatibility, couldn't someone develop a conversion manual that shows how the content aligns between new and old editions? e.g. new edition, pages 100-140 = old edition, pages 123-166. Table 3-4 = Table 4-6. Chapter 2 = Chapter 3.

If large chunks of the textbooks remain unchanged, I would think this wouldn't be too difficult an endeavour. I guess wily publishers could devise a work-around by making the alignment between new and old ever more complicated.

[Alan T.]

Two free micro textbooks by Yoram Bauman, "Stand-Up Economics: The Micro Textbook" and "Stand-Up Economics: The Micro Textbook with Calculus", are available at http://www.standupeconomist.com/books/stand-up-economics-the-micro-textbook/.

Despite the titles, these are serious books. I am not qualified to judge how good they are.

Dr. Bauman's comedy routine, "Mankiw's Ten Principles of Economics, Translated" can be found on YouTube at http://www.youtube.com/watch?v=VVp8UGjECt4.

[Frances Woolley]

Alan T - Thanks for the links. These are aimed at the introductory/principles market, like the Rittenberg and Tregarthen text, and operate on the same business model: provide the textbook free, and charge for the add-ons. In this case, the for-charge add-on is Bauman's book, a cartoon introduction to economics. I've taken a look at the cartoon book, and was reasonably impresssed - the discussion of Pareto optimality/efficiency is very good. The course that I teach is at a slightly more advanced level.

Another source of free material - again aimed at the introductory/principles market - is the khan academy videos, http://www.khanacademy.org/#microeconomics . I took a look at a couple of these, e.g. the one for "types of indifference curves" and was a bit disappointed. This video, for example, contrasts normal goods with perfect substitutes and perfect complements, but in fact perfect substitutes and complements are both examples of normal goods. Hopefully others are better. Jodi Beggs also has a series of videos with free intro to econ content on her economists do it with models site. These are good companions to the Mankiw text.

[Nick Rowe]

Suppose a law were passed to double the life of editions from 3 years to 6 years. Would the equilibrium price of textbooks also double?

In other words: is there are equilibrium price; or is there an equilibrium rental rate?

[jt]

Perhaps all the Canadian micro profs could form a buying union and issue a tender for a long term book agreement: (a) lower price, (b) no new editions for X years. This could also be used as a real life economics case study, like provincial medicine, co-ops, HMOs, drug plans. It will also teach students that economics is a participatory sport, not a passive geek passion ... heh, this may even be a good cross-institution senior thesis project.

[Frances Woolley]

Nick, "Would the equilibrium price of textbooks also double?" Two thoughts - the real price of a text tends to decline over its lifecycle. The initial price would definitely be higher; not sure about the price path.Perhaps a longer half-life of editions would induce more people to enter the textbook production market? One or both of us might be in the textbook writing business were it not for the unspeakable awfulness of the three-year-revision cycle.

jt: great idea! I'd be happy to free-ride.

[Donald A. Coffin]

In the introduction to his advanced micro theory book (which I used as a student in the early 1970s), C . E. Ferguson actually stated in the preface that the purpose of new editions was to kill the used book market. Maybe too much honesty?

[Donald A. Coffin]

I might add that in my US economic history class (in which I have used Gary Walton/Hugh Rockoff's textbooknow in its 11th edition, I explicityly say, in my syllabus, that any edition from the 8th on is OK, but that students are responsible for making sure that the chapters they read correspond to the description of the mateial, not the chapter number, in the syllabus. The 8th and 9th are widely available for $1 plus shipping. (The other issue is getting this information to students far enough in advance of the beginning of the course for them to get the book; I usually posted the syllabus on out course management system 30-45 days before the beginning of the semester.)

I have read that, in some courses at Oxford and Cambridge, some professors list a set of acceptable texts rather than assigning a specific text. But that's both hearsay and anecdotal.

[Neil]

If the university keeps a few copies of current textbooks on reserve to get assigned course questions from, then it becomes quite easy to get by with any version of a textbook (or really, anything covering similar material).

Of course, that's not always possible. During their dispute with Access Copyright last year, the U of A pulled their on-reserve textbooks, presumably to cover their asses if students chose to photocopy the relevant pages. Now that they've resolved their dispute, hopefully they'll be available again.

