The Difference Between Cost and Price
by Morley Winograd
May 30, 2019
An additional excerpt from our interview with Morley Winograd and Jack MacKenzie. Conducted and condensed by frank news.
Morley: Your focus this month is on the cost of college?
Morley: That's a mistake. Focus should be on the price of college.
Can you explain the difference between cost and price?
Morley: Sure. If people had to pay the cost of getting a college education, they could never afford it. Every state subsidizes college to some degree. They pay for something – they pay for building, they pay for something. Nobody pays the full cost of sitting in a classroom for four years and getting a college education.
What they're really concerned about is how much are you going to charge me for that education, which is the price.
Morley: If you then go behind the price and say, I'm going to charge you 20% of our cost and I'm going to pay the other 80% – you won't find that statistic anywhere because colleges and universities disguise how much they spend on that education, versus how much they spend on everything else. The elite research universities get all this federal money for research, and when the professor says I'm too busy to teach, they say okay, but they still charge the cost of that faculty salary, not on a portion of time spent basis, but on an ancient allocation basis to what it costs to educate a student at the university. So cost and price no longer have any relationship to each other. You could significantly cut the cost of college in the sense of how much the university spends to educate a student and how much the state covers, and not change the price of tuition at all. In fact, it wouldn't change because it's all variable based upon how much they think the parent can afford to pay and still come there.
Morley: It's kind of become airline pricing. It has nothing to do with what it actually costs, it's just a price they can charge and that's another reason we need free college, to eliminate that entire substructure of financial manipulation.
A conversation about capitalism now. I will make a note to our editors letter.
Morley: Now, look, it's more complicated, to warn you. You'll hear people talking about the cost of attending college.
Morley: So, now they've shifted the issue to the family's budget.
Morley: Not to the state or university budget. How much are we going to have to spend to make sure the kid eats, sleeps, gets his books and tuition? And that's a different issue and it's a perfectly legitimate issue, but it has anything to do with the “cost of college."