The New York Times complains about the high cost of textbooks, and says that something ought to be done about it. Greg Mankiw points out that, if textbook prices really were unreasonably high, textbooks would represent an excellent business opportunity, and the Times should go into the business and undercut the current publishers, something they would actually be well-placed to do. But, of course, they won’t:
My guess is that the Times business managers would not view starting a new textbook publisher as an exceptionally profitable business opportunity, which if true only goes to undermine the premise of their editorial writers.
Textbook prices are unreasonably high. But the problem isn’t that publishers are charging an exorbitant amount or that authors (trust me!) are making a killing. It’s that the ubiquity and efficiency of the used book market means that authors and publishers have to extract whatever they are going to make on the book within three to four years. After that, profits and royalties disappear.
Remember when buying a movie on videotape cost at least $70, and the only viable option was to rent one from Blockbuster or one of its competitors? The rental model didn’t die, but it lost much ground as prices fell and it became possibly to buy a videotape or DVD for $15 or less.
The textbook market has been moving in the opposite direction. Students used to buy their textbooks and, most often, keep them. Now, they sell them back to used textbook dealers. Effectively, students are renting books for a semester; the real cost to them is the difference between the initial cost (often, that of a used copy) and the buyback price. As with the movie market, but in reverse, that leads to high initial prices.
That isn’t good for students who want to keep their books—or for book authors and publishers, or for students in general who face a cash-flow problem, paying high initial costs. But I don’t know how to reverse it.