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Journal of Education for Business

ISSN: 0883-2323 (Print) 1940-3356 (Online) Journal homepage: http://www.tandfonline.com/loi/vjeb20

Investigation of Higher Education: The Real Costs

and Quality of Online Programs

David E. Smith & Darryl J. Mitry

To cite this article: David E. Smith & Darryl J. Mitry (2008) Investigation of Higher Education: The Real Costs and Quality of Online Programs, Journal of Education for Business, 83:3, 147-152, DOI: 10.3200/JOEB.83.3.147-152

To link to this article: http://dx.doi.org/10.3200/JOEB.83.3.147-152

Published online: 07 Aug 2010.

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nline฀education฀has฀been฀a฀remark- able฀development฀in฀higher฀edu-cation.฀The฀connectivity฀of฀the฀Internet฀ and฀the฀concept฀of฀distance฀education฀is฀ a฀ natural฀ combination.฀ However,฀ noth-ing฀ before฀ has฀ been฀ so฀ controversial฀ and฀ at฀ the฀ same฀ time฀ widespread฀ and฀ quickly฀driven฀by฀rapid฀investment฀and฀ expanding฀ program฀ offerings.฀ Despite฀ lingering฀ controversies฀ regarding฀ qual-ity฀ and฀ costs,฀ the฀ technology฀ is฀ now฀ deeply฀ integrated฀ in฀ higher฀ education,฀ and฀ the฀ basic฀ process฀ of฀ online฀ deliv-ery฀ has฀ already฀ become฀ an฀ ubiquitous฀ feature฀ of฀ most฀ universities฀ (Survey฀ of฀ Higher฀ Education,฀ 2005).฀ Millions฀ of฀ students฀are฀now฀taking฀courses฀via฀dis-tance฀education,฀mostly฀online฀(Carlson,฀ 2004;฀Carnevale,฀2005).

Nevertheless,฀some฀schools’฀adminis-trators฀discovered฀that฀online฀programs฀ were฀more฀costly฀than฀had฀they฀expected,฀ and฀so฀they฀retrenched.฀The฀online฀quest฀ of฀Columbia฀University฀closed฀after฀2.5฀ years,฀whereas฀Caliber,฀the฀online฀part-ner฀ of฀ the฀ Wharton฀ School,฀ filed฀ for฀ bankruptcy.฀ Many฀ major฀ schools฀ such฀ as฀ Temple฀ University฀ and฀ New฀ York฀ University฀ discontinued฀ their฀ online฀ programs฀ (e.g.,฀ Virtual฀ Temple,฀ NYU฀ Online;฀Kyle฀&฀Festervand,฀2005).฀How- ever,฀at฀the฀same฀time,฀several฀nonrank-ing฀universities฀have฀leaped฀ahead฀with฀ rapidly฀ growing฀ enrollments฀ in฀ their฀ escalating฀ and฀ profitable฀ online฀ degree฀ programs.฀ One฀ of฀ the฀ most฀ amazing฀

examples฀is฀the฀for-profit฀Apollo฀Group,฀ which฀ owns฀ several฀ for-profit฀ schools,฀ including฀ the฀ University฀ of฀ Phoenix.฀ The฀ for-profit฀ University฀ of฀ Phoenix฀ is฀ now฀ the฀ largest฀ university฀ in฀Amer-ica,฀ with฀ an฀ enrollment฀ of฀ more฀ than฀ 300,000฀ students.฀ Moreover,฀ this฀ for-profit฀ university฀ is฀ expanding฀ globally:฀ in฀Mexico,฀Canada,฀Puerto฀Rico,฀China,฀ and฀India฀(Survey฀of฀Higher฀Education,฀ 2005).฀ The฀ question฀ is:฀ Why฀ do฀ some฀ institutions฀ find฀ online฀ programs฀ to฀ be฀ less฀ profitable,฀ whereas฀ other฀ institu-tions฀ discover฀ online฀ programs฀ to฀ be฀ highly฀profitable?

