Download Using cost-benefit considerations to evaluate textbook costs: A case

USING COST-BENEFIT CONSIDERATIONS TO EVALUATE TEXTBOOK COSTS:
A CASE STUDY
Robert T. Morton, Jr., B.S.
Graduate Student
Charles F. Dolan School of Business
Fairfield University
1073 North Benson Road
Fairfield, CT 06824
Phone: 203/254-4000 x2844
Fax: 203/254-4105
Email: [email protected]
and
Dawn W. Massey, Ph.D., CPA*
Associate Professor
Charles F. Dolan School of Business
Fairfield University
1073 North Benson Road
Fairfield, CT 06824
Phone: 203/254-4000 x2844
Fax: 203/254-4105
Email: [email protected]
*Corresponding author.
Using cost-benefit considerations to evaluate textbook costs: A case study…………..…..…1
USING COST-BENEFIT CONSIDERATIONS TO EVALUATE TEXTBOOK COSTS:
A CASE STUDY
ABSTRACT: The cost-benefit approach (CBA) generally evaluates whether expenditures
(costs) are worthwhile relative to their returns (benefits) (Harlow and Windsor 1988; Watkins
2008). Equal alternatives have the same relative benefit/cost ratio; thus, a higher cost alternative
will have the same benefit/cost ratio as a lower cost alternative if its benefit is correspondingly
higher than the benefit of the lower cost alternative (c.f., Hold and Elliott 2002). The purpose of
this study is to demonstrate how CBA can be used to assess the most cost-effective business
school major. We present a case study in which we apply CBA to evaluate textbook costs across
the typical business majors (i.e., Accounting, Finance, Information Systems, International
Business, Management and Marketing). We discuss how the CBA findings can inform public
policy and individual decisions.
Key Words: case study, cost-benefit, text cost, textbook cost.
Data Availability: Contact the authors.
Using cost-benefit considerations to evaluate textbook costs: A case study…………..…..…2
INTRODUCTION
It’s no secret the cost of higher education is rising rapidly, with little relief in sight.
Typically, reports focus on tuition and room and board (e.g., Block 2007; U.S. News & World
Report 2007), but there is a third cost center that is also increasing in importance: textbooks.
Indeed, the price of college textbooks has risen just as sharply as tuition and room and board,
consistently outpacing the rate of inflation (GAO 2005). Moreover, because no significant
government aid is offered to defray textbooks costs (Illinois Board of Higher Education
2006), text costs are becoming a bigger burden – in relative terms – on students and their
families.
The paucity of research on textbook costs leaves unanswered both public policy
questions (e.g., whether government aid for textbooks should be directed to all business
disciplines equally) as well as individual decision-making questions (e.g., which business
school major offers students more “bang for their buck” in terms of starting salary relative to
textbook costs). As a result, the purpose of this paper is to provide an approach that can be
used to assess the cost-effectiveness of business school majors from the perspective of
students’ discipline-specific average starting salaries relative to their textbook costs.
To do so, we present a case study from a single university at which we assessed
differences in the benefit/cost ratio for students in each of the six typical business majors
(Accounting, Finance, Marketing, Management, Information Systems, and International
Business)1 – by comparing the average starting salary that students in each major can expect
to be offered to the total cost of discipline-specific textbooks that the corresponding majors
spend over their four-year academic career. Findings of the study reveal differences in the
1
Note that Economics is considered a business discipline at some universities; however, there is not widespread
acceptance of Economics as a business discipline.
Using cost-benefit considerations to evaluate textbook costs: A case study…………..…..…3
benefit/cost ratio across the disciplines. Such an analysis can inform public policy and
individual decisions, respectively, by providing information about the business disciplines to
which limited resources (i.e., financial aid) might be directed and by providing students with
information they can consider when choosing their business-school major.
The remainder of this study is organized as follows: In the next section we present a
review of the literature. In Section 3, we discuss the measurement of the variables, while in
Section 4 we profile the cost-benefit analysis. In the final section, we include the conclusion
and suggestions for future research.
