The question of what American colleges and universities should spend to educate their students is addressed. Both societal and institutional factors that determine the costs of colleges' educating their students and longitudinal changes in the unit cost of higher education are examined. The following issues are considered: long-term trends in unit cost, faculty and staff compensation as a major element of cost, costs that have been socially imposed as the nation has tried to protect and enhance social welfare, and undermaintenance of assets. In addition to examining the higher education system as a whole, a sample of institutions are also assessed. Cost differences among institutions, institutional affluence and patterns of resource allocation, effect of institutional affluence on educational outcomes, and economies and diseconomies of scale are analyzed. Implications of the study of national trends and of the study of individual institutions are discussed. Appended materials