View source for Textbooks and Drugs

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[[Category:Tony Cookson]]
[[Category:Ideological Mainstream Economics]]
[[Category:Greg Mankiw]]
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{{DES | des = [[Tony Cookson]] takes [[Greg Mankiw]] to task for presenting textbooks as a competitive model.  He points out that the textbook market suffers from most of the imperfect competition problems of big pharma, explaining $268 textbook prices. | show=}}
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Greg Mankiw gives his favorite example of competition in his latest column:

Granted, competition is not always good for producers. I produce economics textbooks. I curse the fact that my competitors are constantly putting out new, improved editions that threaten my market share. But knowing that I have to keep up with the Paul Krugmans and the Glenn Hubbards of the world keeps me on my toes. It makes me work harder, benefiting the customers — in this case, students. The upshot is that competition among economics textbooks makes learning the dismal science a bit less dismal.

From my perspective, this is the wrong example for how competition benefits consumers.  To be sure, there are competitive forces in the textbook market, but the textbook market is far from a model of perfect competition.  The textbook market is more like the market for pharmaceuticals, and the analogies run deep.  In case you are unfamiliar, here are the salient features of the textbook market (along with how big pharma marketing is similar): 

Professors -- not students -- make decisions about which textbook to adopt for a class.  From the standpoint of quality of content, this is likely optimal.  After all, the professor knows more about the subject, and should be better positioned to know what constitutes a comprehensive and useful treatment of the material.
Professors are like doctors, while students are like patients in the parallel universe that is the market for pharmaceuticals.
Because professors decide on textbook adoption, textbooks are marketed directly to professors.  All else equal, professors care more about the quality of the book than the price (profs don't pay for the book).  The result is that the marketing and competition emphasizes quality, and price just isn't salient -- even though students justifiably care about the price. Students may complain about the expense of the textbook, but students will always complain about something, so profs imperfectly account for student price sensitivity.
The market for pharmaceuticals is slightly different, but ends up with the same tension / emphasis on quality rather than price.  Doctors don't care directly about price, but nor do patients (really) because a third party usually heavily subsidizes the cost of the drugs.
There is extensive (maybe excessive) detail advertising of professors.  It does not look like advertising, but rather appears to be "peer review."  If you teach a class that could use a textbook at some university, textbook companies solicit you to review some small part of the textbook (one or two chapters, the table of contents, the book "mission statement").  They even pay profs some small amount to provide feedback, but to solicit feedback, they need to send a trial copy of the book.  There is likely some value to the peer review aspect of this, but a significant component of this is direct-to-professor advertising.
This is not unlike how the pharma industry treats doctors -- although doctors probably get better treatment.  To my knowledge, professors are not solicited by gifts like watches or golf clubs (see Table 2 of link).
All of this is to say that there are frictions in the textbook market -- the market is imperfectly competitive.  It is true that imperfect competition is still competition of sorts, but when you're trying to argue for the force of competition to generate outcomes that are greatly beneficial to consumers, it is harder to get on board when your example is a book with a list price of $268 (on sale today for $255 at Amazon!).  For my money, the three-pound can of Kirkland Signature coffee for $14 is a much better illustration of the forces of competition.
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