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Is Your University Complying With the New Textbook Law?—A Commentary by Ian Ayres ’86

The following commentary was posted on on September 1, 2010.

Is Your University Complying With the New Textbook Law?
By Ian Ayres ’86

University students are returning to campuses throughout the country. It is a migration that raises my spirits — seeing the energetic, eager faces tackling another course in contracts or intellectual property.

But this year something is different. For the first time, a federal law has taken effect which requires “institution[s] of higher education receiving Federal financial assistance” to provide students with information on textbook pricing. The key textbook provision (sec. 133(d)) of the Higher Education Opportunity Act mandates that schools disclose:

on the institution’s Internet course schedule and in a manner of the institution’s choosing, the International Standard Book Number and retail price information of required and recommended college textbooks and supplemental materials for each course listed in the institution’s course schedule …

Part of the idea behind the law is to give students better information so that they can shop around for a better textbook price. The mandated disclosure should reduce the monopoly power of the local college bookstore. Armed with a textbook’s title and ISBN, students can jump on the Internet and search for a retailer with a lower markup. Knowing the ISBN is key to making sure you have the right textbook, because different editions of the same book will have different numbers. The law might also shift students toward buying used editions of the same textbook at a fraction of the price.

The disclosure, however, might also promote other dimensions of competition. Students might start choosing courses in part based on the cost of course books. And professors who want to teach larger classes might feel some added pressure to assign cheaper books. (Of course, profs who want fewer exams to grade might have a perverse incentive to assign higher-priced books.)

The new law responds to several of the problems I wrote about in a 2005 New York Times op-ed, “Just What the Professor Ordered.” I worried about the high cost of textbooks uncovered in a GAO report:

We’re used to paying $25 for a hardcover novel, but my casebook on contracts now sells to students for $103 . . . . At state universities, textbooks and supplies account for 26 percent of all student fees, including tuition. At junior colleges, they are a whopping 72 percent.

High prices are still a problem. My contracts casebook is now being offered on Amazon for $141.67. In my original article, I blamed poor professorial incentives:

It’s easy for prices to drift upward when the person choosing the product doesn’t really care how much it costs. Instead of competing on price, publishers compete for professors’ attention with an excess of computerized bells and whistles.

But professorial ignorance is also to blame. I imagine that few of my colleagues could tell you the cost of the textbooks they assign. The new law helps here because some institutions are choosing to fulfill the requirement of secondary disclosure “in a manner of the institution’s choosing” by asking professors to add the required cost and ISBN information to their course syllabuses. For the first time, some professors will have to confront the marginal price of taking their course during the very process of creating their course syllabuses.

The new law also indirectly takes action against another inefficiency in the market — the scourge of edition churn. Publishers and authors have a strong incentive to arbitrarily churn out new editions of a textbook even with just minimal changes to kill off competition from used books of the previous edition. The key to successful edition churn is for the textbook author to change a few pages of material early in the book so that all of the remaining material will appear on different pages. That way, any student who buys an older edition will literally not be on the same page with the professor and will have a harder time following class discussion and assignments.

The new law contains a gentle nudge which is aimed at making edition churn more embarrassing. Publishers must provide faculty members (or any “entity in charge of selecting course materials”) with the copyright dates of the three previous edition of the textbook together with a “description of the substantial content revisions made between the current edition of the college textbook or supplemental material and the previous edition, if any.” (Publishers must also disclose the price at which the book will be available to the bookstore on campus.) Some publishers are complying with these new mandates by having the preface of new editions clearly describe all “substantial content revisions.” This new disclosure may serve a useful disciplining function. The more egregious the edition churn, the harder it will be to document substantial content revisions. Students may prefer to take on the work of translating pages numbers to an older and cheaper edition of basically the same material.

Is your school complying with the new law? Take a few minutes and see if you can find the required Internet course schedule webpage that includes the ISBN and prices for all required and recommended textbooks. If not, you might email a school administrator a copy of this post and ask if the school is currently in compliance. Either way, please post comments with the links or with the administrator’s response (and we’ll send some Freakonomics schwag at random to one of the responders).

I predict that many schools are not yet in compliance. You can’t sue if your school isn’t providing the required information. But the Secretary of Education “is authorized to take administrative action, including the imposition of fines, against institutions that do not comply.”

Stepping back, it’s not clear that all of these disclosure requirements are worth the costs of compliance. The textbook market has some serious inefficiencies and the industrial organization economist in me can see how the new rules might nudge us toward a better equilibrium. But I don’t expect seismic changes.