Economists Do It With Models

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It’s Nice To Be Acknowledged, And A Lesson On The Market For Textbooks…

June 10th, 2013 · 17 Comments
Administrative · Books · Buyer Beware · Markets

The market for introductory economics textbooks is pretty crowded, but there is at least one new one coming onto the market soon:

If you’ve ever used a textbook as an instructor rather than as a student, you are probably aware that there are lots of supplementary materials- solutions manuals, test question banks, and so on- that serve as companions to the textbook and that are given to the instructors at no charge. (In case you were curious, copies of the textbook are also given at no charge, and, although it’s technically prohibited, there are plenty of instructors who sell the free books to the used book brokers that are constantly stopping by our offices. Yep, those exist.) If you are a student, I am not going to explicitly encourage you to try to find copies of such materials online, but I am going to mention that a lot of the materials are out there.

Have you ever wondered who writes all of these supplemental materials? People like me, apparently:

I suppose if you’re a good enough student it’s only a matter of time until you get paid to essentially read textbooks and do problem sets. I contend that there are far worse ways to earn a living.

What I found most interesting about the experience, however, was the insight that it gave me into the textbook market. On some level, I’ve always known that there is inefficiency in the textbook market due to the fact that the decision makers (i.e. instructors) aren’t the payers/end consumers (i.e. students). Among other things, this means that instructors don’t have a particularly strong incentive to care how much the textbooks that they are assigning cost, so textbooks are more expensive than they would be in a well-functioning market. (Luckily there are considerate instructors out there who do care to some degree whether they are sending students further into the poor house. Also, if this sounds familiar, it’s because you’ve been doing your reading on the healthcare industry.)

What I didn’t realize until I started teaching large courses, however, is the degree to which instructors are courted by the textbook publishers- remember the stories about how pharmaceutical companies used to heap lavish perks on doctors in order to get on their good sides so that they would prescribe more of the company’s drugs? Yeah, it’s kind of like that, except that the sales reps that are constantly contacting me are way less hot than the typical pharma girl. (No offense to the textbook reps, it’s just that the pharma girls are pretty far out there on the spectrum.) I’m not complaining about the free books, food, booze, conferences, etc., mind you, I just thought it was worth noting.

What I *am* going to complain about is the fact that the decision-making authority regarding textbooks is becoming, in an increasing number of circumstances, even more removed from the end consumer. One strategy of Pearson Education, for example, is to sign contracts with university administrators that require instructors to use Pearson textbooks (presumably only for classes where Pearson has textbook coverage). What this means, obviously, is that instructors can’t always assign the text that they think is best, and, in an important number of cases, can’t even assign textbooks they’ve written themselves, at least not without forgoing royalties and, in one case a little birdie told me about, “donate” said royalties to the university. In what may or may not be related news, Penn State signed such a contract with Pearson and the first author of the above textbook is now employed by the University of Kentucky. Students, I encourage you to play a potentially fun game- check out the textbooks you’ve used recently in various courses and see if they are disproportionately Pearson textbooks. If so, ask your professors if they are obligated to assign Pearson texts and see what they say- I’m very curious. (It’s too bad you can’t text your professors and then send me the responses a la Nathan Fielder.)

This system is obviously problematic on a number of levels, not the least of which being that it creates incentives to engage in rent-seeking behavior at the expense of actually producing products that are better for students. (I’ve used Pearson’s products, and, while a number of the textbooks themselves are quite good, the online materials leave much to be desired. And I’m not just saying that because I do review work for Pearson’s competition. :) ) So, next time you’ve wondering how textbooks could possibly have started climbing over the $200 price point, just think back to this discussion.

For what it’s worth, the publisher of the above book (W. W. Norton and Company) is an independent publisher and seems pretty legit- their biggest claim to fame is that they were the ones who gave Michael Lewis a deal for Liar’s Poker, and he’s stayed with them ever since, which I figure is a good signal. Also, they throw kickass parties. :)


Update: I guess I shouldn’t be surprised that people are asking how this compares to the Mankiw textbook that is often featured on this site. Fair question, though it’s hard to give a fair answer because a 6th edition of Mankiw isn’t really comparable to a draft of a 1st edition of Mateer/Coppock. Like Dirk Mateer’s web site, his book is focused on giving examples related to pop culture and generally being relatable to students. I think the best way to put it is that I will probably continue to use Mankiw for my own reference but would be inclined to use Mateer/Coppock for a survey course for non-majors. It’s important to keep in mind that differentiation does in fact exist in the world of introductory economics textbooks, so both instructors and consumers should do their homework to find out which version is appropriate for them. I think the only subject where I could universally recommend a single undergraduate textbook is econometrics, where the text by Wooldridge reigns supreme, in my opinion.

