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Hot on the heels of last week's arguments in favor of taxing private schools, the U.S. News and World Report rankings have given bloggers another chance to knock expensive educations. The particular spark? A recent study that says raising the price of tuition pays off in better rankings for liberal arts colleges. The New York Times Economix blog summarizes:

Traditional economics would suggest that raising the price of an item (such as a college education) would reduce demand for it. But instead this study found that raising tuition -- as well as instructional expenditures -- actually improves the demand to attend liberal arts schools...For liberal arts colleges ranked 26th to 50th, a $1,000 increase in tuition and fees was associated with a 12.9-point increase in SAT scores and a 3.5 percent increase in the proportion of top freshmen admitted.

Why does a more expensive school become--by some metrics--a better school?

  • A Sign of Prestige, say the study's authors, as quoted by Catherine Rampell in the New York Times Economix blog. Boosting the price on an institution works because they "serve as markers of institutional quality and prestige."
  • A Class Filter to Allow Networking with the Rich, argues Ryan Avent at the Economist's Free Exchange blog. He outlines two explanation. First, "Education at a pricey institution could be a Veblen good, such that an increase in tuition makes the school more desirable as a status symbol." On the other hand, he says high prices could be a signal that the school offers opportunities to network with the rich. "By increasing tuition, schools increase the potential connectedness of the families of attending students. That's a real selling point, and a real reason why demand might increase"
  • One of the Only Measures Parents Have, qualifies Matthew Yglesias at Think Progress. "The underlying issue, either way, is that there's very little in the way of reliable information about the quality of undergraduate education in the United States...Consequently, "signals" and prestige wind up being hugely important. This, in turn, is an important driver of ever-higher-tuition."

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