Tuesday, February 17, 2009

Prof. Mankiw Proves the Point

From his website:
Gross makes another, unrelated mistake. He suggests that, as a Harvard professor, I am an example of a person with a particularly stable income. (That is why, he intimates, I fail to appreciate the consumption decisions facing real people who face substantial uncertainty.) It is true that my university salary is reasonably secure, but more of my income comes from book royalties than salary, and that income is anything but stable. Any day now, someone could come along with a better textbook and put me out of business.

On this last point, of course, I am speaking hypothetically.
Perhaps Prof. Mankiw has something to fear from the open textbook effort described by Timothy Burke. (Although the wikibooks macroeconomics discussion page has not been updated since 2005.)
But maybe his textbook is more like the one Kevin Drum describes:
I only have one of my college textbooks still in my possession, but I just got it off the shelf to see if it had a price in it. It did: $17.25. That was in 1976, and adjusted for inflation it comes to $64 in today's dollars. So what does it currently cost on Amazon? Answer: $132. It is, as near as I can tell, the exact same book. Same binding, same number of pages, same charming lack of color. In fact, browsing through it, it looks as if it's being printed from the same plates as it was in 1976.

This, then, is obviously a book that ought to be cheaper today than it was three decades ago. The costs of production have long since been paid back, there's a ton of competition from the used book market since the book hasn't changed in 30 years, and I imagine that author royalties are the same as ever. For reference, a similar size commercial hardback would run about $40 these days.

Bottom line: I don't believe Prof. Mankiw's textbook sales are nearly as volatile as say: the income of a small dairy farmer, or even the average crop farmer, or a restaurant owner, or a construction worker, or a waitperson, or... Mankiw, like me, has a good income (mine not quite as good as his) from a nonprofit institution plus somewhat more changeable income from investments (his time, my savings) which puts us in another category than employees of profit-making enterprises now facing losses. Somehow it assuages the guilt if we pretend to be insecure.

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