Dartmouth and Yale Law alum Joseph Asch has been called “Dartmouth’s most important critic” for his Dartblog posts on “mundane but highly important issues.”
In his latest post, the serial entrepreneur, Bain & Co. veteran and failed Dartmouth trustee candidate makes a “circumstantial case” for price-fixing in the Ivy League based on next year’s tuition, room and board and fees growth.
Dartmouth, Cornell, Yale, Penn and Harvard
raised their rates in a narrow band between 3.7% and 3.9%. Only Brown and Princeton broke 4%. According to the Labor department, the Consumer Price Index (CPI) rose less than 1% between 2015 and 2016. [Columbia hasn’t yet announced next year’s costs.] …
The Ivy Presidents meet on a regular basis in private session. And while the cost for faculty and senior administrators is set by the national market for people with these skills, their cost is only about a sixth of an institution’s total budget. The wages of accountants, administrative assistants, dining hall workers, janitors, medical personnel, etc. vary a great deal from region to region, as does the cost of construction and utilities. Obviously it’s a lot more expensive to do business in Manhattan or Cambridge than in Hanover or Ithaca. So why the consistent cost increases?
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Asch calls this “a prima facie case for price fixing,” given Federal Trade Commission policy that says “direct competitors [that] have a pattern of unexplained identical contract terms or price behavior” and a “lack of legitimate business explanation” can be found to have engaged in price-fixing.
He says the schools would probably cite the growth in the Commonfund Higher Education Price Index (HEPI), though three of its components – nonprofessional wages and benefits, contracted services and utilities – are also part of the Consumer Price Index, “which is rising much more slowly”:
And if you imagine that schools do a poor job of managing their costs — and that assumption does not take a lot of imagination — then using the HEPI to establish prices is a guarantee, as [Dartmouth President] Phil [Hanlon] likes to put it, of unsustainable, superinflationary price increases for the foreseeable future.
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