Another Update: Apparently people followed up with Dirk regarding his move from Penn State. So let me see if I’ve got this straight: Penn State thinks that professors benefiting financially from writing a textbook that was customized for the course that instructor is teaching is a conflict of interest, but the university itself getting kickbacks from a publisher for mandating the use of particular textbooks is A-OK. As noted in the comments, students at Penn State really valued Dirk’s presence, and it’s sad that rent-seeking behavior by publishers (and rent-accepting behavior by universities) did in fact factor in his decision to move.

Tags: Administrative · Books · Buyer Beware · Markets

17 responses so far ↓

  • 1 Nick Keesey // Jun 11, 2013 at 11:28 am

    I took Dirk Mateer’s intro to micro at Penn State last fall and he had a huge influence on my decision to major in Econ. It really saddens me to learn that Penn State may have actually pushed him out the door with this Pearson contract. Dirk’s personally written textbook was great and gave him the freedom to teach what he thought was important, and how to teach it. Dirk was the singe most popular professor at Penn State, and with a campus boasting over 40,000 undergraduates, that’s saying something.

  • 2 Doug Gentry // Jun 11, 2013 at 11:34 am

    You’re right, the textbook market is broken. We need to include, in a discussion of this market, the growing rental book model, and also digital texts, like those published by FlatWorldKnowledge.com.

    I’ve used the latter for several years, since I couldn’t stomach requiring my students to buy (even used) a Micro or Macro text for over $100.

  • 3 econgirl // Jun 11, 2013 at 2:28 pm

    @ Nick: I am going to pass along your comment to Dirk. :) I met Dirk in Atlanta at the AEA Annual Meeting in 2010, when he was camped out in a poster session for Innovation in Economics Teaching or something like that in order to stalk people were were passionate about teaching and get them to join him at Penn State. His goal was clearly to get a critical mass of instructors together that could deliver his level of quality throughout the undergraduate curriculum, and, from what I can tell, he was doing a good job of getting people together. I, too, am saddened that Penn State didn’t create an environment where he and his department could flourish in that way.

  • 4 Dan L // Jun 11, 2013 at 2:29 pm

    I had no idea that there were major research universities where administrators choose the textbooks… I just died a little inside today.

  • 5 econgirl // Jun 11, 2013 at 2:41 pm

    @ Dan L: I cannot tell you how upset this makes me. It’s bad enough that this happens at the K-12 level (basically all public-school textbooks are chosen by Texas, in case you were curious), but it’s even worse here since the schools are receiving some sort of kickbacks from the publisher without being the ones who actually pay for the books. I am tempted to go rustle up a consumer advocate lawyer and see whether there is anything here that might be worthwhile to raise a stink over, since it’s pretty clear that the schools engaging in this behavior (especially since it’s not transparent to students) are not acting in students’ best interests.

  • 6 Bill W // Jun 11, 2013 at 4:17 pm

    Of course, the supplementary materials are thrown in at no charge because it kills the used textbook market. (The publishers’ main competition, even more so than other publishers). What really needs to happen is for faculty and department chairs to realize that textbook reps are salesmen. They don’t particularly care about students. If you believe they do, next time they offer to package the book with a completely free access code to online content, ask them to give you the codes and the books separate. It won’t happen. They bundle them together, create a new ISBN, charge students who want to buy only the code an obscene amount, and thereby kill the used textbook market.

    Every single learning tool they offer to bundle for free is meant to eradicate the used textbook market. They don’t care about learning; they are salesmen working on commission.

  • 7 Nick Keesey // Jun 11, 2013 at 4:18 pm

    @ Econgirl: Thanks for passing along the message! Yes I think he did a good job, the Econ dept at PSU seems to be doing well, although I wouldn’t really know who to compare it to.

    After my comment earlier I was at work thinking about the rest of your article and am in agreement with you and Dan L about how sickening this has become. Why should I pay close to $3,000 (plus books!) for a class in which the instructor is required to use one book or another? How does this create a learning environment in which the Professor can best teach the material and be flexible in regards to different learning techniques for different students? I don’t want a Pearson education, I want an education from Penn State University.

    I have used Pearson several times already and am only a Sophomore. Their Math Lab was helpful for me but besides that I have always preferred materials selected by the instructor (and sometimes that meant no required text books because they provided excerpts from various materials, yay!).

  • 8 Michael // Jun 11, 2013 at 5:53 pm

    I am looking forward to being able to look at textbooks again (am going to be a student again at 31.) I am currently a Chef (where I paid a huge fortune to have a degree) and am now going back to school for Economics. I will be looking at the textbooks that are assigned (say this issue in Culinary School though) but will also continue reading on my own (as only reading what is assigned can narrow the mind, IMO.)

    Thanks for your influence and maybe a decade from now (when I hopefully have my Ph.D) we will meet at conference. Keep up the good work.