An฀analytical฀inquiry฀using฀economic฀ theory฀ and฀ a฀ small฀ set฀ of฀ experimental฀ data฀ can฀ answer฀ the฀ question฀ of฀ cost฀ comparability.฀For฀example,฀the฀Copen-hagen฀ Business฀ School’s฀ experiments฀ (Pettersson฀ &฀ Heede,฀ 2000)฀ provide฀ evidence฀ from฀ which฀ researchers฀ can฀ draw฀ compelling฀ general฀ conclusions.฀ We฀ also฀ present฀ our฀ recent฀ survey฀ of฀ online฀ business฀ degree฀ programs.฀ The฀ survey฀explains฀the฀behavior฀and฀quality฀ of฀ competing฀ institutions.฀The฀ answers฀ become฀ clear฀ as฀ we฀ examine฀ the฀ eco-nomics฀of฀opportunity฀costs,฀economies฀ of฀ scale,฀ quality฀ considerations,฀ and฀ marginal฀costs.฀

Distinguishing฀Characteristics Online฀courses฀are฀essentially฀distance฀ education฀because฀the฀students฀are฀phys-ically฀separated฀from฀each฀other฀and฀the฀

Investigation฀of฀Higher฀Education:฀The฀Real฀

Costs฀and฀Quality฀of฀Online฀Programs

DAVID฀E.฀SMITH DARRYL฀J.฀MITRY NATIONAL฀UNIVERSITY LA฀JOLLA,฀CALIFORNIA฀

O

ABSTRACT.฀In฀this฀article,฀the฀authors฀

describe฀an฀analytical฀inquiry฀into฀the฀cost฀ and฀quality฀issues฀of฀online฀pedagogy฀ in฀university฀education.฀Using฀economic฀ theory,฀pedagogical฀insight,฀survey฀find-ings,฀experiments,฀and฀other฀studies฀that฀ researchers฀have฀reported฀in฀the฀literature,฀ the฀authors฀address฀these฀issues,฀identify฀ answers,฀and฀present฀findings,฀implications,฀ and฀recommendations.฀The฀authors฀con-clude฀that฀educators฀and฀students฀will฀not฀ realize฀the฀true฀potential฀of฀e-learning฀until฀ the฀administrators฀of฀all฀universities฀adhere฀ to฀the฀higher฀academic฀standard฀of฀full-time฀ faculty฀expertise.

Keywords:฀costs,฀online฀courses,฀quality

Copyright฀©฀2008฀Heldref฀Publications

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professor.฀ Distance฀ education฀ degree-granting฀ programs฀ are฀ not฀ a฀ new฀ phe-nomenon฀(Huntley฀&฀Mather,฀1999).฀The฀ disadvantage฀of฀these฀pedagogical฀alter-natives฀relative฀to฀traditional฀classroom-฀ based฀ education฀ has฀ always฀ been฀ that฀ learning฀ associated฀ with฀ self-study฀ lacks฀ any฀ extensive฀ dialogue฀ with฀ the฀ expert฀faculty฀(Perelman,฀1992).฀How- ever,฀the฀interconnectivity฀of฀the฀Inter- net฀does฀provide฀opportunity฀for฀exten-sive฀dialogue,฀whether฀synchronous฀or฀ asynchronous.

During฀ the฀ past฀ few฀ years,฀ many฀ researchers฀ have฀ made฀ great฀ promises฀ about฀ reshaping฀ education฀ through฀ the฀ Internet.฀ Nevertheless,฀ the฀ truth฀ is฀ that฀ many฀ online฀ programs฀ do฀ not฀ use฀ the฀ intrinsic฀ potential฀ for฀ real฀ interactivity฀ (Young,฀ 1998).฀ Essentially,฀ the฀ major฀ missing฀ingredient฀is฀usually฀meaningful฀ dialogue฀ and฀ deliberation฀ with฀ appro-priately฀ credentialed฀ faculty฀ members.฀ Therefore,฀ many฀ online฀ courses฀ are฀ no฀ more฀ than฀ a฀ simple฀ computerization฀ of฀ the฀ correspondence฀ course฀ (Hjortkjær,฀ 1998).฀Although฀the฀use฀of฀virtual฀facili-ties฀such฀as฀chat฀rooms฀and฀downloadable฀ overhead฀ presentations฀ with฀ speak฀ pro-grams฀has฀become฀widespread฀(Carlson,฀฀ 2004;฀Huntley฀&฀Mather,฀1999),฀they฀are฀ still฀inadequate฀substitutes฀for฀high-level฀ cognitive฀ interactivity฀ (Drucker,฀ 2000;฀ Duus฀ &฀ Nielsen,฀ 1999;฀ Pettersson฀ &฀ Heede,฀2000).

