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Stop Misusing Higher Education-Specific Price Indices

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Title: Stop Misusing Higher Education-Specific Price Indices
Language: English
Authors: Gillen, Andrew, Robe, Jonathan, Center for College Affordability and Productivity (CCAP)
Source: Center for College Affordability and Productivity (NJ1). 2011.
Availability: Center for College Affordability and Productivity. 1055 Thomas Jefferson Street NW Suite L 26, Washington, DC 20007. Tel: 202-621-0536; e-mail: ccap@theccap.org; Web site: http://centerforcollegeaffordability.org
Peer Reviewed: N
Physical Description: PDF
Page Count: 21
Publication Date: 2011
Document Type: Reports - Evaluative
Education Level: Higher Education
Postsecondary Education
Descriptors: Higher Education, Educational Finance, Cost Indexes, Tuition, Budgeting, Bias
Abstract: In order to compare the price of things over time, it is necessary to use a price index to adjust for inflation. The Higher Education Price Index (HEPI) and the Higher Education Cost Adjustment (HECA) were designed to more accurately account for the spending patterns of colleges and universities. However, there are some methodological problems with HEPI and HECA. Both suffer from inherent biases regarding quality, productivity, and substitution causing them, in practice, to overstate the rate of inflation. In addition, HEPI is self-referential. In spite of these problems, HEPI and HECA mirror university spending patterns more closely than other price indices and as such are quite useful for certain purposes, such as internal budget planning. However, as industry specific price indices, they are of very limited use. While HEPI and HECA can be appropriately used for budget forecasting, internal university documents relating to future budgets are rarely publically available. This means that virtually every instance of the use of the HEPI and HECA in the public domain is inappropriate. Those who use HEPI or HECA should be aware of the problems highlighted in this report, namely that HEPI and HECA likely suffer from quality, productivity, and substitution bias, and that HEPI is self-referential. More importantly, however, organizations and institutions need to ensure that they are using the appropriate price index for the issue they are examining. For most purposes (including indexing college tuition for inflation), the use of HEPI or HECA is simply inappropriate. Table 3, "Index Values for Various Price Indices (1961-2010)" is appended. (Contains 2 figures, 3 tables, and 36 footnotes.)
Abstractor: ERIC
Number of References: 19
Entry Date: 2012
Accession Number: ED536149
Database: ERIC
FullText Text:
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  Data: Stop Misusing Higher Education-Specific Price Indices
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  Data: Center for College Affordability and Productivity. 1055 Thomas Jefferson Street NW Suite L 26, Washington, DC 20007. Tel: 202-621-0536; e-mail: ccap@theccap.org; Web site: http://centerforcollegeaffordability.org
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  Data: In order to compare the price of things over time, it is necessary to use a price index to adjust for inflation. The Higher Education Price Index (HEPI) and the Higher Education Cost Adjustment (HECA) were designed to more accurately account for the spending patterns of colleges and universities. However, there are some methodological problems with HEPI and HECA. Both suffer from inherent biases regarding quality, productivity, and substitution causing them, in practice, to overstate the rate of inflation. In addition, HEPI is self-referential. In spite of these problems, HEPI and HECA mirror university spending patterns more closely than other price indices and as such are quite useful for certain purposes, such as internal budget planning. However, as industry specific price indices, they are of very limited use. While HEPI and HECA can be appropriately used for budget forecasting, internal university documents relating to future budgets are rarely publically available. This means that virtually every instance of the use of the HEPI and HECA in the public domain is inappropriate. Those who use HEPI or HECA should be aware of the problems highlighted in this report, namely that HEPI and HECA likely suffer from quality, productivity, and substitution bias, and that HEPI is self-referential. More importantly, however, organizations and institutions need to ensure that they are using the appropriate price index for the issue they are examining. For most purposes (including indexing college tuition for inflation), the use of HEPI or HECA is simply inappropriate. Table 3, "Index Values for Various Price Indices (1961-2010)" is appended. (Contains 2 figures, 3 tables, and 36 footnotes.)
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      – SubjectFull: Budgeting
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