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1、There is no question that the cost of a college degree is increasing rapidly. An oft-cited 1996 study by the General Accounting Office found that tuition and fees at public institutions have in creased some 234 perce nt since 1980 while family in come and the gen eral in flatio n rate have in crease

2、d only about 80 perce nt over the same period.Costs at private college and uni versities have fared little better, increasing more than 220 percent.Many reas ons have bee n give n for the in creas ing costs of higher editi on. Some of the most persuasive in clude the in creased dema nd for colleges

3、degrees, higher overhead costs associated with in creased faculty research, rce nt reduct ions in state support of public in stitutio ns,a nd federal stude nt aid programs that in directly subsidize schools. These all are importa nt factors that in crease costs; however, there is ano ther reas on no

4、t. often men ti on ed. Colleges and uni versities, particularly elite private universities exercise a certain degree of monopoly power that allows them to charge each in dividual stude nt a higher price tha n would be the case otherwise.This article addresses each of the reas ons for in creased cost

5、s. However, the emphasis is placed on the last one, the mono polistic power of schools.The Reas ons for In creas ing CostsIn creased value of a college degreeThe most importa nt reas on college costs have escalated is that the value of a college educati on has in creased. In fact, accord ing to the

6、Gen eral Acco un ti ng Office the average college graduate earned about 43 perce nt more tha n the average high school graduate did in 1980. Today, the differe nee in earnings betwee n these same two groups is more than 70 percent. Therefore, more and more families are finding it necessary to succee

7、d in the,job market. At the same time, the college age populati on in gen eral has in creased. This in creased dema nd for higher educati on has drive n up the price of college just as in creased dema nd for any commodity drives up the price if that dema nd is not met with a sufficie ntly in creased

8、 supply.In creased research at uni versities.A no ther factor affecti ng tuiti on costs at many colleges and uni versities is an in creased emphasis on research. The prestige of a college or uni versity today is largely a fun cti on of the publishi ng prowess of the in stituti ons professors. Publis

9、h ing requires research, which requires time. This means that professors are doing less teachi ng and more research. Fewer hours at the lectern for each professor means either that course and class selecti on are reduced, which forces stude nts to take Ion ger to fin ish a degree, or that more profe

10、ssors are required on staff, which forces the institution to spend more for salaries. Charles Sykes made this point in his excellent 1988 book, Pro/scam. Either way, the result is higher fixed or overhead costs, which typically are passed on to stude nts and pare nts through higher tuiti on and fees

11、.Reduced state funding for public institutions. In addition, the current era of fiscal austerity in gover nment has meant slower growth in state budgets, which ofte n has meant slower growth in financial support of public universities.According to Dpartment of Education statistics,state government f

12、unds accounted for 46.3 percent of public institution revenues in 1980. By 1993 that figure had dropped to 36.8 percent. Increased tuition has been the only recourse for public in stituti ons simulta neously faced with in creased dema nd and shri nking state support.Federal programs that facilitate

13、family debt. Federal programs meant to assist students facing steep college costs have themselves added to the rise in tuition. Starting with passageof the Higher Educatio n Act of 1965, the federal gover nment has guara nteed stude nt loa ns exte nded by private banks.The Student Loan Marketing Ass

14、ociation （Sallie Mae） was established in 1972 as a gover nmen t-sp on sored en terprise to establish a sec on dary market in stu dent loa ns. In additi on, a limited direct government loan program was estab lished in 1993. These loan programs not only facilitate indebtedness, but also boost the scal

15、e of that indebtedness by encouraging steeper tuition in creases. As Thomas Donlan recently wrote in Barron s magaZynendTtteffaccan vote themselves higher salaries and more resources if the only con seque nee is that stude nts and parents just have to sign on the dotted line to borrow some more mone

16、y. With federal debt assista nee so readily available, schools have no incen tive to con trol the costs of educatio n.Schools as mono polistsn creased dema nd, in creased research, and reduced state funding all affect the sticker price of a college degree-the advertised tuition that a school charges

17、. However, federal programs （and to a lesser extent private scholarships and institutional aid） that subsidize stude nts directly affect not only the sticker price of college but also the actual price paid by a student and his family. Most students and their families do not pay the full sticker pric

18、e just as few people pay the full sticker price for a new automobile. In fact, tha nks to subsidized loans, in stituti onal scholarships, state subsidies, and federal gran ts, schools can usually get away with charging each student a different price. Thus, the same education typically costs every st

19、ude nt a differe nt amount.The ability to charge differe nt stude nts differe nt prices is known in econo mic terms as price discrim in ati on. Only firms with mon opolistic power are able to en gage in price discrim in ati on. The result of price discrimination is that colleges are able to charge e

20、ach student exactly as much as he or she is willing to pay. While this may seem fair and financial aid is often touted as leveling the playing field, the fact is that price discrimination rarely ben efits any consumers, eve n those with low in comes. To un dersta nd this importa nt first to un derst

21、a nd the basis of every econo mic tran sacti on takes place in the marketplace.Every one who takes part in any econo mic tran sacti on does so becausehe believes he will be better off after the deal tha n he before. Why otherwise should en gage in the trade? For example, if you, the student, decide

22、a semester of classes at a particular school for$10,000 then decision that at prese nt that semester of classes is worth more to you tha n hold ing on to the$10,000. If this were not the case the n you would be better off holdi ng on to the cash or making ano ther purchase. The extra value you recei

23、ve from that tran sacti on-above and bey ond the$10,000 paid-is known as your con sumer surplus.The university is making exactly the same calculation on the other side of the deal.If the transaction transpires then the school has obviously decided that the$10,000 in cash is more valuable tha n not s

24、pe nding the time and resources to offer the classes. The excess value on this side of the ledger is known in econo mic terms as producer surplus. This example helps illustrate that a transaction will transpire only when both the purchaser and the seller receive some surplus value from the deal and

25、conversely, an economic trans action will always occur if there is a surplus to be gained by both the con sumer and the producer.Of course, the actual amount of surplus enjoyed by the consumer or producer is difficult if not impossible to measure in most in dividual market tran sacti ons. However, i

26、t gen erally is true that a consumer will receive a greater surplus in a competitive market （one served by many producers） ,than in a monopolistic market （one serverd by a small number of producers） and a prducer will enjoy a larger surplus in a mon opolistic market. This is because in a competitive

27、 market the consumer can switch from one producer to another if he is unhappy with the level of surplus he is recei ving. Competiti on among producers lowers prices and thus in creases con sumer surplus at the expe nse of producer surplus. Firms that have mon opolistic power, however, n eed not comp

28、ete with other producers as much and are able to retain a larger surplus for themselves. In short, mono polistic producers have the luxury of determ ining exactly how much an in dividual will pay for their services and charg ing precisely that amount. Con sumers have little choice but to pay the mon

29、 opolists price.What, the n, is the less on for higher educati on? Colleges and uni versities have greater monopolistic power today than ever before. This fact came to the forefront in 1991 when a group of Ivy League schools were investigated by the Department of justice for collusion in setting the

30、ir tuiti on prices. In short, these schools agreed that they would no Ion ger offer merit-based scholarships and would offer finan cial aid on the basis of n eed only. Thus, the schools invo Ived agreed to end econo mic competiti on for tale nted stude nts. The Departme nt of justice broke up the Iv

31、y League cartel. However, this has not put an end to the exercise of monopolistic power by schools of higher lear ning.In fact, the power of the mono poly has spread bey ond a small nu mber of elite in stituti ons and has bee n widely adopted by more ordinary colleges and uni versities. In part, thi

32、s expa nsion is attributable to a failure to meet the in creased dema nd for higher educati on with a comme nsurate in crease in supply. It is difficult to build a new college or uni versity. And so the same nu mber of schools is serving an increasing number of students. This will eventually even out as new colleges are created and gain a reputation in the marketplace, but that will take time.More directly and concern is that federal stude nt aid has en abled mon opolistic by schools. Colleges and uni versities are able to in crease the sticker price bey ond the reach of most stude nts