LITERATURE REVIEW
Cost- Benefit Analysis
Cost-benefit analysis (CBA) is a tool used by businesses, governments, and
individuals in order to help determine whether undertaking a project or making an investment
is a worthwhile and profitable venture (Cheever 2005; Dmytrenko 1997; Watkins 2008). CBA
compares the benefits of a project with its costs (Cheever 2005; Dmytrenko 1997; Hartlow
and Windsor 1988; Holt and Elliott 2002). Equal alternatives have the same relative
benefit/cost ratio; thus, a higher cost alternative will have the same benefit/cost ratio as a
lower cost alternative if its benefit is correspondingly higher than the benefit of the lower cost
alternative (c.f., Hold and Elliott 2002). Likewise, the higher the benefit/cost ratio, the more
profitable the project; thus, when making a decision between multiple projects upon which
CBA is performed, the project with the higher benefit/cost ratio is the more profitable project
and, from a financial perspective, is the preferred one (Watkins 2008).2
2
Non-financial considerations, while important, are often omitted from CBA because they cannot be measured
reliably (c.f., Harlow and Windsor 1988).
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To illustrate the point, consider the example of deciding whether to invest in a one
stock (Stock A) over another (Stock B). To perform CBA, the benefits that would be derived
from investing in the stock would have to be estimated and the costs of investing in the stock
would have to be measured. In this case, the benefit would be total profit that would be earned
from the stock investment while the cost is simply the initial investment (i.e., the money paid
for the stock). If the total earnings that Stock A was expected to produce were $1,000 and the
total cost paid to obtain Stock A was $400, then Stock A’s benefit/cost ratio, which is arrived
at by dividing total expected benefits by total costs, is 2.5. If the total earnings that Stock B
was expected to produce were $1,500 and the total cost paid to obtain Stock B was $500, then
Stock B’s benefit/cost ratio is 3.0. In this case, Stock B would be the preferred investment
because its benefit/cost ratio exceeded that of Stock A.
CBA can have public policy implications. For instance, it can inform legislators
considering whether the government should increase spending on textbook costs ratably
across majors. Additionally, CBA can inform individual decisions. Thus, for example, CBA
can assist individuals in evaluating whether text cost for one discipline compares favorably to
that of another.
Textbook Benefits and Costs
Research measuring the benefits of textbooks is sparse. Indeed, the lone textbook
CBA study we could find (Annand 2002) ignores consideration of the benefits of textbook
use, per se, focusing, instead, on the cost reduction of paper-based versus CD-ROM-based
textual material (i.e., Annand [2002] presumes the benefits of paper-based and digital-based
texts are equivalent). Nonetheless, the benefits of a college education are many and include,
for instance, higher income owing to specialized knowledge and technical skills, greater
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productivity and better brainstorming (c.f., Adam 2005; Bernasek 2005). Educational benefits
break down along individual lines – which are fairly straightforward – as well as economywide lines – which are more difficult to measure (Adam 2005; Bernasek 2005). For instance,
because the use of textbooks provides individuals with specialized knowledge and technical
skills, it therefore leads to higher income for that individual. Hence, an individual benefit of
textbook use is higher income earned by the text user as compared to the income earned by a
non-user of the text. In contrast, the economy-wide benefits of textbook use (e.g., productivity
gains) are harder to quantify because those “benefits accrue to the economy gradually”
(Bernasek 2005, 3.6). Indeed, there have been competing findings in the literature as to the
economic benefits of education. “In the early 1990’s economists calculated big economic
rewards from additional investment in education. A decade later, the conclusions were
different: studies suggested…there might be no overall economic benefit.” (Bernasek 2005,
3.6).
Measuring the costs of textbooks is much more straightforward; indeed, one needs
merely to compute the cost of the relevant texts – using readily available pricing information.
More interestingly, however, over the last several years, a number of organizations have
raised concern about the skyrocketing cost of textbooks. Examples include: the California
Student Public Interest Research Group (CALPIRG), the United States Government
Accountability Office (GAO), and the Illinois Board of Higher Education (Fairchild 2004;
GAO 2005; Illinois Board of Higher Education 2006, respectively). Of key importance,
reports issued by these organizations highlight the fact that text costs have risen to a greater
degree than inflation over the last several years. Indeed, in its report, the GAO (2005) found
that the average price increase for college textbooks between 1986 and 2004 was six percent;
Using cost-benefit considerations to evaluate textbook costs: A case study…………..…..…6
over the same period, overall price increases (i.e. increases in inflation,) were three percent.
