Do not adjust your TV set. You did not leap into a parallel universe, and I am not suddenly sporting an evil Van Dyke. After enlightening us on how the Labor Department tracks inflation in higher education costs, the Times‘ resident champion of the elusive average college graduate, David Leonhardt, smugly compared anyone who uses government inflation data in good faith to conspiracy theorists like ShadowStats who think the government is cynically manipulating cost data.
One hastens to point out to Leonhardt that using the government’s published indexes, notwithstanding their flaws, to make an argument is not the same as (a) claiming the government is lying, or (b) cooking one’s own measurements based on repudiated methodologies to sell Web site subscriptions at fixed nominal prices. (For the record, I use Education Department data on college costs, though that’s probably problematic as well.)
So what prompted Leonhardt’s self-satisfied editorialization?
Answer: He discovered that until 2003, the Bureau of Labor Statistics tracked college tuition inflation by their stated prices and not their “net tuition” costs, which the bureau now largely tracks. It’s an interesting finding, but it deserved to be raised more professionally—and with better reasoning.
Leonhardt’s argument is that reporting on college tuition costs based on BLS data is “exaggerated” and “deeply misleading” because those data exclude financial aid discounts. He adds that only rich families pay sticker price and then compares college costs to retailers (e.g. Joseph A. Banks) that continuously discount their prices, making their sticker prices meaningless. Hence, he boasts that he’s knocked away yet another (sic) pillar people use to criticize the value of college education.
So what’s the problem here? One, the Joseph A. Banks comparison doesn’t work at all. Retailers that engage in psychological discounting in fact discount their prices—for everyone. They do not ask customers what their annual household incomes are and then charge them (in)appropriately. Colleges really do charge some people sticker price, so the sticker prices aren’t fictitious. Leonhardt hedges this fact by telling us this doesn’t matter because, allegedly, only rich families are charged full price.
The response, my second point, is if this is true so what? What are they paying more money for? Has the quality of education increased for people who pay sticker price? If you’re going to say that these students are paying for the privilege of learning with subsidized, smart people, then you’re going to have to prove that they actually learn more as a result. I’m also going to ask you to estimate when the marginal benefit of adding one more smart, subsidized student to an incoming class outweighs the additional cost to a given student paying full tuition. Note also that “graduating from college while well off” does not in fact ensure that a graduate will be well off going forward.
Finally, Joseph A. Banks’ prices are transparent once customers walk in, see the sticker, and do the math. Colleges, by contrast, advertise a *cough* *garble* *cough* percent-off sale. If this isn’t “real” inflation, why can’t families know up front what they will be charged?
I agree that the BLS should track inflation based on what people pay for goods and services holding the quality of those goods and services constant. However, the best Leonhardt can say about his discovery is that the composition of household spending on college has changed such that some students are asked to pay much more than they would have in the past so that other students can pay about what they would have in the past. If anything, this is a reason to track sticker price inflation, not ignore it.
Leave it to The New York Times to publish a blogger who trolls critics for using government data and then defines inflation away. Maybe Yale should give him an honorary B.S. in applied sophistry.