Anatomy-of-College-Tuition

the average while others will experienceslower price growth. Some goods may evendecline in price. But the data show that theprice of higher education consistently risesmore rapidly than inflation. Is this unusual?Are there other industries with similar pricebehavior?Suppose we live in a world in whichthere is a 50/50 chance in any given yearthat the price of a particular good orservice will go up faster than the overallinflation rate. In this world, as the yearsgo by most items would increase in pricefaster than average roughly half of the time.Alternatively, we might live in a world inwhich the prices of some items usuallyincrease more than average, and to balancethings out some others usually increase lessrapidly than average. If we live in the firstworld, the price behavior of college tuitionwould appear very odd. If we live in thesecond world, higher education would notbe so unusual.Figure A details price changes overthe period 1947–2010 for 69 products thatare part of the price index for personalconsumption expenditure. 1 These goodsand services include categories like newcars, jewelry and watches, electricity, lifeinsurance, and higher education. We can usethe 64 annual price changes from 1947 to2010 to count the number of times the priceof a particular product rose more rapidlythan the overall index. The chart orders the69 industries from left to right by how manytimes its price increased faster than theoverall inflation rate.On the left of the diagram, we have twoindustries (1 and 2) whose price increaseonly exceeded the overall inflation rate infour of the 64 years. At the other extreme,we have one product whose annual price70Figure A. number of Years with a Percentage Price IncreaseExceeding the Inflation Rate, 1947–20106050Higher Education40number30201000 10 20 30 40 50 60 70 80Service industries Non-durable goods Durable goodsRankService industriesNon-durable 2 goodsAmerican Council on EducationDurable goods