Similarly, Atkinson-Adams (2007) found that textbook prices were increasing at a rate four
times that of inflation and that American students pay, on average, twenty percent more than
their peers in the United Kingdom do for texts.
Because of findings such as these, there have been loud cries for reforms. For instance,
in December 2006, the Illinois Board of Higher Education (2006) reported that the proportion
of students buying their textbooks online to cut costs is growing at a startling rate. In March,
2008 Paulson (2008) reported that a state representative from Colorado introduced a bill that
would require publishers to disclose the price of textbooks, as well as the expected time that
those texts would remain on the market before they were succeeded by a new edition, to
faculty members before making their decision on which text to use for their classes. In April
of 2008, Chute (2008) reported on a growing trend amongst college professors that are
seeking lower-cost alternatives than traditional textbooks in an effort to help their students.
An important undercurrent in the cries for reform is concern over the paucity of
financial aid available to defray students’ textbook costs (Illinois Board of Higher Education
2006; Mansfield 2008; Samuels 2008). For instance, the report of the Illinois Board of Higher
Education (2006) stated that since federal Pell grants have stopped keeping pace with rising
tuition costs, there is very little funding left to defray textbook cost. Similarly, Mansfield
(2008) and Samuels (2008) both note that students’ financial aid packages rarely cover
textbook costs.
Given that limited dollars are available for student financial aid, how should any
governmental financial aid allocations amongst business disciplines be made? Similarly,
given that students have limited dollars available to pay for their textbooks, which business
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major offers students the best “bang for the buck”? To assist those interested in answering
these questions, we demonstrate how CBA can be used to evaluate the costs and benefits for
business school discipline-specific texts.
MEASUREMENT OF THE VARIABLES
We demonstrate using CBA to analyze discipline-specific benefits and textbook costs
for the business school of a private, religious, comprehensive University in the Northeast.
Because assumptions are frequently necessary, a key challenge in CBA is monetizing benefits
and costs (Harlow and Windsor 1988). Thus, we highlight the significant assumptions
necessary for conducting our CBA to assist those who desire to utilize our approach. As a
prior research identifies conflicting findings with respect to the existence of economic
benefits and costs of education (Bernasek 2005); however, the individual benefits and costs of
education are clear. Accordingly, in our analysis we focus only on the benefits and costs of
textbooks accruing to individuals.
Measurement of Textbook Benefits
The key individual benefit of textbook use is salary (c.f., Bernasek 2005). In our study,
we utilize average 2007 starting salaries for school of business students graduating with a
primary concentration in each of the six business disciplines (i.e., Accounting, Finance,
Marketing, Management, Information Systems, and International Business). We obtained this
data, which is shown in Table 1.0, from the Career Planning Center of the university in our
study. It represents the average starting salary offer made within six months of graduation to
students in a given major. However, it does not account for differences in the number of
students in each major who did not receive job offers within six months of graduation.
Likewise, Career Planning was unable to specify whether student job offers were discipline-
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specific (e.g., whether all accounting majors received offers in accounting positions versus
non-accounting positions.) and so it does not adjust for out-of-discipline job offers.
Table 1.0
Average 2007 Starting Salaries
Degree
Accounting
Finance
Information Systems
International Business
Management
Marketing
Average Starting
Salary
53,764
54,500
$
55,000
42,500
44,000
41,000
Based on the data for the university included in our case study, on average,
Accounting majors can expect to earn an annual starting salary of $53,764; Finance majors,
$54,500; Information Systems majors, $55,000; International Business majors, $42,500;
Management majors, $44,000; and Marketing majors, $41,000.
Measuring Textbook Costs
Amassing the estimated textbook cost information was a bit more involved. In order to
determine textbook cost information, we first had to identify the courses relevant to each
business school discipline. At the school under study, every business student must complete
“the standard university core” curriculum as well as a series of courses comprising “the core
business requirements.”3 Due to the variety of courses that are offered to students in order to
fulfill the standard university core curriculum, it would be a virtual impossibility to compile
the cost of all potential permutations of required courses and corresponding textbooks. More
importantly, business students can fulfill the university core curriculum by taking the same
3
See Appendix A for a listing of business core and University core requirements for all students in the business
school of the school included in our study.