[Frances Woolley]

Neil - the Carleton library - and I suspect many other libraries as well - often don't have copies of current textbooks. If the prof has a spare copy, he/she can put one on reserve. Now here's an interesting question: how many profs would shell out $180 to buy a copy of the text to put on reserve fo their students? If the money came out of a professional development allowance?

[Ryan]

Here's a general thought... (My mind is wandering.)

Given the following:

1. In a lot of situations, the theory of a math or economics text book doesn't change, but the examples and monetary values and such do.
2. Society is moving toward electronic-files-as-books rather than paper-and-ink-as-books.
3. Computer code can be parameterized such that blocks of text can be updated at the touch of a button.

Perhaps what is bound to occur are "virtual edition updates," in which the author updates examples and certain passages of the book and then uploads it as an "app." Readers then update their existing text copies via the consumer end of the same app, all for a minor subsription fee.

Certainly would solve some of these problems, wouldn't it?

[Min]

Why stop there? Why not ban textbooks? At least for upper level courses. Introductory courses, where a significant number of students will not major in the subject, should spoon feed a certain amount of pabulum, but shouldn't students in upper level courses be prepared for meatier fare?

[Min]

Frances Woolley: "Now here's an interesting question: how many profs would shell out $180 to buy a copy of the text to put on reserve fo their students?"

What if 15 students shelled out $12 each? :)

[Mike]

Hmm I don't think banning anything would help. Publishers would probably just update a textbook, but instead of adding a new edition, they would just change the title. Same with lengthening the life of a title. That sort of intervention isn't the way to go. Personally, I'm all for a subscription to some sort of website, which just has the content you want. Sort of what Ryan talks about. You pay a monthly fee, done. It gets updated when it needs to get updated. Also, website can have interactive aspects, such as quizzes, and adjustable graphs.

[Frances Woolley]

Mike - publishers have experimented with this model with e-texts of various forms. In principle, I think the idea of e-texts is great. In practice, the price charged for these web sites is so high that they're often not a particularly attractive option. It's particularly brutal for students who drop the course - with an e-text, you're out $50, but a hard copy text can be returned to the bookstore. I experimented with Aplia once, but the students really didn't like it - try explaining to someone born in 1993 that they need to pay money to access a bunch of on-line content ("What do you mean I can't get it through piratebay?").

The present model has, historically, been pretty lucrative for publishers, and they're looking for a new model that's equally - if not more - lucrative.

Sure, individuals can do their own e-texts - if you read this blog regularly you'll know that I do posts explaining basic micro concepts, and one day I might string them together to create A Worthwhile Microeconomics Initiative. But it's like watching youtube videos - loads of fun and entertainment, but sometimes you miss having great production values. And, to be quite honest, explaining income and substitution effects is really tedious - even Wikipedia doesn't have a good explanation of them (what passes for an explanation of the substitution effect on Wikipedia is, in fact, a derivation of a demand function - and I can't be bothered to tidy it up).

[Jim Sentance]

Just wanted to mention first that the old first edition of Samuelson's Economics text I bought years ago now goes for 2-500 on Abebooks.

I assign a text for intermediate micro, but make a point of telling them an older edition or for that matter any standard micro text from the past ten years will do. I don't really teach to the text, but teach intermediate micro, basically the way I always have. I make up my own questions for assignments or tests.

Fun is when someone asks a question about some chapter and I have to borrow someone's text to see what they're talking about.

[Frances Woolley]

Jim - sounds more or less like what I do.

[Martin]

Frances,

"Alternatively, professors could force publishers to compete on price by giving their students a choice of texts (e.g. Readings - pp. x-y, Varian OR pp. y-z, Eaton OR pp. a-b, Browning). The obstacle this solution faces is that professors like to rely on publishers' add-ons, for example, end-of-chapter questions, and it's impossible to require students to complete end-of-chapter questions if every student has a different textbook. Coordinating with students when every one has a different textbook is difficult."

