Schooling as a positional good

I started browsing another article about the perpetually rising cost of college (Internet Explorer crashed and I do not remember which newspaper published it), and I started thinking about different causes.  Of course the topic is incredibly complex, but I can think of two possible proximate causes.

First, the phenomenon of tuition rates rising signficantly above the rate of inflation is relatively recent, and by recent, I mean happening during the previous three decades.  Perhaps it is just coincidence, but the rise in the price of higher education roughly coincides with the rise of neoliberalism as a ruling ideology, our financial oligarchy, and the stagnation of the middle class.  This could be just correlation, but I think we need to reconsider everything of the previous 30 years in order to separate the fundamental progresses from ideological noice.

Second – and I think this is more convincing – is that a university education is a positional good.  This means that a bachelor’s degree is a limited good with luxury status, so the supply of it grows at a much slower rate than its demand.  Universities can therefore extract rents because it is very difficult to expand the supply of quality bachelor degrees.  Therefore, universities can charge higher and higher rates for the same product because income and population grow much faster than the quantity of quality bachelor degrees.  This same phenomenon explains why urban density is not uniform, prices for cultural events and most sporting events increase at a great rate, and the existence of premium luxury goods such as Prada, Gucci, Louis Vuitton, etc.

It is possible that this second explanation only applies to prestigious schools such as the US News and World Report‘s top 50 undergrad programs.  It would be nice to see the rise in tuition costs broken down for each school, by selectivity, or by US News‘ ranking to get a better idea of the robustness of my second proposition.