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The fully-loaded gross aggregate cost to all of the students that I will be teaching this academic year is around $25 million.

It is true that most students do not pay the full cost; yet it is also true that the institutional cost of educating each student exceeds the full sticker price, and often by a substantial amount (e.g. last I checked, Amherst College spent something like $70,000 per year educating each student – about $50,000 on instructional and related expenses, and the remainder for infrastructure and amenity expenditures).

Though I earn well less than 1/2 of 1 percent of the aggregate expenditures of my students, I do not believe I am being exploited. However, I cannot help being convinced that there is a huge opportunity that remains unexploited. The crazy higher education cartelization accreditation system is partly to blame; but there remain other causes, in no particular order:

  1. We are really much richer and better off than conventional wisdom would have you believe
  2. Parents and students place an enormous value on the consumption aspect of higher education
  3. Consumer surplus in higher education is far higher than anyone previously thought, even controlling for 1 and 2
  4. Behavioral economics has something to say … are the masses simply irrational?

The title of the post comes from this interesting paper.

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