Analysis฀of฀a฀European฀Business฀ School

The฀ Copenhagen฀ Business฀ School฀ (CBS)฀in฀Denmark฀took฀an฀early฀leader-ship฀ role฀ in฀ technology-assisted฀ learn- ing฀experiments฀(Smith,฀1995).฀The฀fac-ulty฀ conducted฀ an฀ extensive฀ review฀ of฀ pedagogy฀ before฀ initiating฀ their฀ online฀ experiments฀and฀developing฀their฀online฀ programs.฀ They฀ recognized฀ that฀ the฀ Internet฀provided฀opportunities฀and฀chal-lenges฀to฀the฀traditional฀learning฀format฀฀ (Duus,฀1996).฀CBS฀established฀carefully฀ planned฀ online-learning฀ studies฀ (Duus฀ &฀Nielsen,฀1999).฀In฀the฀present฀article,฀ we฀present฀some฀important฀results฀from฀

profile฀ of฀ the฀ students฀ showed฀ that฀ the฀ online฀students฀were฀homogeneous฀with฀ the฀ general฀ student฀ population.฀ During฀ the฀experiments,฀Duus฀and฀Nielsen฀kept฀ the฀ same฀ curriculum฀ and฀ faculty฀ mem-bers฀ as฀ in฀ traditional฀ courses฀ to฀ ensure฀ consistent฀comparability฀of฀online฀cours-es฀ with฀ on-ground฀ classroom฀ courses.฀ Academic฀ rigor฀ was฀ further฀ scrutinized฀ and฀maintained฀by฀the฀additional฀moni-toring฀of฀a฀CBS฀faculty฀academic฀study฀ board.฀The฀same฀full-time฀faculty฀mem-bers฀ who฀ were฀ responsible฀ for฀ the฀ on-ground฀courses฀developed฀and฀taught฀the฀ online฀courses.

In฀measuring฀and฀comparing฀the฀out-comes฀ of฀ the฀ e-learning฀ and฀ the฀ tradi-tional฀ learning฀ experiences,฀ Duus฀ and฀ Nielsen฀ (1999)฀ based฀ course฀ compari-sons฀ on฀ identical฀ learning฀ goals,฀ con-tent,฀ and฀ curriculum.฀ Table฀ 1฀ shows฀ a฀ comparison฀ of฀ academic฀ outcomes฀ for฀the฀online฀and฀traditional฀on-ground฀ courses.฀ Duus฀ and฀ Nielsen฀ found฀ no฀ significant฀ differences฀ in฀ outcomes฀ between฀ classroom฀ and฀ online฀ learn-ers฀ (p฀ <฀ .05)฀ with฀ this฀ equal-standards฀ pedagogical฀model.

Essentially,฀this฀finding฀is฀the฀same฀as฀ from฀ numerous฀ U.S.฀ university฀ studies฀ (Merisotis฀&฀Phillips,฀1999).฀However,฀ Duus฀ and฀ Nielsen฀ (1999)฀ controlled฀ for฀ variables฀ very฀ carefully฀ and฀ were฀ more฀thorough฀than฀most฀other฀studies.฀ These฀ findings฀ are฀ particularly฀ impor-tant฀because฀the฀meticulous฀attention฀to฀ detail฀in฀the฀CBS฀studies฀left฀little฀room฀ for฀ doubt฀ about฀ the฀ findings.฀Although฀ this฀e-learning฀approach฀is฀not฀an฀exact฀ replication฀of฀the฀dialogue-based฀semi-nars฀in฀the฀traditional฀classroom฀setting,฀ it฀ is฀ a฀ close฀ approximation.฀ By฀ using฀ this฀ equivalent฀ approach,฀ it฀ is฀ possible฀ to฀raise฀the฀quality฀of฀online฀education฀ to฀a฀level฀at฀which฀it฀equals฀the฀standards฀

of฀ seminar-type฀ classroom฀ pedagogy.฀ However,฀this฀is฀possible฀only฀by฀main-taining฀ the฀ intensive฀ faculty-student฀ interaction฀ based฀ on฀ problem-solving฀ and฀applications-oriented฀assignments.฀