I really liked this in my contract law classes. The teacher in our first lecture basically gave us a long list of textbooks we could possibly purchase that would cover the same material; like micro, contracts is pretty standard stuff. The case-law book, however, was the same.

It seems to me therefore that you need to separate out the questions/cases from the textbook.

Nick,

"Suppose a law were passed to double the life of editions from 3 years to 6 years. Would the equilibrium price of textbooks also double?

In other words: is there are equilibrium price; or is there an equilibrium rental rate?"

It would less than double; there is depreciation. On the other hand it might also more than double if the manufacturer can cheaply invest in extending the durability of the book; they might run into the durable good monopolist problem on the way though.

[Frances Woolley]

Martin - "It seems to me therefore that you need to separate out the questions/cases from the textbook." I suspect that's the way the industry is going - cheaper texts and more expensive add-ons.

[Andrew F]

I've seen some highly unethical textbook requirements as a student. I had one professor that released a new edition of his first year programming text every two years, and even by the fifth or so edition, there were large sections with 'This section not yet completed' under the heading. I found that galling.

[Stephen Gordon]

I try to avoid assigning textbooks, because the prices really are so damn high. I make my lecture slides available on line, and each topic will have suggested readings for those who want it. And I put those readings on reserve at the library.

I can usually get away with that because I generally teach advanced courses. But the last time I taught intermediate macro, I decided to focus on the open economy and used the second half of the Krugman-Obstfeld international economics text. Students liked that, because they already owned it: the first half of the text was covered in the international trade course.

[Nick Rowe]

C'mon guys. Let's model this like an economist should.

Here's a Modigiani-Miller(ish) Theorem on the Irrelevance of New Editions:

Assume:
Profit-maximising pricing
Zero printing costs
Zero revision cost
Zero transactions costs
Zero interest rate
New and used copies of the current edition are identical (no hi-liter marks)
No student wants to keep the book after the course is over
Old editions have a value and price of zero
Other assumptions I've forgotten

Assume that the demand curve for an edition that lasts for one year is (in inverse form):

P=a-bQd

So Marginal Revenue is MR=a-2bQd

Setting MR=MC (which is zero) we get the profit-maximising Quantity and Price as:

Q_1* = a/2b

P_1* = a/2

(Unless I've screwed up.)

Now let's repeat the analysis for an edition that lasts 2 years:

First we have to solve for the price of a 1-year old used book, as a function of the quantity of used books. Then solve for the profit-maximising price of a new book, where we recognise that the demand curve for a new book that can be re-sold at P_2(used) will be:

Qd=a-b[P_2(new)-P_2(used)]

Cutting out a lot of math, (unless I've screwed up) the answer will be exactly the same as above:

P_2(used) = a/2

P_2(new) = a

In other words, given my (unrealistic) assumptions above, it doesn't matter if editions are changed every year, every 2 years, or whatever. It's going to cost the students exactly the same amount either way.

So if it does matter, it's got to be one (or more) of my assumptions that makes it matter.

So the question becomes: which of those assumptions is the one that matters, and how does it matter?

(BTW, the problem here is, I think, isomorphic with the "download music from the internet" question.)

[Nick Rowe]

Yep. I screwed up. "Qd=a-b[P_2(new)-P_2(used)]" should be:

[P_2(new)-P_2(used)] = a-bQd

[Nick Rowe]

As Martin says, I've ignored the durable goods monopolist problem in the above. I've assumed the publisher sells no books in the second period, and doesn't try to undercut the used market. That's probably (I think) realistic.

[Frances Woolley]

Let's assume that there's a fixed cost of $500,000 to produce a textbook.

Let's suppose that the market equilibrium is characterized by:
- one textbook,
- new edition every year
- 10,000 copies sold at $50 per copy
Since profits=0, no one wants to enter the market.

Now suppose the publisher decides to go to a new edition every other year. Price doubles to $100 per copy as per your assumption. The same number of copies are sold, since there's still only 10,000 students each year, and the user cost ($50 per year) hasn't changed. Profits are now $500,000. This will attract another textbook author. The two now split the market, each sells 5,000 copies at $100 per copy and - you're right.

