Recently, tuition for tertiary education has increased dramatically, when college and graduate-school enrollments are also at all-time highs.  Jay Diamond suggests for a Bloomberg article that recent increases at Harvard and Princeton, et al. justify a classification of higher education as a Giffen good.  

In economics, a Giffen good is something that becomes more desirable as it increases in price, counterintuitively.  Giffen goods are seen as theoretical, and there is little empirical evidence for their existence, although various econometric studies have suggested kerosene, gasoline, prostitutes, rice, wheat noodles, bread, and shouchuu (a variety of Japanese sake distilled from wheat or potatoes) may be Giffen goods.  It is believed in some quarters that potatoes took on properties of Giffen goods during the Irish Potato Famine, but there is only anecdotal evidence to support this.

The main conditions for something to be considered a Giffen good are that there can't be differences in quality to account for price differences, and the good cannot be subject to the forces of conspicuous consumption, whereby people buy more and more expensive things to show off their wealth.  Examples of conspicuous consumption abound, but typically luxury automobiles are cited.  While Mercedes certainly makes a good product, is it worth paying double when a Suzuki (or the bus) is just as capable of bringing me to work?  Do people choose Mercedes over Suzuki simply because it carries more prestige, or because they honestly believe the Suzuki will break down and thereby justify a cost difference of $20,000? 

It's long been debated whether college enrollment suffers from some degree of conspicuous consumption.  If one looks within higher education, at the differences between public and private schools, there seems to be a prestige gap.  This is complicated by the fact that the rankings* are based on prestige (or popularity or starting salary for graduates or number of Fortune 500 CEOs or number of Nobel Prize winners on the faculty - all things largely irrelevant to quality of undergraduate education and incapable of isolation from mitigating factors).  However, if one looks at the real differences between Harvard (#1) and UC Berkeley (#21) affecting undergrads, they are all microscopic except for price: Harvard's tuition is about $37,000; UC Berkeley's is just over $8,000 if you're in-state, meaning that the education a typical undergrad receives from Harvard must be at least 4.63 times better than the education a typical undergrad receives from Berkeley in order to justify a student from California selecting Harvard over Berkeley if admitted to both schools.  (I'm reminded of the bar scene from Good Will Hunting at this point...as well as this list of autodidacts.)

The economy is still very much in full-blown recession, even millionaires are panicking that they can't afford their children's tuition, conspicuous consumption has decreased across the board (and should continue to should the government impose a long-awaited value-added tax), yet college tuition has increased dramatically.  Public colleges raised tuition this year by an average of 6.5%, while private colleges raised tuition by 4.4% according to a College Board survey, this at a time when the consumer price index dropped 2%.   

Community colleges and graduate schools have also seen record enrollments as more and more young people are out of work and out of options.  Conventional wisdom holds that recessions are good times to go back to school, and this suggests an increase in demand for education across the board, thereby resulting in higher tuitions across the board, which means that education is not a Giffen good, but a normal good: with a shift in demand, both price and quantity go up.  The paltry difference between public and private university tuition increases could suggest that branding, i.e. conspicuous consumption, does not play as strong a role as thought across the board, this compounded by the fact that public universities depend on bankrupt state governments for the vast majority, if not all, of their funding.

*All rankings from U.S. News and World Report 2010