Comparative฀Costs

This฀equal-quality-conscious฀approach฀ to฀ online฀ learning,฀ which฀ has฀ identical฀ academic฀ standards฀ and฀ a฀ high฀ level฀ of฀ interactivity,฀ requires฀ a฀ similar฀ invest- ment฀in฀faculty฀time฀and฀support฀in฀com-parison฀ to฀ equal-sized฀ on-ground฀ class-rooms.฀However,฀analysis฀of฀the฀cost฀of฀ operating฀ the฀ program฀ reveals฀ that฀ it฀ is฀ more฀expensive฀in฀comparison฀to฀larger฀ classrooms฀ on-ground,฀ as฀ researchers฀ would฀ expect.฀ This฀ finding฀ agrees฀ with฀ what฀ other฀ academicians฀ believed฀ to฀ be฀ the฀case:฀Equal-quality฀online฀programs฀ will฀ never฀ be฀ as฀ cost฀ effective฀ as฀ large฀ classrooms฀(Navarro,฀1998).฀This฀is฀true฀ because฀the฀per฀capita฀cost฀of฀providing฀ online฀ learning,฀ where฀ class฀ sizes฀ are฀ necessarily฀ limited฀ to฀ a฀ smaller฀ number฀ of฀ students,฀ is฀ substantially฀ higher฀ than฀ providing฀ on-ground฀ classrooms฀ with฀ larger฀ class฀ sizes.฀ For฀ universities,฀ the฀ fixed฀cost฀of฀classrooms฀is฀not฀a฀consider-ation฀in฀the฀comparison฀of฀online฀classes฀ versus฀on-ground฀classes.฀The฀buildings฀ have฀ previously฀ been฀ amortized.฀ What฀ remains฀are฀the฀variable฀costs฀of฀instruc-tion฀ of฀ which฀ the฀ primary฀ expense฀ is฀ faculty฀ compensation.฀ Furthermore,฀ no฀ significant฀ economies฀ of฀ scale฀ exist฀ for฀ online฀programs฀because฀the฀major฀cost฀ is฀not฀infrastructure฀but฀the฀variable฀cost฀ of฀the฀hours฀spent฀by฀faculty฀members.

The฀primary฀factor฀in฀online฀programs฀ is฀ the฀ expert฀ faculty฀ time฀ per฀ student,฀ which฀translates฀into฀faculty฀salaries.฀A฀ previous฀ report฀ of฀ six฀ studies฀ commis-sioned฀ by฀ the฀Alfred฀ P.฀ Sloan฀ Founda-tion฀ found฀ similar฀ empirical฀ findings฀

TABLE฀1.฀Comparison฀of฀Not-For-Profit฀and฀For-Profit฀Schools฀of฀Business฀ Offering฀Online฀Education

Variable฀ Not-for-profit฀schools฀(%)฀ For-profit฀schools฀(%)

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(Carr,฀2001).฀It฀should฀not฀be฀surprising฀ that฀ the฀ single฀ largest฀ cost฀ component฀ for฀ online฀ programs฀ is฀ faculty฀ salaries.฀ Therefore,฀ in฀ the฀ scope฀ of฀ a฀ quality-conscious฀ educational฀ system,฀ expense฀ comparisons฀ will฀ always฀ show฀ that฀ the฀ equal-quality฀ online฀ approach฀ is฀ more฀ expensive฀if฀the฀student-to-faculty฀ratio฀ is฀smaller฀for฀online฀programs฀(all฀other฀ things฀ being฀ equal).฀ A฀ faculty฀ confer-ence฀ at฀ the฀ University฀ of฀ Illinois฀ made฀ similar฀ conclusions฀ (Young,฀ 2000).฀ According฀to฀Young,฀“good฀teaching฀is฀ possible฀online฀only฀by฀lowering฀student-฀ to-instructor฀ ratios฀ and฀ taking฀ other฀ steps฀to฀counteract฀the฀disadvantages฀of฀ teaching฀at฀a฀distance”฀(p.฀A48).

