Education ‘Cost Disease’ May Be Eradicated by Online Ed

The productivity problem of higher education as articulated by William Baumol and William Bowen in the 1960s is about to be solved, writes Bruce Guile and David Teece in an article for Forbes Magazine. Baumol and Bowen postulated that it was impossible to make teaching more efficient through the use of technology, and therefore modern advances in it were unlikely to fundamentally change the model of higher education. However, with the arrival of widespread internet access, and the evolution of online learning, that hypothesis is about to be put to the test.

The productivity problem – also known as Baumol’s cost disease – is being challenged as the popularity of massive online open courses prove that education could be delivered on a huge scale at a drastically reduced price tag. According to Teece and Guile, it is only a matter of time before these innovations will have people asking if the high price tag currently being charged for a college degree is a worthwhile investment.

This tremendous jump in professional productivity is the most significant advance in the pedagogic part of higher education in a millennium. And therein lies the great news for countries with less developed higher education sectors than the United States.

Think of MOOCs as modules of knowledge or content packaged together with high-quality pedagogy, student-student interaction, and specialized tools for scalable faculty-student interaction. Students can join a course, which becomes a powerful active learning community, without enrolling in a degree program or paying tuition. They can do so simultaneously in New York City and in farming communities in California’s Central Valley. And, of course, in Mumbai, Munich, Seoul, and Tunis.

Technological growth means that the reach of each individual teacher is about to be greatly expanded. Actually being in proximity to faculty – one of the requirements that keep the residential college model operating – will no longer be required. The experience of a lecture could be replicated not just in the costly buildings and auditoriums, but in one’s own home, in front of a computer equipped with an internet connection, a mic, two speakers and a webcam — meaning that the value added by college campuses will diminish very quickly over time.

The potential savings will not just benefit countries where the higher education system is well developed and robust like the U.S. In countries where higher education is just taking root and student access is a substantial problem, online education would erase the reasons for capital investments in actual university campuses and allow governments to deliver quality education to more people for a fraction of the price.

Both during and after this restructuring in U.S. higher education, universities, governments, and companies in emerging economies will be able to tap low cost, high-quality online education to leapfrog the slow and painstaking process of developing educational capacity to meet critical national needs. They will rebundle modules for their purposes and populations to create certificates and degrees that meet local demand.

03 13, 2013
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