Online education is an inferior good.

28 03 2011

Going to college at the University of Phoenix and its ilk costs three to four times as much as at a typical state university. Shouldn’t it be significantly cheaper?

Think about it: The faculty are all part-time, hence cheaper. The start-up costs of their software were paid years ago. There’s no campus to upkeep. There’s no football team to subsidize. Nevertheless, students at these places pay more for a substantially inferior education. Shouldn’t it be the other way around?

[Come to think of it, why don’t actual campuses with online arms discount tuition for online courses? If they want students to go into these courses that require less overhead, wouldn’t that be the logical way to get them to take them?]

I suspect my answer to the original question depends upon who the target audience is. People who have an option to attend a bricks and mortar campus generally do so. The people who go to these online places do so as a last resort. That’s why the drop-out rates are so high. This makes online education an inferior good in the economic sense. Here’s Wikipedia (which I needed to refresh my mind of the definition of that term):

In consumer theory, an inferior good is a good that decreases in demand when consumer income rises, unlike normal goods, for which the opposite is observed.

That doesn’t mean there aren’t some online courses somewhere that are taught well (perhaps even better than their face-to-face equivalents), but give all but the laziest students a choice between online and face-to-face I’m guessing they’ll take the one with real contact, otherwise they wouldn’t enroll in a real college to begin with.

So why hasn’t the online education industry tried to do to higher education what Walmart did to Mom and Pop or what the Internet has done to daily newspapers?: Discount the product and steal our customers? Is it because the industry is run by greedheads? Maybe.

But perhaps it’s because they know they can’t. To discount their product would be an admission that their education isn’t worth as much as a traditional higher education, which would then send the whole house of cards tumbling down.




6 responses

28 03 2011

I teach an online course that is NOT an inferior good. Yes, there is no overhead insofar as we don’t use a classroom, but the course costs me more time (not less) than a face-to-face course would. Education requires feedback; online courses that do not provide feedback on the student’s work are indeed inferior. But please don’t tar us all with the same brush.

13 08 2013

I don’t think you know what an inferior good is…

28 03 2011
Jonathan Rees


I thought this line covered your objection well:

“That doesn’t mean there aren’t some online courses somewhere that are taught well (perhaps even better than their face-to-face equivalents)…”

Even so, your efforts are numerically overwhelmed by the shoddy ones. I suspect that it is a product of the for-profit nature of their parent institutions rather than being online, but online education as a whole remains an inferior good.

29 03 2011
Dan Allosso

On the other hand, rather than being an inherent deficiency of the medium, this could due to where we’re at in the life cycle of the online education business model. It may be that some of the people who got into it early were looking to cash in on the expense of higher education. It might be that many of them didn’t think far enough outside the box. It might be that the system of accreditation favors a certain type of organization.

The point is, online education is in its infancy. If we’re going to say it doesn’t meet student needs, it doesn’t enforce quality standards, it doesn’t bring the best possible instructors in front of students, I think we have to ask ourselves honestly whether the existing system is doing these things? What other things, besides the potential for profit, does the proliferation of online alternatives tell us?

6 06 2011
Why higher ed is like the Northern Pacific Railroad. « More or Less Bunk

[…] already explained why I think online education is an inferior good in the economic sense. This ties back to what I […]

15 01 2013
Duty now for the future. « More or Less Bunk

[…] the faults of regular old online courses in this space. One of the things I kept wondering is why online courses aren’t cheaper than regular face-to-face courses. Apparently, now they are – in this instance at […]

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

%d bloggers like this: