Chapter

Higher Education Is a Service

Robert B. Archibald and David H. Feldman

in Why Does College Cost So Much?

Published in print October 2010 | ISBN: 9780199744503
Published online January 2011 | e-ISBN: 9780199866168 | DOI: http://dx.doi.org/10.1093/acprof:oso/9780199744503.003.0003
Higher Education Is a Service

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The path that most service prices follow over time differs systematically from the evolution of goods prices over time. As far back as David Ricardo's work in the early 19th century, economists have known that slow labor productivity growth in services compared to goods could provide an explanation. In the 1960s, the work of William Baumol and William Bowen on prices in the performing arts explained this process and gave it the name it typically goes by—cost disease. This chapter explains cost disease and how it affects colleges and universities. The chapter then uses cost disease to make sense of the price data for the wide variety of industries presented in the previous chapter.

Keywords: William Baumol; William Bowen; cost disease; productivity growth; David Ricardo

Chapter.  5486 words.  Illustrated.

Subjects: Financial Markets

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