We฀find฀that฀the฀answer฀to฀the฀question฀ of฀comparative฀costs฀between฀on-ground฀ and฀ online฀ delivery฀ is฀ straightforward.฀ With฀equal฀quality฀in฀all฀academic฀stan-dards,฀ including฀ equal฀ quality฀ of฀ fac-ulty฀ credentials,฀ the฀ comparative฀ costs฀ between฀on-ground฀and฀online฀delivery฀ will฀be฀approximately฀the฀same฀between฀ same-size฀enrollments,฀but฀the฀costs฀of฀ small฀classrooms฀will฀be฀higher฀in฀com-parison฀ to฀ those฀ of฀ large฀ classrooms฀ because฀the฀per฀capita฀variable฀costs฀are฀ lower฀in฀large฀classrooms.฀This฀finding฀ is฀ because฀ the฀ largest฀ costs฀ are฀ for฀ the฀ academic฀ expertise—the฀ appropriately฀ credentialed฀ faculty—which฀ must฀ be฀ the฀same฀for฀either฀online฀or฀on-ground฀ programs฀to฀claim฀real฀equivalency,฀but฀ the฀ potential฀ for฀ a฀ quality฀ faculty-to-student฀ ratio฀ is฀ limited฀ by฀ the฀ online฀ environment฀ (Perreault,฀ Waldman,฀ &฀ Zhao,฀ 2002).฀ Therefore,฀ there฀ are฀ no฀ significant฀economies฀of฀scale฀in฀equal-quality฀online฀academic฀programs.

Economies฀ of฀ scale฀ would฀ exist฀ if฀ educators฀could฀somehow฀distribute฀the฀ instructor’s฀ expertise฀ and฀ interactivity฀ over฀a฀much฀larger฀number฀of฀students.฀ However,฀serious฀reflection฀would฀indi-cate฀ that฀ the฀ assumption฀ that฀ one฀ can฀ somehow฀develop฀economies฀by฀record-ing฀ the฀ faculty฀ expertise฀ for฀ mass฀ dis-tribution฀ is฀ illogical.฀ Such฀ an฀ assertion฀ requires฀ that฀ the฀ on-ground฀ classroom฀ could฀ also฀ be฀ recorded฀ and฀ be฀ equiva-lent฀to฀live฀classrooms,฀by฀all฀standards.฀ Would฀ the฀ on-ground฀ student’s฀ contact฀ with฀ faculty฀ be฀ limited฀ to฀ prerecord-ed฀ content?฀ Is฀ prerecorded,฀ text-basprerecord-ed฀ learning฀ equivalent฀ to฀ a฀ live฀ faculty฀ content฀ expert฀ being฀ readily฀ available?฀

The฀ answer฀ is฀ no.฀ If฀ it฀ were฀ otherwise฀ true,฀ then฀ any฀ sort฀ of฀ text-based฀ cor-respondence฀ format฀ would฀ satisfy,฀ and฀ we฀ would฀ be฀ back฀ to฀ the฀ correspon-dence฀experience฀of฀the฀early฀1900s.฀Is฀ an฀ audio฀ track฀ or฀ a฀ recorded฀ videotape฀ equivalent฀to฀communicating฀with฀a฀real฀ live฀ professor?฀ If฀ that฀ were฀ the฀ case,฀ then฀ equivalency฀ could฀ be฀ claimed฀ for฀ solely฀video฀courses฀on฀ground฀as฀well,฀ and฀this฀idea฀has฀proved฀untrue.฀Previ-ous฀pedagogical฀research฀has฀supported฀ the฀possibility฀that฀learning฀and฀student฀ satisfaction฀ are฀ always฀ positively฀ cor-related฀ with฀ the฀ extent฀ and฀ the฀ quality฀ of฀ the฀ dialogue฀ (Bloom,฀ 1956;฀ Specht,฀ 1985).฀The฀major฀input฀responsible฀for฀ the฀ learning฀ output฀ of฀ the฀ educational฀ process฀is฀the฀living฀faculty.฀Indeed,฀fac-in฀ online฀ education฀ (Bocchi,฀ Eastman,฀฀ &฀Swift,฀2004).฀There฀should฀no฀longer฀ be฀controversy฀on฀these฀issues฀of฀equiva-lency฀ or฀ costs.฀ However,฀ the฀ academic฀ community฀ still฀ needs฀ to฀ address฀ some฀ important฀issues.฀