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classes, regardless of business school major; hence the cost of these “core” texts was excluded
from our analysis, as it does not necessarily differ across the six business majors. Similarly,
since all business school students must take the same business core courses, they must buy the
same (or similar) texts; as a result, the cost of these “core” texts was excluded from our
analysis, as it does not differ across the six business majors.
Once we identified the relevant courses, we needed to amass a list of required courses
for each business discipline, coupled with the required texts for those courses and the
corresponding prices of those texts. We compiled a list of courses for each major by
reviewing University Course Catalogue. Next, we reviewed the most recent syllabi for the
courses on file with the Dean’s office in the school of business, to determine the text(s) most
recently used in each course. From that review, we assembled listings of the texts recently
required for each course in the business school. Finally, we gathered data regarding the prices
for new copies of those texts by performing simple search queries at Amazon.com, a leading
book retailer.4 We did not consider the cost of used texts or the resale price for new texts
being returned at the end of the semester for three reasons. First and foremost, not all
textbooks were available in the used textbook market; accordingly, complete used textbook
pricing was unavailable. Second, the prices offered to students selling used texts vary
considerably depending on factors unrelated to the instructor’s text choice, such as condition
and age of the used book as well as its geographical location/market. Third, in relative terms,
higher-priced new texts also cost (and fetch) more on the used book market; hence, using only
new textbook costs yields more comparable information than does using a hybrid of new and
used textbook costs.
4
It should be noted that textbook price information is also available at the university bookstore. However, we
did not use bookstore pricing because the bookstore only stocks texts for classes that are currently being offered,
and as a result, complete pricing information was not available from that source.
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Some further details about the text cost data set – particular to the school included in
our case study – merit discussion. First, on a few occasions, although there was a course listed
in the Course Catalogue as a possible elective for a discipline (e.g. marketing), when we
presented the course name and number to the Dean’s office, we were informed that the course
had not been offered in the past three academic years. In those instances,5 the course’s
syllabus was unavailable and so we excluded the course from the data set. Second, in rare
instances, the professor of a course would only require a collection of various readings that
s/he would compile and then send to the University Printing and Graphics department for a
simple binding.6 The cost of these “texts” is nominal in nature and was unavailable from
Amazon.com; as a result, we excluded their cost from the data set. Finally, in some
disciplines, such as Marketing, a student can obtain a degree in a certain “concentration” by
completing specific courses. We compiled the specific textbook cost for each concentration
offered for every discipline; however, for CBA purposes, we averaged the costs of all the
concentrations offered within a major to get an average text cost for that major. Based on the
procedures outlined above, we amassed textbook costs for each major, which are summarized
on Tables 2.1 – 2.6.
5
There were eight courses that either were not offered in the past three years, or were no longer offered at all.
There were three courses in which the professors used non-traditional texts duplicated at the University Print
Shop.
6
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Table 2.1
Accounting Curriculum
Course Requirements Book Cost
AC203
AC204*
AC310
AC320
AC330
AC343
Total Cost:
$
$
185.50
125.00
179.50
172.25
182.50
844.75
* The required text for AC204 is the same as the
one required for AC 203. Therefore, the cost of
the AC204 text is $0.00.
Using cost-benefit considerations to evaluate textbook costs: A case study…………..…..…12
Table 2.2
Finance Curriculum
Course Requirements
Book Cost
FI210
FI215
FI330
Subtotal
FI200*
FI220
FI240
FI310
FI315
FI320
Total
Average Cost
Three Courses:
Total Cost:
$
159.50
176.50
238.30
574.30
$107.25
112.75
138.80
146.56
123.25
103.75
732.36
$122.06
$
366.18
940.48
*Finance students are required to select 3 courses out of this group.
To obtain an accurate cost for the curriculum, the text cost of each of
the courses was obtained and then summed. The average cost per
course was calculated, and then multiplied by 3 to obtain the average
cost a Finance student would spend on books for these courses.
