Last night, President Obama delivered an address to the nation.  He focused on the state of the economy and his administration’s plans for the economic future of our country focusing on energy, healthcare, and education.  I thought I would examine his plans for education as it relates to higher education and compare them to the public policy initiatives and thought pieces that have previously been published.

President Obama’s speech led off with a discussion of the global economy and the fact that “the most valuable skill you can sell is your knowledge.”  One of the first persons to stimulate a national discussion on this topic was author Thomas Friedman with the publication of his book, The World is Flat, in 2005.  Friedman cogently makes the point that technology has opened up the ability for companies to effectively employ engineers from India and China while conducting their business from the U.S.  Friedman also discusses the higher rates of education in countries with former third world status where it is recognized that the ticket to financial success is a good education.

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In 2003, Michael Silverstein and Neil Fiske published the book Trading Up: Why Consumers Want New Luxury Goods…And How Companies Create Them.  As partners at The Boston Consulting Group, Silverstein, Fiske (now the CEO of Eddie Bauer Holdings, Inc.) and others worked to research the consumer purchasing trends in the United States and overseas.  The phenomenon that they identified was the willingness of consumers to pay a premium for certain goods even in times of economic downturns.  Identified as “trading up,” the researchers also identified that consumers often “trade down” in order to afford the items for which they “trade up.”  In fact, they state that the effect of luxury brands in a market segment is to cause that category to polarize where the growth and profits move to the high and low ends of the spectrum while “companies caught in the middle struggle to succeed and survive.”  The authors provide a historical perspective that the trend to trade up has been around for centuries and that economists from Adam Smith to Thorstein Veblen to John Kenneth Galbraith have observed the trend of consumers to buy goods that cost more than what most others can afford to pay.

Silverstein and Fiske believe that the trading up phenomenon is positive and is driven by middle class consumers who are aware of the price/value ratio of what they are purchasing.  Furthermore, they state that so many middle class consumers are able to afford premium goods that the conventional wisdom of “higher price, lower volume” does not follow the trading up phenomenon.  Instead, the middle class consumers have a stronger emotional attachment with their luxury purchases than with other goods.  That emotional attachment is why they choose to ignore the mid-price product.  Silverstein and Fiske believe that the consumers have no desire to purchase a product that offers “neither a price advantage nor a functional or emotional benefit.”

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The College Board has published an annual report on college pricing since 1998.  The report looks at tuition and fees, room and board, and other related costs at colleges in the United States.  It also reviews the net price of college after subtracting financial aid grants to students.  Colleges are categorized as public four-year, public two-year, and private non-profit four year.  Data is also collected for public out of state student pricing and for-profit pricing.  (see http://www.collegeboard.com/html/costs/pricing/) 

The College Board states that all costs of college attendance are important and that often, costs such as room and board and books influence the ability of a student to afford college more so than tuition and fees.  The College Board encourages readers to cite or reproduce the data as long as they are given proper attribution, so I’ll list a few facts that I found interesting in this year’s report.

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