Understanding the Runaway Tuition Phenomenon: Credence Goods in an Age of Skepticism
- Author(s): Daniel Polsby
- Date Posted: 2017
- Law & Economics #: 17-10
- Availability: Full text (most recent) on SSRN
Wandering in search of an explanation for why college tuitions are so rapidly increasing, and finding nothing compelling in the usually-offered explanations, the author stumbles upon the answer in plain sight. Because of the kind of product higher education is (a credence good) sellers must go to heroic lengths to keep up the semblance that the product is worth all that is charged for it. Money and resources of other kinds must be directed to this end to the limit of their availability, which can never be satiated no matter how much is spent. The economist Howard Bowen seems to have had the basic insight in 1980.