Using cost-benefit considerations to evaluate textbook costs: A case study…………..…..…13
Table 2.3
Information Systems Curriculum
Course Requirements
Book Cost
IS240
IS260
IS310
IS320
Subtotal
IS135*
IS210
IS220
IS240
IS350
OM140
Subtotal
Average Cost
Two Courses:
Total Cost:
$
119.00
118.00
167.00
100.00
504.00
$70.00
100.00
53.75
119.00
100.00
115.00
557.75
$92.96
$
185.92
689.92
*Information Systems students are required to select 2 courses out of this
group. To obtain an accurate cost for the curriculum, the text cost of each
of the courses was obtained and then summed. The average cost per
course was calculated, and then multiplied by 2 to obtain the average cost
an Information Systems student would spend on books for these courses.
Using cost-benefit considerations to evaluate textbook costs: A case study…………..…..…14
Table 2.4
International Business Curriculum
Course Requirements
Book Cost
IL10
IL101
IL200
Subtotal:
$174.00
175.75
91.20
$
440.95
MG350*
174.75
MG385
69.95
MG390
55.95
Total Cost w/Management Concentration:
$741.60
FI200**
FI240
Total Cost w/Finance Concentration:
$687.00
107.25
138.80
MK312***
136.00
Total Cost w/General Business Concentration:
Average Cost Across All Concentrations
$576.95
$
668.52
*These courses are required for students who wish to earn a degree in International Business with a
concentration in Management.
**These courses are required for students who wish to earn a degree in International Business with a
concentration in Finance.
***This course is required for students who wish to earn a degree in International Business with a
concentration in General Business.
Using cost-benefit considerations to evaluate textbook costs: A case study…………..…..…15
Table 2.5
Management Curriculum
Course Requirements
Book Cost
MG235
MG240
MG340
Subtotal:
$134.25
146.25
280.50
BU220*
$ 84.95
BU320
166.75
BU325
160.90
MG320
21.40
MG365
99.99
Total:
533.99
Average:
106.80
Three Courses:
320.39
Total Cost w/Business & Society Concentration: $600.89
MG320**
21.40
MG330
85.45
MG385
69.95
Total:
176.80
Total Cost w/Human Resources Concentration: $457.30
Average Cost Across All Concentrations
$
529.10
*Students seeking to earn a Management degree with a concentration in Business & Society
are required to select 3 courses out of this group. To obtain an accurate cost for the
curriculum, the text cost of each of the courses was obtained and then summed. The average
cost per course was calculated, and then multiplied by 3 to obtain the average cost a
Management student would spend on books for these courses.
**These courses are required for students who wish to earn a degree in Management with a
concentration in Human Resources.
Using cost-benefit considerations to evaluate textbook costs: A case study…………..…..…16
Table 2.6
Course Requirements
Marketing Curriculum
Book Cost
MK212
$160.25
MK311
170.00
MK312
136.00
Subtotal
466.25
MK221*
$
162.50
MK321
157.95
MK322
118.60
Total:
439.05
Average:
146.35
Two Courses:
292.70
Total Cost w/Relationship Marketing Concentration:
MK231**
161.75
MK331
79.95
MK332
136.00
Total:
377.70
Average:
125.90
Two Courses:
251.80
Total Cost w/Integrated Marketing Communication Concentration:
MK221***
162.50
MK231
161.75
MK241
106.67
MK321
157.95
MK322
118.60
MK331
79.95
MK341
180.75
Total:
968.17
Average:
138.31
Three Courses:
414.93
Total Cost w/General Marketing Concentration:
Average Cost Across All Concentrations
$758.95
$718.05
$881.18
$
786.06
*Students seeking to earn a Marketing degree with a concentration in Relationship Marketing are required to select 2 courses out of this
group. To obtain an accurate cost for the curriculum, the text cost of each of the courses was obtained and then summed. The average
cost per course was calculated, and then multiplied by 2 to obtain the average cost a Marketing student would spend on books for these
courses.
**Students seeking to earn a Marketing degree with a concentration in Integrated Marketing Communications are required to select 2
courses out of this group. To obtain an accurate cost for the curriculum, the text cost of each of the courses was obtained and then
summed. The average cost per course was calculated, and then multiplied by 2 to obtain the average cost a Marketing student would
spend on books for these courses.