Ah - but wait - do remember something called contestable markets theory? Incumbents aren't stupid. They can deter entry by reducing the cost of the books that last 2 years to $75. That still gives them $250,000 in profits - which is nice for them, but not enough to induce entry by new contestants. So price does fall.

But I was wrong on one thing - it's not just to kill the second hand market that publishers introduce new editions, it's also to deter entry. Which I should have thought of.

[Nick Rowe]

Frances: Is that a fixed cost of $500,000 *per new edition*? I was assuming zero costs of a new edition. (Not that it matters in my problem, if it's a fixed cost, but it will affect profits).

But I think you are right. The real question (or at least one real question) is about variety and contestability. I'm trying to remember the conditions under which you get too little and too much variety. Eyeballing into and intermediate textbooks, it looks like a lot of different books with only trivial differences each trying to grab a slice of the market. So we either get lots of different editions with trivial changes, or lots of different texts with trivial differences?

[Nick Rowe]

I've just remembered, thinking about Frances' point about the interaction of contestable markets and new editions, I *think* that publishers always try to bunch their new editions. "ABC is coming out with a new edition next Fall, so we had better have a new edition too".

Does my memory seem correct there, in that different texts try to come out with new editions at the same time? Or do they try to get just a little bit ahead of the cycle?? How does it work in micro?

[Frances Woolley]

Nick - "So we either get lots of different editions with trivial changes, or lots of different texts with trivial differences?" Or coordinated action by buyers or governments to try to stop the madness?

Oh well, torrenting is going to fundamentally reshape the textbook market anyways, and in 5 years time we'll be wondering why we ever had this conversation.

[Will]

An old pet peeve of mine. The school or professor has a captive audience of purchasers, spending loaned or parental money. The difference between an older and newer edition is often far more trivial than other commenters have allowed: I have seen instances where only the numbering of chapter-end questions was changed.

Doesn't this touch more broadly on the issue of "planned obsolescence"? In this specific case, the depreciation of the older editions is forced by the publication of new ones, but this seems equivalent to designing a product to fail after a small number of years, or making it deliberately difficult for the owner to manually service it. This could, from an employment and overall production point of view, actually be a good thing -- but there is something about the notion of "productively" turning resources into waste that does not sit well.

[Frances Woolley]

Will - 'Doesn't this touch more broadly on the issue of "planned obsolescence"?" agreed, see the comments earlier about cell phone chargers, rechargeable batteries, printer cartridges. To say nothing of devices with batteries that can't be replaced (if anyone knows how to replace the battery in an early edition Sony Xperia mini, please let me know). Compare with, e.g., bicycles, where all parts are interchangeable and replaceable, and it's possible to keep a bike that you like on the road for many years.

What's interesting is that consumers don't seem to be particularly sensitive to this issue - see, e.g., the success of the almost-impossible-to-repair macbook air, as compared to the much easier to repair macbook pro.

[Eclectic Obsvr]

I'm not against a refresh of material, but it seems to me that textbooks just cost too much. And frequent re-issue just aggravates the matter. Unfortunately there is no real market forces that would work for textbooks separate from the cost of the class itself. In fact it's a little like alot of market imperfections where the ultimate consumer or beneficiary is effectively helpless or severely disadvantaged.

I think a much better method for both efficiency, cost control and equity would be a mandate that all direct costs associated with the class in terms of instruction and materials be included as part of the cost of the class. Therefore the university would have an incentive to make the best decisions compatible with instructional materials. I'd bet that we'd have electronic versions made free very quickly.

[Frances Woolley]

Eclectic Obsvr: "a mandate that all direct costs associated with the class in terms of instruction and materials be included as part of the cost of the class...we'd have electronic versions made free very quickly."

I'd bet you're right on that one. And this touches on something that really worries me about academic life. Professors don't fight against a system that is in many ways grossly dysfunctional (e.g. the textbook cycles), because life is pretty sweet at present. People are now asking "Why does college cost so much?" "What are people actually learning in university anyways?" and other uncomfortable (for professors) questions.

