Why My Students Don't Get Rebates
Ian Ayres recently posted about returning to his students the royalties on his book that he assigned to them.
This has caused me trouble: one of my students read it and asked why I don’t do that as well for my little book, Economics Is Everywhere. I have done this before, when I assigned my labor economics text to a class of 35 students, but not in her class.
The reason I don’t now, I told her, is transactions costs. With 550 freshmen, there is no way to determine which students have bought the book or to hand out the money efficiently. Instead, I make a donation to the university about equal to the royalties earned from my class. My guilt is assuaged and my very scarce lecture time is not disrupted. But if the transactions costs (and my class) were smaller, giving the money back to the students would be a Pareto improvement: the students would be better off. (Hat tip: R.W.)