Higher Education - Investment or Consumption

I've contended for a long time that higher education is both an investment good and a consumption good. The portion of higher education that generates an economic return over time is an investment. What doesn't looks a lot like consumption.

Tuition and other fees keep going up faster than inflation. The CPI for tuition is 594 while the overall CPI is 225. That means $100 in tuition in 1983 now costs $594 while on average $100 expenditure in 1983 now costs $225. The question of course is why the discrepancy.

A news story on ASU's new "investments" provides a clue.

As soon as David Anaya moved onto Arizona State University's West campus his freshman year, he bought a box of Lucky Charms cereal, sat in his room and ate the entire contents in one sitting.

"My mom would never let me have it growing up," he told about 100 people who gathered last week to break ground for a new residence hall on the West campus.

Anaya's tale may sound trivial, but it bolsters the concept behind "academic villages" that will rise on ASU's West and Polytechnic campuses in 14 months. By living in residence halls and eating together in dining rooms, the freshmen of 2012 will experience what ASU President Michael Crow calls "immersion" education.

Also

As another lure, students on all four ASU campuses will find glossy new recreation centers within the next few years. The need is strong enough that students agreed to "assess" themselves an extra $150 a year to pay off $25 million bonds for each project. Basketball courts, gymnasiums, outdoor pools and multi-use rooms for yoga and ballet were among the desired amenities.

As administrators have discovered, young adults today have raised the standards for acceptable campus living.

These sound a lot like consumption goods. Just to put the extra fee into perspective, $150 will buy you 2 credit hours of courses at Mesa Community College.