If the cost of the textbook was included in the cost of classes, though, what would immediately disappear is professors' freedom to choose which textbook to assign - which, despite everything I've said about textbooks being very similar, is a problem, because it gets to the real core of academic freedom - the idea that the professor has a better idea of what material should be covered in an undergrad or grad course than a bureaucrat over in the admin building.

[rsj]

I do think it is odd that in public education -- which is acknowledged as good with sufficient externalities to be subsidized -- that we need to leave the textbook aspect to the free market.

Particularly with information, in which the marginal cost of production is near zero, there is a much better case to be made for federal financing of textbooks that for federal subsidies for education. It makes perfect sense to hire a professor to write a book, have the copyright belong to the government, and make the book available to students at low or no cost.

[walt]

Delong last month http://delong.typepad.com/sdj/2012/07/orin-kerr-says-a-system-in-which-i-cannot-force-my-students-to-purchase-my-textbook-for-200-is-socialism.html

[whitfit]

Frances quotes Martin - "It seems to me therefore that you need to separate out the questions/cases from the textbook." I suspect that's the way the industry is going - cheaper texts and more expensive add-ons.

Martin was talking about first year law courses which operate on a different model from regular undergrad courses. The casebook is the assigned book. You read cases from the casebook (which are generally available in the public domain, but the casebook has them in an edited form) and discuss the meaning in class, making an outline that ends up being your personal textbook. There are not usually any assigned readings from a "textbook". There are texts available, but they are not usually needed for the course, and are also usually books that are more like what a practitioner would use - I still have my "Waddams on Contracts" that I bought in first year law school. The texts aren't associated with a particular casebook, so there is no tying.

If I had to do my education all over again I would spend a lot less on textbooks - although when taking a masters in econ there were a couple of books that were worthwhile. I would have less debt now, and wouldn't be any worse off in terms of knowledge.

[Will]

Fraces-

Agree. I think that the hard-to-fix, hard-to-replace batteries and electronics are actually more troubling than superfluous textbooks, since the batteries and electronics can be toxic, and are often thoughtlessly disposed of. I suppose we have to invoke asymmetric information to account for why consumers don't assess product durability/repairability well, and why the information doesn't appear in prices. In theory something like Consumer Reports can test products and say how long different ones last, but products change unpredictably all the time and most people ignore such publications. Can anybody think of a solution to the problem that doesn't rely on some sort of regulation of new products? I can't.

[nemi]

Delong should be careful so that the left-neoliberals do not revoke his membership. Redistribute and pray that the market will solve things despite logic and empirics suggesting otherwise.

Hell, it is only two words more than the rightwing-neoliberal mantra, and they always remember what to say.

PS: MC for a textbooks is zero. The price should be zero. The public should fund this

The expected benefit – a free well reviewed text (reduced dead weight cost, better public knowledge of economice) and, probably, a shared reference for e.g. discussions and government reports. The expected cost – dead weight cost from tax collection (a fraction of the monetary cost). A cost benefit analysis, at least with respect to the first or maybe second version, would be a waste of time.

However, I suspect that a lot of it already exists but as usual, the transaction costs are not exactly zero. I suspect that, for example, pretty much every government agency with more than two employers have their own books or reports concerning how to do cost benefit analysis (not that I understand why this is the case). I also suspect that pretty much every big agency has more or less complete micro economics books (with examples from their area of responsibility). If these agencies (in different countries) would pool the recourses they already spend, we would probably get hundreds of versions of micro economics and still be able to save money.

[Donald A. Coffin]

Eclectic Obsvr: "a mandate that all direct costs associated with the class in terms of instruction and materials be included as part of the cost of the class...we'd have electronic versions made free very quickly."

But that assumes that all students buy the textbook, which is a demonstrably false assumption. At my (former) institution (I've retired), textbook sales in intro econ classes were usually on the order of 1/3 of the enrollments. So incorporating the textbook into the tuition/fee structure would all but certainly raise the cost of attendance for a large percentage of students.

Why don't students buy the book? It may be because much of what passes for in-class activity, at least in intro classes, consists of the faculty member "reading" the book (one way or another) to the class. But that's a different can of worms...and, besides, Frances startd this all off by talking about intermediate theory. Anyone have any sort of data on purchase vs. enrollments there?

