Textbook Economics

I had not noticed this before, but apparently August is college textbook season. I guess that makes sense. School will start up in a month and college students are widely known for not leaving things to the last minute. Both SmartMoney and The New York Times’ Bucks blog came out with items on how to save on textbooks in the last 48 hours.Grads Kit

My first reaction to the focus on textbook costs is that it is misplaced. College is an expensive endeavor, and the price of textbooks does not help any, but let’s get real. It’s like worrying about the low gas mileage on a Ferrari. Double what you spend on books or eliminate it entirely and you’ll still graduate with essentially the same heap of debt.

Alas, this is yet another triumph of psychology over math. Textbooks, unlike tuition, are usually not financed, so the expenditure is more noticeable. Money not spent of books can be spent on Pizza. Further, my unscientific guess is that texts are more likely to be paid for out of the pocket of students, rather than by mom and dad.

Textbooks are also an area of yet more unnecessary federal regulation. A law passed in the waning days of the Bush administration mandates that, starting this summer: a) Publishers must tell professors what they will charge students for the books b) Publishers can no longer bundle together software and other items, but must sell them separately and c) Colleges will be required to provide lists of required texts at registration time.

My thoughts are: a) Professors only care about the price if they wrote the book. b) Now only one student per campus will need to buy the software, the others will just copy. c) More good news for the many college kids fond of planning ahead.

The SmartMoney article is actually entitled “Should You Rent Your Textbooks?” Apparently, the latest craze on campus is to rent the things.  SmartMoney more or less answers the question positively.

Going by the book for college textbook savings no longer requires buying the book. Students facing a hefty annual bill for books can save an average 30% to 50% by renting that required reading.

It is not exactly clear where the 30%-50% figure comes from, but from reading the rest of the piece I get the impression they mean that the per-semester rental cost is that much lower than the purchase price. If that were the right way to evaluate these things then nobody would ever buy a house.

The basic calculus for comparing renting to owning a textbook is simple. You compare the cost of renting to the net cost of buying the book and then selling it after a semester. (The math is a little more involved for houses and cars.) So you need to know what it will cost to rent and buy and what you could get for a nice used copy in a few months.

A key point is that the purchase price to plug into the calculation is not the price for a new book. Neither SmartMoney nor the Times makes this clear, but I am inferring that what you rent is a book that has likely been rented to others before you.

And, of course, neither article cites any kind of broad pricing information, such as that on average used texts cost X% of new, or that you can sell them for Y% of the used price. So, like the articles, I will have to resort to providing an anecdotal example rather than a general statement.

A website mentioned but not linked to by SmartMoney, called eCampus.com, will rent a copy of Greg Mankiw’s Principles of Economics for $100.06. They will sell you a used copy for $158.82. And they will buy it back from you for $65 cash or $78 in store credit. $158.82 – $65 (or $78) = $93.82 (or $80.82). That’s less than $100.06.

So renting is a bit more expensive than buying and selling used. At least for this book and this website, both of which I selected arbitrarily. I have a feeling that you could do better on both the buy and sell prices if you shopped around.

Bigger picture, how could renting possibly be meaningfully cheaper than buying and selling used? The renting out is done, after all, by the same outfits that do the used book selling and buying. Why would they rent if they could buy and sell for more?

That sounds like just the sort of very basic economics lesson college students should be learning. I think it is in Mankiw’s book somewhere.

[Photo – Kit]

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