June 25, 2013

Summer Camp Bubble

I read at Moneybox that Summer Camp Cost Growth Will Bankrupt America.   That is  of course a tongue in cheek comment.   However he points out that from 2005 to 2012 the cost of summer camp went from $397 to $690.   Thats about +75% increase or around 8% annual growth.

They commented :

The serious point here, though, is that the sleepaway camp industry has some broad structural similarities to the higher education industry but isn't subject to the kind of subsidies and regulations we associate with education. Nevertheless, among the structural similarities is a similar cost trajectory. And broadly speaking, I'd say the reason is that middle-class people want to spend lots of money on their kids.
 Now I'm not sure that summer camp and college are really all that comparable.   One is a fun luxury diversion for a week or two and the other is a multi year endeavor that can have significant impact on your lifelong career and earnings.   Its almost like saying that tricycles are similar to Toyota Camrys.

However I do think they both have a few things in common.   They are optional.  More or less educational.   You send your kid away there.    And the cost growth rates are similar.    Is the key reason both are going up at the same rate simply that middle class people want to spend lots of money on their kids?    Maybe I'd rephrase it that : people want the best for their kids often regardless of the costs.

I think one of the key reasons that college costs have gone up so much is that the market will bear it.   If nobody would ever pay $40,000 a year for college tuition then colleges couldn't ever charge that much.   This isn't to say that the costs are going up because there are people willing to pay that much.  But there are some things people will pay more for and somethings that people won't pay more for.  


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