Profits฀at฀the฀Expense฀of฀Quality

Educators฀ can฀ lower฀ costs,฀ but฀ only฀ by฀ lowering฀ the฀ quality฀ of฀ the฀ primary฀ resource,฀ thereby฀ reducing฀ the฀ variable฀ expense.฀ If฀ all฀ teaching฀ faculty฀ mem-bers฀have฀earned฀doctoral฀degrees฀from฀ grams฀ is฀ littered฀ with฀ deceptive฀ prac-tices.฀ For฀ example,฀ one฀ may฀ assume฀ that฀a฀highly฀reputable฀faculty฀member,฀ a฀ recognized฀ expert฀ in฀ his฀ or฀ her฀ field,฀ is฀ capable฀ of฀ designing฀ the฀ initial฀ tex-tual฀online฀course฀content.฀However,฀the฀ issue฀ then฀ becomes฀ a฀ question฀ of฀ who฀ interacts฀ with฀ the฀ students.฀ Does฀ the฀ online฀instructor฀need฀to฀have฀this฀same฀ expertise฀ of฀ academic฀ equivalency?฀ If฀ not,฀ then฀ the฀ institution฀ can฀ hire฀ lower฀ cost฀ labor฀ (e.g.,฀ adjunct฀ instructors,฀ facilitators)฀to฀assist฀in฀the฀online฀cours-

es.฀By฀significantly฀limiting฀the฀involve-ment฀ of฀ the฀ original฀ content฀ expert฀ or฀ equivalently฀ credentialed฀ instructors,฀ the฀ program฀ administrators฀ can฀ easily฀ reduce฀ the฀ cost฀ by฀ hiring฀ less฀ quali-fied฀ facilitators.฀ These฀ facilitators฀ or฀ instructors฀ would฀ rarely฀ be฀ considered฀ for฀full-time฀faculty฀positions฀at฀schools฀ of฀ quality฀ and฀ would฀ certainly฀ not฀ be฀ considered฀ for฀ tenure-track฀ positions.฀ Currently,฀the฀lower฀cost฀of฀delivery฀is฀ accomplished฀by฀hiring฀fewer฀full-time฀ faculty฀members฀with฀terminal฀degrees฀ from฀ ranking฀ universities฀ and฀ replac-ing฀ them฀ with฀ less฀ qualified฀ part-time฀ facilitators฀ with฀ inferior฀ or฀ question-able฀ credentials.฀ Unfortunately,฀ this฀ is฀ happening฀ on฀ a฀ large฀ scale฀ at฀ many฀ schools฀ that฀ are฀ enjoying฀ large฀ profits฀ from฀online฀degree฀programs.

At฀first฀glance,฀the฀situation฀with฀this฀ substitution฀ of฀ less฀ qualified฀ instructors฀ might฀appear฀similar฀to฀the฀situation฀of฀a฀ large฀ lecture-hall฀ classroom,฀ where฀ stu-dents฀ can฀ listen฀ to฀ a฀ faculty฀ member’s฀ lecture,฀ but฀ hold฀ discussions฀ or฀ interact฀ only฀ with฀ doctoral฀ students฀ acting฀ as฀ teaching฀ assistants.฀ However,฀ there฀ are฀ real฀quality฀differences฀between฀the฀on-ground฀ doctoral-student฀ teaching฀ assis-tants฀ and฀ many฀ of฀ the฀ current฀ online฀ facilitators.฀ A฀ facilitator฀ with฀ only฀ a฀ master’s฀ degree฀ is฀ not฀ the฀ same฀ as฀ a฀ better฀trained,฀research-oriented฀doctoral฀ candidate.฀Furthermore,฀in฀the฀traditional฀ classroom฀ environment—regardless฀ of฀ whether฀it฀is฀large฀or฀small—a฀professor฀ the฀ faculty฀ member’s฀ judgment,฀ as฀ the฀ student-professor฀ interaction฀ dictates.฀ Such฀ flexibility฀ and฀ academic฀ freedom฀ for฀ immediate฀ judgment฀ is฀ not฀ possible฀ in฀ a฀ recorded฀ online฀ distance-education฀ format,฀ especially฀ when฀ the฀ instructors฀ are฀not฀authorized฀to฀make฀changes฀and฀ when฀ only฀ the฀ course฀ developers฀ are฀ authorized฀to฀do฀so.฀

Fundamental฀Economic฀ Considerations

For฀existing฀brick-and-mortar฀univer-sities,฀ if฀ the฀ classroom฀ buildings฀ are฀ fully฀ amortized,฀ a฀ similar฀ average฀ cost฀ per฀ student฀ up฀ to฀ the฀ limit฀ imposed฀ by฀

