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The first piece from the series, Internet Economics”, can be found here: Internet Economics and Online Higher Education. 
The third piece from the series, Internet Economics”, can be found here: The Network Effect and Online Higher Education. 

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The “iron triangle” of cost, quality and access in higher education has seemed, at times, unbreakable. The sector has frequently operated under the assumption that improving one of the three objectives – access, quality or price  – is necessarily at the expense of one or both of the others. Like health care,  costs in higher education rise faster than in other industries where technology can be more easily deployed to increase productivity.

Breaking the iron triangle has become a more pressing issue for higher education’s stakeholders as student debt hits record highs, institutional costs rise faster than inflation, and access to higher education becomes a social and economic imperative for nations struggling with challenges of global competition.

“We can’t allow higher education to be a luxury in this country. It’s an economic imperative that every family in America has to to be able to afford.”

President Barack Obama, February 27, 2012.

In this context, the task of finding smart ways to “scale-up” and improve economies of scale is generating more attention. Historically, institutions of higher education have used a number of tactics to increase scale, including:

  • Large, lower-level courses that enrol hundreds of students at a time. While much maligned, the “lecture” course is very economical;
  • Greater reliance on adjunct/sessional instructors, which allows institutions to adjust supply quickly as demand rises and falls, at a far lower cost that full-time faculty;
  • Mega-universities. While not common in Western nations (save for Open University UK), these institutions, according to an analysis by Sir John Daniel, have a lower per-student cost;
  • By simply creating more universities: many Western nations funded a new crop of all-purpose universities in the mid-twentieth centuries to serve the first of the baby boomers and feed an increasingly post-industrial workforce.
  • Participation in consortia with the hope that sharing resources, rather than going it alone, reduces costs. (My own analysis of online consortia found that this objective often remains elusive.)

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The impact of technology-mediated learning in higher education on costs, quality and access have been, to date, moderate. While the online format has added significant value, particularly through convenience for adult and working learners, it has not led to downward pressure on tuition or significantly increased participation rates. Certainly, online education’s scalability pales in comparison to the new breed of Internet-born companies we hear about so often these days. (Instagram was sold for 1 billion dollars when it had only 13 employees.)  For our purposes here, let’s set aside the terrifying labour implications of this particular example.

The challenge of scale in higher education is not merely technological – it’s organisational and social, as well. While achieving scale is fundamental to most enterprises, it can be deleterious in higher education. Increasing access and reducing price can actually hamper an institution’s value in the marketplace.  Value is based, in part, on maximizing exclusivity: an institution’s reputation typically increases when it admits fewer applicants than competing institutions. When we tell friends that our daughter “got into a good school” we mean, in effect, a school that is relatively difficult to get in to. The recent statements by Peter Thiel about the unique economics of higher ed, who made his fortune through highly scalable Internet-based businesses, are amusing in this context:

“[Higher education admissions is] a crazy tournament. It’s a zero-sum tournament. If you were the president of Harvard or Stanford and you wanted to get a lynch mob of students, alumni, and faculty to come after you, what you should say is something like this: We live in this much larger, more global world. We offer this great education to everybody. So we’re going to double or triple our enrollment over the next 15 to 20 years. And people would all be furious because the value of the degree comes from massive exclusion. And what you’re really running is something like a Studio 54 nightclub that’s got an incredibly long line outside and a very small number of people let inside. It’s branded as positive sum, everybody can learn, but the reality is that it is deeply zero sum.”

Photograph by Samuel Zeller of a train on a snowy train
Photograph by Samuel Zeller

The same claim can be made about price: Increasing tuition levels can increase exclusivity, which in turn, increases perceptions of value. New York University and George Washington University have used this tactic according to Daniel Luzer (see The Prestige Racket).

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The good news is that educational technology has matured to the extent that it can now have a major impact on costs, access, and quality.  It scales. Some of the most promising applications of technology include:

  • Software that generates automated, real-time feedback to students on their performance. This instructional technique frequently increases student retention of the curriculum and ensures that the student doesn’t proceed to the next unit of curriculum with misconceptions about the curriculum;
  • Sharing common instructional content across as many courses and programs as is suitable in order to ensure (a) the lowest possible cost per student and (b) access to the highest possible quality (at a given price);
  • Adaptive, personalised learning that identifies and responds to student differences – an instructional tactic that’s not feasible in most mid to large size courses due to the demands it places on instructional staff;
  • Course authoring applications with instructional intelligence embedded within the software. LMS typically don’t seek to guide instructors/authors toward best (better practices). But new, more sophisticated applications have been developed that make it possible to generate learning activities that are beyond the capacity of what most instructors can achieve independently. (In this respect, educational technology will become more similar to other, time and labour saving technologies, such as desktop accounting software that, for example, directs the user toward adhering to accounting standards and rules, or blogging software like WordPress that makes it possible for content creators with stunted design sensibilities to create beautiful, easy-to-navigate sites.)

Most importantly, each of these applications of technology captures what educators have told us is valuable to students. The technology isn’t dictating the instructional method; rather, it reflects our best thinking and practices while allowing us to scale education, one of our most important and precious resources.

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The first piece from the series, Internet Economics”, can be found here: Internet Economics and Online Higher Education. 
The third piece from the series, Internet Economics”, can be found here: The Network Effect and Online Higher Education. 
Keith Hampson, PhD is the founder of digital / edu / strategy, a research and consulting service that helps colleges, universities and education businesses develop better strategies for maximizing value.