Value-based pricing: right Idea, wrong measure

[Phil Davis <pmd8@cornell.edu>]

I was never a fan of comparing the price of academic journals to 
an index that included breakfast cereal, apartment rent, and 
women's dresses [1].  I'm even less inclined to believe that the 
Producer Price Index used by the University of California 
Libraries is any better a comparative measure.

> From the Bureau of Labor Statistics web page, "The category for 
consumer goods other than foods and energy includes durables such 
as passenger cars and household furniture and nondurables such as 
apparel and prescription drugs." [2]

A journal is highly dependent upon people doing the production 
work.  While a new machine can punch out 5 times as many wiggets 
per hour than in 1980, the output per knowledge worker is more or 
less static.  This is why cost savings are hard to find in higher 
education, which by the way, are increasing by about 3-4% per 
year [3], and evoke much more concern from the public than the 
price of a scientific journal.

This is not to defend those publishers who charge prices that are 
not commensurate with the value they provide to libraries and 
their communities [4].  Analyses like the kind proposed by the 
University of California Libraries are desperately needed.  My 
chief concern is how one systematically calculates something as 
aloof as "value" and what index one uses to compare price 
inflation.  The CPI and PPI for consumer goods, I believe, are 
both inadequate for such comparisons.

--Phil Davis


Notes:

[1] What goods and services does the CPI cover?
http://www.bls.gov/cpi/cpifaq.htm#Question_7

[2] Chapter 14. Producer Prices. http://www.bls.gov/opub/hom/homch14_b.htm

[3] Higher Education Price Index.
http://www.umass.edu/oapa/publications/factbooks/05-06/finances/FB_fi_03_bot_2005.pdf

[4] Journal Cost-Effectiveness Tables and Graphs
http://www.people.cornell.edu/pages/pmd8/prices.pdf