  • 9 David // Jun 11, 2013 at 10:24 pm

    Text books are obsolete and have been for some time. They’re simply not current, much less cutting edge, which is what students should expect to get from a $140 investment. At Chicago Booth (GSB back then) Canice Pendregast taught labor econ almost entirely from a course specific set of research articles, working papers, and cases that were assembled into an inexpensive paper back bound book (U Chicago Press, of course.) It wasn’t pretty but the content was compelling.
    Today, with the relative ease of assembling e:books, I would hope that more professors would be using this technology to customize their course reference materials to make them more cutting edge, relevant, and available at lower cost to students.

  • 10 Jeff // Jun 11, 2013 at 10:26 pm

    I agree with the general incentive that there are perverse incentives in the textbook market, but regarding Mankiw…

    I checked it out to see what my local University was pedalling, and I found these whoppers:

    “The fundamental relationship between productivity and living standards is simple, but its implications are far-reaching. If productivity is the primary determinant of living standards, other explanations must be of secondary importance. For example, it might be tempting to credit labor unions or minimum wage laws for the rise in living standards of American workers over the past century. Yet the real hero of American workers is their rising productivity.”

    References like this are littered throughout the book. There seems to be a complete lack of awareness that every economic transaction involves both a buyer and a seller and the fact that monopolies are not a strange condition, but rather just the end of a spectrum. Or to put it in simpler terms, it doesn’t seem to get that the disappearance of British dominance started in the 1850s when the Corn laws were repealed and Smith Ricardo became gospel.

  • 11 econgirl // Jun 13, 2013 at 12:28 pm

    In case you guys are getting follow-up comments by email, here’s an article confirming that Pearson factored into Dirk’s decision to leave Penn State:

    http://onwardstate.com/2013/06/13/dirk-mateer-left-penn-state-partly-because-of-big-textbook-publishing/

  • 12 Nick Keesey // Jun 13, 2013 at 3:55 pm

    Glad to see the looked further into this issue and even got a response out of the university. I sent Onward State an email with your article tuesday afternoon to tip them off because regardless if it only played a minimal role in his departure, what they are doing is not right and the students deserve to know about it. Great article Jodi : )

  • 13 Nick Keesey // Jun 13, 2013 at 3:57 pm

    It may be “common practice,” among many institutions, but that doesn’t mean it’s the best way to compose business.

  • 14 econgirl // Jun 13, 2013 at 6:02 pm

    Thanks! I have suspicions that the Pearson nonsense is going on at other schools under the radar, and it seems as though instructors are at the very least discouraged from talking about it. Unfortunately, this usually ends up making them look foolish for choosing crappy materials when, in reality, it wasn’t really their choice.

    Fun fact: the Principles of Economics instructor at Harvard Extension School used to work for Greg Mankiw, who is a Harvard Professor, but the instructor doesn’t use Mankiw’s text for his course. He uses a Pearson text instead (and does for Intermediate Micro as well) even though the online problem sets are filled with errors and nonsensical questions. Students started speculating about whether he was obligated to use these materials, since he, like Dirk, is a beloved instructor who clearly wants the best for his students.

  • 15 Varun Gupta // Jun 14, 2013 at 10:37 am

    Isn’t there an argument to be made that while the textbook is a tool to help the student learn, it’s also a tool to help the teacher do their job of teaching. Meaning that they should share in the cost of the materials they are using. Perhaps increase base pay but deduct a % of textbook costs for standardized class sizes.

    A teacher that just goes for the bad discounted books will be more transparent and see their class size dwindle over semesters and lowered pay or fired over time. Best part is that teachers who create their own teaching solutions don’t have to rely on mass market to see financial returns. This would allow more competing teaching tools into the market. With good student feedback, best teaching methods would spread quicker.

    I’m curious though, why should the textbook market survive at all? Wouldn’t it be better to sell books by the chapter? Then instead of writing a textbook to compete with Mankiw, you could pick the chapter that needs most work and try to write it so that it fits with the rest of the book but is better than what exists.

  • 16 Dirk Mateer Left Penn State Because of Textbook Publishing - Onward State // Jun 14, 2013 at 11:36 am

    [...] contract with textbook company Pearson Education. As first discussed in a post on the blog Economists Do It With Models, textbook companies like to sign contracts requiring professors to use their textbooks, [...]

  • 17 Jeff // Jun 14, 2013 at 12:36 pm

    Varun – “A teacher that just goes for the bad discounted books will be more transparent and see their class size dwindle over semesters and lowered pay or fired over time”

    Be very careful what you optimize for. I see no reason to assume that the teacher a student likes best during finals week is the same person as the teacher a student likes when they are stuck in a difficult job and have to use their skills or knowledge. This sort of market failure is endemic in education settings.

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