I’ve read a couple of articles lately talking about how information technology is going to totally disrupt the market in higher education (here and here).
Both argue that most traditional 4-year colleges will be decimated by the cheaper education options the internet will make possible (though both seem confident the Ivy League has nothing to fear).
While I believe new technology will have a profound effect on higher education – think about the information already available through online journal searches like Econlit or JSTOR or the Google books project – I don’t buy the argument that 4-year colleges will be rendered obsolete.
I’m also skeptical about how online-only education will capture such a large part of the market. Obviously, there’s a selection bias for the students that attend the University of Phoenix’s, but a 6-year graduation rate below 10% isn’t a positive sign. My intuition is that online education will be most disruptive to schools like community colleges. If people choose to attend a particular community college (or part-time or continuing education program) primarily on the basis of convenience (location), then they have some degree of monopoly power in the local education market. Online education presumably erodes that market power. Location doesn’t seem nearly as relevant for campus-based schools.
It also begs the question, what is it that makes a good university good? Is it just the quality of instruction? If so, there’s good news for future engineers. They may soon be able to get their education free from Stanford. How much do network effects of being around other students and professors contribute to the generation of human capital at campus-based universities? Can those network effects be generated in an online-only environment? How much of the value of a college degree is just signaling vs. the human capital that the student actually accumulated while in school?
Publicly Economic 
Leave a comment