The Making of Mankiw's Millions

In 1994, Harvard professor Greg Mankiw stunned the textbook publishing world by scoring a $1.4 million advance to write his Principles of Economics textbook. The textbook, now in its fifth edition, is now available for sale through Amazon.com at prices ranging from $114.98 (used) to $123.85 (new) to $158.73 (new from Amazon), the latter price representing a 25% discount from the book's hefty $210.95 list price.

We wondered just how many textbooks would it take, at today's Amazon sale price, for Mankiw to make the same amount of money today.

The key to this puzzle was provided by the National Association of College Stores, which provided the crucial information that textbook authors receive, on average, 11.7 cents of every dollar college students spend on textbooks.

Let's say that this percentage is exactly what Mankiw sees from each sale of his "Number 1 best-selling economics textbook". At a price of $158.73, that would mean that Mankiw personally pockets $18.57 for each textbook sold. [Note to students: It's unlikely that you could get a discount on the text by sending this portion of the money for the textbook directly to Mankiw. Or a better grade....]

Now for the big numbers! To justify an advance of $1.4 million dollars with today's prices, that would mean that college students would need to purchase over 75,390 new copies of the text over the publishing life of each edition. For the sake of comparison, in 1998, sales of 50,000 would represent the typical point of breaking even for textbook publishers under normal circumstances.

There's no question then that sales of Mankiw's Principles of Economics then are much higher than these figures, otherwise the publisher would not consider creating new editions. Consequently, while the total sales volume exceeds this figure, look for Mankiw to continue churning out slightly modified new editions of his text.

Which in turn explains the title of James Yu's post at IvyGate: Prof. Releases New Textbook, Poor Students Cower in Fear!