By Richard Vedder
When CCAP chief Whiz Kid (and my friend) Matt Denhart and I wrote an op-ed piece last Friday for the Wall Street Journal on March Madness, we got the usual number of predictable emails, some liking what we said and one or two hating it (and one predicting we would be in some danger from the NCAA, which, in the writer's view, did not take kindly to public dissent of its policies). The most interesting email came from Chicago businessman and financial guru Daniel Kerrigan, who sent me a copy of his "Tuition Madness", giving the brackets for the NCAA men's basketball tournament complete with the cost of attending each school, presumably for four years.
Virginia Commonwealth University was the only school under $100,000 ($98,025), while over three times higher was Boston College at $345,504. All colleges are expensive, but some are distinctly more expensive than others.
That got me thinking. Is Boston College worth three times as much to attend as Brigham Young ($100,710)? Even if one accepts the proposition that "college is a good investment", some college choices may be better investments than others. Why is Harvard so popular? Its cost is not a great deal more than Boston College, and for many students, it is in fact less. Yet Harvard has a far better reputation, its graduates make more money upon graduation, etc. Harvard, in fact, charges only a small fraction of what us economists call the equilibrium price --where the quantity wanting the service equals the quantity of service that the provider is willing to offer. At VCU, which turns relatively few students away, the gap between the quantity supplied and the quantity demanded is very small at the existing tuition fee. That is why, on value grounds, I usually encourage kids to go to the best school they can get into, since the variation in quality between schools is vastly greater than the variation in price.
The gap in tuition charges between the elite colleges and the medium quality state schools is less in another regard --a typical student will graduate from a high quality private college typically in four years, but is more like to take five or even six years at the typical state school. Thus the true cost of college differs less than the stated sticker price.
Kerrigan is raising another issue --namely that competition between schools is far more than what basketball records and scores would indicate. Universities are supposed to be about academic things and values more than the prowess in putting a ball through a hoop. You wouldn't know that from the reaction of the American people to the current tournament.