***Students seeking to earn a Marketing degree with a concentration in General Marketing are required to select 3 courses out of this
group. To obtain an accurate cost for the curriculum, the text cost of each of the courses was obtained and then summed. The average
cost per course was calculated, and then multiplied by 3 to obtain the average cost a Marketing student would spend on books for these
courses.
Using cost-benefit considerations to evaluate textbook costs: A case study…………..…..…17
Based on the data for the university included in our case study, on average,
Accounting majors can expect to pay $844.75 for the texts required for their major classes.
Finance majors, $940.48; Information Systems majors, $689.92; International Business
majors, between $576.95 and $741.60, or an average of $668.52 across three concentrations;
Management majors, between $457.30 and $600.89, or an average of $529.10 across two
concentrations; and Marketing majors, between $718.05 and $881.18, or an average of
$786.06 across three concentrations.
COST-BENEFIT ANALYSIS
To perform benefit/cost calculations, we divided the average starting salary of each
discipline by the average cost of textbooks required for the corresponding major. The results
appear in Table 3.0 and are depicted in Figure 1.0.
Table 3.0
Summation & Rate of Return Calculations
Degree
Management
Average
Starting Salary
Average
Textbook Cost
Rate of Return on
Textbook
Investment
$ 44,000
$ 529.10
83.16
Information Systems
55,000
689.92
79.72
Accounting
International
Business
53,764
844.75
63.64
42,500
668.52
63.57
Finance
54,500
940.48
57.95
Marketing
41,000
786.06
52.16
As shown in Table 3.0, the major in our sample with the highest return on the cost of
its required textbooks is Management, with a rate of 83.16. This means, simply put, that for
every dollar Management students spent on textbooks, they would, on average, receive $83.16
in their starting salary. On the other end of the spectrum, Marketing students would receive
Using cost-benefit considerations to evaluate textbook costs: A case study…………..…..…18
only $52.16 in their starting salaries on their investment. The other four majors fall in the
following order: Information System, at 79.72; Accounting, at 63.64; International Business,
at 63.57; and Finance, at 57.95.
Figure 1.0
Rate of Return on Textbook Investment
90.00
80.00
70.00
Rate of Return
60.00
50.00
40.00
30.00
20.00
10.00
Management
Information Systems
Accounting
International Business
Finance
Marketing
Major Area of Study
After some analysis and review of the input variables to the benefit/cost calculations,
some explanations for the results become apparent. First, Information Systems students are
offered a higher average starting salary than any other business school student, at $55,000.
Second, Information Systems has the third lowest textbook cost in the business school.
Concurrently, Management has the lowest textbook cost of any of the disciplines, by far. The
smaller investment offsets the relatively low average salary in order to create a favorable rate
of return. On the other hand, Marketing students have the third highest textbook costs, and
receive, on average, $14,000 less than their peers who graduate with an Information Systems
degree.
Using cost-benefit considerations to evaluate textbook costs: A case study…………..…..…19
These results beg the question “Why do Management and Information Systems
students have lower textbook costs?” Upon review of the data, we noted that all three of the
professors using the “readings collections,” whose costs were unavailable through
Amazon.com and thus were excluded from the analysis, were Management professors. We
also noticed that the required text in each course offered in the university Information
Systems (IS) department is a rather inexpensive one. Oftentimes, the instructors use handouts
and online readings to supplement the book, which would minimize the roles that the text
would need to fill. As a result, a “comprehensive” text on the course material is not often used
in IS.
The former chair of the Information Systems department explained that he and his
colleagues try to select affordable books for their classes. For example, he tries to have only
one required text for the class. Oftentimes, professors choose two (or more) books for a class,
and never get to use more then one. Additionally, the former IS department chair explained
that his department always tries to avoid using textbooks with color pictures because the IS
faculty believe that this seemingly mundane detail adds to the cost of the textbook without
adding anything to the students’ understanding of the concepts involved.
Marketing students are in a much less fortunate situation. On average, they receive the
lowest offers for starting salaries, at $41,000, which provides them with a rate of return of
59.16. At first one would assume that they must also have higher textbook costs than
Information Systems students. While that is correct, the cost of Marketing texts exceeds that
of Information Systems texts by less than $100 – hardly a substantial amount. Thus, it would
seem that correcting this inequity would require Marketing students to receive higher salaries.