[Donald A. Coffin]

nemi--As long as books appear in print versions, the MC of a printed text clearly exceeds zero. Based on some discsussions I had with a publisher about three years ago, the marginal cost of printing a textbook selling for $120 is about $40. Mult-color printing is still not cheap, the the paper used in textbooks (which is pretty high-grade paper) is also not cheap.

So P > MC, and by a fair amount. (It corresponds to a Lerner coefficient of about 0.67, but, then, the industry is hardly competitive, so what would we expect?)

On another subject which has been raised. What makes anyone think that moving to more unified textbook adoptions would make things cheaper? Don't we then wind up in a bilateral monopoly situation, in which the price outcome is indeterminate?

[Martin]

Nick,

"Does my memory seem correct there, in that different texts try to come out with new editions at the same time? Or do they try to get just a little bit ahead of the cycle?? How does it work in micro?"

Intuitively, from the perspective of Hotelling-model where the line represents the time of year, they should all bunch together around the start of the year as that's where the consumers are. Add in a second line at the end and you have the decision to enter now or tomorrow.

There is a minor difference with the model: namely that the cost of purchasing right from the line is the cost of waiting another year to start education. This will be prohibitively high. The cost to the left simply means that when you as the firm don't come out with a new edition as class starts, the consumers will have to search for it and you'll be at a disadvantage. As compensation you'll probably have to set a lower price. The assumptions should imply that the firms will enter at the start of the distribution of each year.

Add in a fixed cost of entry, and the opportunity cost of entering next year, will be to reduce the profitability of the previous years entry as the distance for the consumers to the new entry is now shorter than that to the old one.

The first period a decision to enter or not to enter is made and the price is set; the second period a decision to enter or not to enter is made and the price is set for the new book as well as the old book.

If you want to add in a secondhand book market, have a different actor set the price for the old book than for the new book in the second period when there is entry. That way the existence of an old edition can impose a competitive externality on the newer edition. The implicit assumption here is that there is no depreciation from use and that the supply of second hand books is infinite.

I am not sure what these assumptions will imply, but I think that keeping other things equal that the opportunity cost of capital - here zero - will govern entry plus the profitability of undercutting an old edition by a competitor minus the opportunity cost of the revenue from the old edition.

[Frances Woolley]

Donald " Anyone have any sort of data on purchase vs. enrollments there?" No, but my experience is the same as yours, a substantial percentage don't buy, and I suspect that a number of those who do buy are receiving financial support from parents.

[Frances Woolley]

nemi - the Delong suggestion is interesting, but takes a somewhat optimistic view of professors' integrity - I think there are a few moral hazard issues with giving professors $50 and saying "provide your student with a textbook."

[Linda]

Maybe this has already been covered - I just skimmed the comments - but I think Stephen raised a good point re his macro course. One issue I have with students and texts is that many who do buy the text for one course immediately sell it once the course is over, leaving them with no reference book for subsequent classes that build on the previous ones (the clearest case I see is intermediate micro I and II). We are working on coordination across sections within and between the two courses here at UVic, but it is a difficult process - turnover in teaching assignments, both faculty and grad students - and preferences. I don't think any of us "like" forcing students to pay the large sums for texts, but it is certainly useful to have one standard reference for notation.

[Stephen Gordon]

I was worried about that, which is why I asked the undergrad chair to put out a message during the previous term telling people to hold onto their textbooks, because it'd be used in the subsequent term.

But yes, that would be great to have more department-wide coordination.

[Andrew F]

I sit on the board of directors of a student-funded educational endowment fund. We have funded the development of course notes from time to time (usually hiring an undergrad or graduate student to spend a semester transcribing lecture notes, typesetting in LaTeX, etc.). These were always very enthusiastically funded, as they are generally sold at the cost of printing by the campus print shop (typically around $10-$20), and freely available as .pdfs on the course website. These were usually high quality, and better tailored to the course material than any textbook available. In math at least, texts are frequently very expensive, inpenetrable (written for PhDs), or noncomprehensive.

My point is that textbooks are/should be public goods. The trick is funding them and ensuring that the texts funded are of reasonable quality. That might be less controversial in mathematics than it might be in other disciplines. No one argues with group theory, but there are plenty of 'heterodox' views of economics.

