Should we legislate prices?

I can't say that I'm all that politically active, but occasionally a bill comes along that grabs my interest. This week I heard about a bill that has already passed the Tennessee House and will be voted on soon in the Senate. This bill requires state colleges to develop policies to lower the cost of college textbooks. This bill appears to have good intentions, but I believe it has dangerous implications for our state and perhaps our country.

First let me say that I completely sympathize with students and I agree that textbooks add a substantial burden to the cost of education. I also don't blame those who introduced the bill. They're responding to their constituents. The problem I have with this bill is that it sends the wrong message to our students (and future leaders). This bill suggests that high prices should be dealt with by the government.

If I were an economist, I would argue that lower textbook prices will ultimately lead to fewer incentives for textbook authors and publishers to create quality products. As a professor, I can choose cheaper textbooks now. But you typically get what you pay for.

If I taught personal finance, I might suggest that this problem deals more with student budgeting than with textbooks. I'm not sure if it's still true, but in the late 1990s, a study by the Harvard School of Public Health found that the average college student spent more on alcohol than on textbooks and all other drinks combined.

I know there are a few students who don't buy alcohol, but I'd bet most of my students have cell phone bills that easily surpass their annual textbook budgets. I just got my first cell phone a month ago. And don't get me started about the cars students drive. The difference between a $10,000 car and a $5,000 car will pay for all of your books for your entire collegiate career.

I suppose it's also worth pointing out that, unlike cars, beer, and cell phone use, many textbooks have value that far surpasses their cost. I choose textbooks that I think will help students create value for their organizations after they graduate.

But there's a much bigger point to be made here. The high cost of textbooks is not a new problem and not a problem unique to Tennessee students. I faced the same problem 20 years ago. But instead of asking the government to fix the problem, students at my university came up with an entrepreneurial solution. One of our student organizations began a student book exchange where students could sell books to each other. If eBay had been around, I think I could have paid my entire tuition by buying and selling textbooks.

That's not the only possible solution, but I think this problem offers a tremendous opportunity for students to be creative, innovative, and entrepreneurial. So the question is this: When faced with similar problems, do we want our future leaders to seek government intervention? Or do we want them to see these problems as opportunities for value creation?

I mentioned earlier that this seemingly harmless bill may have national implications. The rest of the world is becoming more entrepreneurial. If we're becoming less so, what will happen to the American economy?

But as long as we're asking our legislators to help lower prices, I wonder if they can do anything about the prices at Outback?