However, considering the economics of the labor market for that industry, it is highly unlikely
Using cost-benefit considerations to evaluate textbook costs: A case study…………..…..…20
that such a change will be forthcoming in the near future. So, is the only other option to
encourage Marketing professors to find cheaper texts? If they were to do this, would it
compromise the academic integrity of the courses, and maybe the department as a whole? Or
is it perhaps best to just continue under the current system, with Marketing students getting a
relatively low benefit for the cost of their texts? Although the situation appears inequitable, a
clear-cut solution does not seem available.
The results from the remaining three disciplines were somewhat predictable.
Accounting received the third highest rate of return, due in large part to the high salaries that
students receive, as well as – according to the department chair – a conscious effort by the
department to select texts that are as affordable as possible, yet still serve the needs of the
class. She pointed out that maintaining currency is a challenge in her discipline because the
standards of the Accounting profession are constantly changing. Thus, endeavoring to teach
students the most current material requires regularly updating textbooks to reflect current
professional standards, which, she says, is unavoidable if a department seeks to provide the
highest level of education. International Business came in right behind Accounting, due to
lower starting salary, but also lower textbook costs. Finance was fifth out of the six
disciplines; having textbook costs of nearly $950, which adversely affected Finance majors’
rate of return.
CONCLUSIONS
In this study we demonstrate how CBA can be used to assess the most cost-effective
business school major by calculating the benefit/cost ratio for average starting salaries as
compared to discipline-specific textbook costs for each of the six business majors. In so
doing, we find that the school of business at the university under study expects its students to
Using cost-benefit considerations to evaluate textbook costs: A case study…………..…..…21
pay, on average, approximately $100 per semester for new copies of the textbooks in their
major classes; this would equate to roughly $800 over a four-year academic career.
Importantly, this is for business major classes only, for students with one major only. These
costs are likely to increase if a student were to pursue a second major or a minor. In addition,
students also have to bear the cost burden of the texts for the business core as well as the
standard university core curriculum.
Further, it seems as though some departments put in a greater effort toward finding
and selecting textbooks that will cost less to the students. However, this can be dangerous
territory, especially if texts are selected for low price rather than effectiveness. Faculty must
walk a fine line between considering the financial burden placed on students and doing a
disservice to those same students by choosing an ineffective but less expensive text.
Thankfully, as discussed in the review of literature section, legislators are considering
initiatives to reign in the costs of students’ textbooks.
Along those lines, our approach identifies differences in the benefit/cost ratio for each
of the business disciplines. For example, the major with the highest textbook cost, Finance,
had the fifth-best benefit/cost ratio out of the six disciplines; the major with the lowest
textbook cost, Management, had the best benefit/cost ratio, but only the fourth-best starting
salary. Accordingly, CBA analysis can inform legislators considering how to prioritize limited
resources that might be allocated for assisting students with the cost of textbooks. That is,
CBA can highlight for legislators the business disciplines more in need of costcontrol/financial assistance. Likewise, students with limited resources might benefit from
CBA analysis – by considering the cost-effectiveness of each of the business disciplines from
the perspective of the benefit/cost ratio associated with their textbooks.
Using cost-benefit considerations to evaluate textbook costs: A case study…………..…..…22
While the cost-benefit approach we describe has usefulness, it does have some
limitations. For instance, we did not scale the salary data we collected to account for the
number of students actually receiving job offers within six months of graduation or to exclude
the average starting salary information for those who received job offers outside of their
major. Had we done so, it is possible that we might have arrived at different salaries for each
major – in both nominal and relative terms. Accordingly, others considering using the CBA
approach we describe should consider including such factors in their analyses.
In addition, we did not factor in effects related to the used textbook market, which
could result in different text cost relationships amongst the majors (e.g., because some
Management courses use “readings,” the students’ only alternative is to purchase a “new”
readings packet each year; in contrast, in other disciplines, students may be able to purchase
or resell used textbooks to reduce overall text costs). Those considering using the CBA
approach we describe may want to consider whether the cost of used texts and/or new texts
less the amount offered to students who resell such texts in the used market is warranted in
their analyses.
Using cost-benefit considerations to evaluate textbook costs: A case study…………..…..…23
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