[Frances Woolley]

Andrew F: "My point is that textbooks are/should be public goods. "

The standard definition of public goods is non-rival and non-excludable. Textbooks, to the extent that a .pdf can be put on a website and costly downloaded, are non-rival. But - to the extent that those websites can be gated - they are excludable.

Interestingly, Samuelson's original definition of public goods focussed only on the non-rival part - he called them "collective consumption goods". Textbooks are an excellent example of a collective consumption good in that sense - where there are potentially massive gains from coordination. I like the idea of student-led initiatives very much.

[Frances Woolley]

Terry McGarty's take on the issue is here: http://terrymcgarty.blogspot.ca/2012/08/textbooks.html.

Terry - the issues you raise about the de-skilling of professorial work (though you don't call it that) are real and serious ones - I talked about them ages ago in a post on "have universities reached the tipping point?" I personally love powerpoint - I can embed images, photos, videos, go between powerpoint and chalk. But I really worry that we might go to a world where university becomes like high school, where professors lack autonomy, and the intellectual content of courses is determined by textbook publishing companies and bureaucrats.

[The Keystone Garter]

I still prefer the matte of paper, but what about Kindle? Shouldn't a $40 manufacturing cost textbook be able to be sold for $50 on Kindle, complete with updates every Semester or Year? If there are cost savings found the money can always be spent on tangential multi-dsciplinary courses or on some Co-op courses where the broke early 20s student gets paid a bit. Given our main industries are petro and finance, and neither or very R+D intensive, public spending would be a way of raising our R+D and creating course content.
Why use a consumer choice model for a technical field if you aren't interested in researching that field? Should we tell our mechanics what car repairs to make?

[Chris J]

Frances wrote: "Excellent idea, and there's no need for it to be done at the department level. The Ontario government could find a prof who writes well, buy them out teaching for a year, and get them to write a text to be used in all intermediate micro courses across the province. Alternatively, a group of profs could coordinate, each writing a chapter of, say, a Canadian public finance textbook, that could be used for free in all their courses."

My knowledge of how this works comes from my experience using GPLed (gnu public licence or "free as in speech") software. It is written by individuals to fill specific needs; it is not centrally planned. There is a great essay on design called "The Cathedral and the Bazaar" which explains the concept. A central university textbook? I bristle at the idea. An open-source/creative commons book that allows the best to be used: awesome.

"The killer is doing pretty graphics - that needs a professional typesetter."
It needs someone with a good eye. A creative commons licence will allow a student with some design talent to remake some figures and submit them as "patches" on the original book. The lead author can accept them or not in the version "endorsed" by the author.

PS: Gratuitous and unfair quip: you went from over-regulation to central planning. That's not what I go to WCI for?

PPS: Real comment: I waited a few days to avoid a quick response and make sure I know what wanted to say. There is a magic to "free as is free speech" work. Central planning can screw it up.

References:
http://www.howtogeek.com/howto/31717/what-do-the-phrases-free-speech-vs.-free-beer-really-mean/
http://www.catb.org/esr/writings/homesteading/cathedral-bazaar/

[Chris J]

http://en.wikibooks.org/wiki/Microeconomics

No idea if what is here is good or not. It is filed under "half fininished".

[Sanchit Kumar]

If I may throw in an additional data point that supports Frances' textbook edition policy, here is a quantum physics textbook (Quantum Physics, authors Reisberg and Resnick, amazon link: http://www.amazon.com/Quantum-Physics-Molecules-Solids-Particles/dp/047187373X) I used for a class 2 years ago, and a book which my dad had used for a similar class at a different school back in the late '80s. The most recent edition of this textbook was published in 1985, when it cost $190 for my dad to buy, but when I went to get it two years ago it was available to me for just $80! I wouldn't underestimate the role the Internet played in helping to bring down the price of this book, but it feels good knowing that I saved some money because the authors didn't feel compelled to release a new edition of the book just to replace the various chapter examples and questions with modern day pop culture references...

[Frances Woolley]

Sanchit - nice example.