ROBERT SIEGEL, HOST:
The cost of the next thing we're going to hear about is rising faster than food, faster than clothing, cars, even health care. It is the college textbook. Need a new calculus textbook? That can run you $250. What's going on?
David Kestenbaum of our Planet Money team has some answers.
DAVID KESTENBAUM, BYLINE: James Koch taught economics at Old Dominion University for many years. At some point, students came to him and asked, do we really need this book you assigned for class? It's kind of expensive. This got him interested in the odd nature of the textbook market. Koch had chosen the textbook carefully. He knew it was clear and up-to-date. He knew everything about it really, except for one thing...
JAMES KOCH: I did not know how much it cost.
KESTENBAUM: Normally he says, the person deciding to buy something is also the person paying. Here, the person choosing was not paying. Economists call this a principal agent problem. It's one reason he says prices have been going up in health care. Doctors say, here - take this medicine, get this test done, without knowing how much any of it costs.
You can think of it as the someone else's money problem. It's someone spending someone else's money.
Is it really true professors don't think about price when they're looking at textbooks?
KOCH: I've been in higher education now for what, about four decades, and I never have had a single textbook salesperson come into my office and talk about price. They're always talking about, gee, we have this new coverage with these new topics. We have these ways that you can test students and give them quizzes and keep track of their progress. It's always what's in the textbook package, never about the price.
KESTENBAUM: It's odd for a salesperson not to talk about price.
KOCH: Well, it's not odd when you think that they're talking to a person who doesn't have to pay it.
KESTENBAUM: As prices for new textbooks have gone up, students responded very logically by buying used books. The Internet made this really, really easy. And ironically, this has made things worse. It's pushed prices up even further. Here's why - if you're a textbook publisher or author, you now have a very short time window to make money on your new book before everyone is just passing around used copies.
Robert Frank is an economist at Cornell and a textbook author.
ROBERT FRANK: It used to be your new addition would come out, then the next year it would sell half as many copies as the first year and then half again on the third year. Now it's you sell copies, if you sell any at all, in the first year and it's done.
KESTENBAUM: Nothing the next year.
FRANK: Almost nothing the next year.
KESTENBAUM: If you're a textbook company faced with this problem, what you do? You're selling fewer books. How are you going to cover your costs? Well, you can raise prices. This produced what one textbook salesman called a spiral of destruction. Students found new ways to avoid the higher prices - textbook rentals, illegal downloads, some skipped buying the textbook. Which meant that textbook companies were selling even fewer books so they raised the price for new books again.
It's this battle. On the one hand, the price of new textbooks going up, and up and up. On the other hand, students are finding lots of ways around buying new full-price textbooks. Who's winning? There is data on this. The National Association of College Stores surveys students, asking them how much do you actually spend on all of your textbooks during a year? New, used, rental, et cetera - what's the total?
Rich Hershman ran through the numbers with me.
In 2007, how much did students spend?
RICH HERSHMAN: $702.
KESTENBAUM: 2009, two years later?
HERSHMAN: A reported spending $667.
KESTENBAUM: Oh so it went down?
HERSHMAN: Yes, it did.
KESTENBAUM: Down again. It went up a bit the next year then down even further. So while the price of new textbooks has been going up, overall, students are not actually spending more.
HERSHMAN: So what we've seen essentially is flat to declining spending from students - what the students are saying they're spending on required course materials over the last five, six years.
KESTENBAUM: Students, it seems have fought the publishers to a draw. One textbook executive told me the way out of all this is to replace textbooks with something better - software, basically, digital interactive versions of textbooks. They're cheaper, easy to update. For students though, there is one drawback - you cannot sell them back to the bookstore or to anyone at the end of the semester. There is no used market for digital textbooks. That's another reason publishers like them.
David Kestenbaum, NPR News.