TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Monday, September 19, 2005

I Hope This Idea Doesn't Catch On . . .

Ian Ayres (Yale) has published an interesting op-ed in the New York Times, Just What the Professor Ordered.  The op-ed follows up on the recent GAO report, College Textbooks: Enhanced Offerings Appear to Drive Price Increases (05-806) (51 pages).  The GAO report notes:

College textbook prices have risen at twice the rate of annual inflation over the last two decades, . . . rising at an average of 6% each year .... While there are many factors that affect textbook pricing, the price of textbooks has increased in recent years, according to experts we spoke with, as a result of the increase in costs associated with new features, such as Web sites and other instructional supplements.

Ayres argues instead that the price run-up is due to the lack of price competition:

It's easy for prices to drift upward when the person choosing the product doesn't really care how much it costs. Instead of competing on price, publishers compete for professors' attention with an excess of computerized bells and whistles.

He proposes a TMO -- Textbook Maintenance Organization -- patterned after HMOs, in which universities would provide textbooks to their students as part of the tuition package. As a result, universities for the first time would start caring about whether their professors were too extravagant in the selection of class materials.  He also argues that the TMO would eliminate the conflict of interest faced by professors who use their own books in their classes:

Such a system at the university level would also do away with some conflicts of interest. Because at the moment, professors' incentives in choosing textbooks are in some ways more distorted than doctors' incentives in choosing drugs. You see, I earn a $10.30 royalty on every copy of my textbook that a student buys. Instead of just trying to get the best book for my class (and to do so I should weigh both quality and price), I might also consider assigning my own book and increasing my profit.

This is a self-dealing transaction, which would be presumptively illegal if professors owed a fiduciary duty to students. Some professors realize this and donate to charity the royalties they earn when they assign students their own books.

So this year, I am going to do something different. I will give $11 to each of my contracts students who buys my book. That way, we will all know that I assigned the book for the right reason. The textbook isn't included with my students' tuition, but at least in my contracts class the royalty will be.

In contrast, I tell my classes in my opening day remarks each year that the students who have historically done the best in the course purchase two copies of my book -- one for use at the law school and the other for use at home! :)

(Hat tip:  Christine Hurt at Conglomerate.)

Book Club, Law School, Scholarship, Teaching | Permalink

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Tracked on Sep 20, 2005 10:58:54 AM