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quality฀considerations฀may฀be฀achieved฀ on฀ the฀ basis฀ of฀ comparisons฀ of฀ small฀ classes฀ of฀ equal฀ sizes.฀ This฀ process฀ requires฀ a฀ straightforward฀ microeco-nomic฀ analysis.฀ However,฀ because฀ we฀ have฀ determined฀ that฀ no฀ economies฀ of฀ scale฀ are฀ possible฀ in฀ online฀ programs,฀ the฀ only฀ advantage฀ of฀ online฀ learn-ing฀ becomes฀ the฀ ability฀ to฀ reach฀ more฀ students฀ in฀ diverse฀ locations฀ and฀ cir-cumstances.฀ Therefore,฀ from฀ a฀ mac-roeconomic฀ standpoint,฀ another฀ set฀ of฀ variables฀ must฀ also฀ receive฀ appropriate฀ attention:฀ the฀ full฀ cost฀ and฀ benefits฀ to฀ society.฀ Researchers฀ have฀ not฀ consid-ered฀the฀full฀cost฀to฀society฀in฀previous฀ analyses.฀ The฀ full฀ cost฀ of฀ educational฀ programs฀ must฀ take฀ into฀ account฀ not฀ only฀the฀cost฀to฀the฀institution,฀but฀also฀ the฀ opportunity฀ costs฀ of฀ the฀ students฀ and฀ those฀ of฀ potential฀ public฀ sponsors฀ (Green฀ &฀ Baer,฀ 2001).฀ For฀ example,฀ economic฀theory฀suggests฀that฀in฀devel-oping฀ countries,฀ such฀ a฀ cost-benefit฀ relation฀ would฀ reveal฀ opportunities฀ for฀ online฀ programs,฀ because฀ the฀ Internet-฀ based฀programs฀can฀reach฀potential฀stu-dents฀ over฀ vast฀ distances฀ and฀ in฀ very฀ remote฀ locations฀ where฀ deployment฀ of฀ conventional฀resources฀(classrooms฀and฀฀ faculty฀accommodation)฀would฀be฀expen- sive.฀Here฀again,฀straightforward฀econom-ic฀theory฀answers฀the฀question฀a฀priori.

Therefore,฀ very฀ small฀ online฀ classes฀ may฀ actually฀ be฀ socially฀ cost฀ effective฀ in฀ certain฀ regional฀ areas,฀ especially฀ in฀ developing฀ countries.฀ For฀ example,฀ the฀ Virtual฀ University฀ of฀ Monterrey,฀ Mex-ico,฀ successfully฀ uses฀ the฀ Internet฀ and฀ telecommunications฀to฀reach฀students฀in฀ diverse฀locations฀(Tecnológico฀de฀Mon-terrey,฀2007).฀Nonetheless,฀although฀the฀ social฀ cost-benefit฀ model฀ supports฀ the฀ use฀of฀online฀programs฀in฀these฀areas,฀it฀ does฀not฀guarantee฀that฀the฀private฀mar-ket฀ oriented฀ for-profit฀ institutions฀ will฀ serve฀them.฀Because,฀in฀this฀case,฀social฀ benefits฀are฀in฀the฀equation,฀such฀justifi-able฀ programs฀ will฀ still฀ require฀ public฀ underwriting฀if฀real฀quality฀equivalence฀ of฀ academics฀ is฀ maintained,฀ all฀ other฀ things฀being฀equal.฀

highly฀ profitable.฀ We฀ surveyed฀ 40฀ online฀ schools฀ with฀ the฀ largest฀ enroll- ments฀and฀found฀that฀the฀schools฀offer-ing฀online฀degree฀programs฀fell฀into฀two฀ distinct฀ categories:฀ not-for-profit฀ and฀ for-profit.฀ Researchers฀ and฀ educators฀ can฀easily฀see฀which฀type฀has฀the฀most฀ decisive฀ quality฀ factors.฀ The฀ data฀ in฀ Table฀1฀show฀the฀percentage฀of฀schools฀ with฀ accreditation฀ from฀ the฀ Associa-tion฀to฀Advance฀Collegiate฀Schools฀of฀ Business฀ International฀ (AACSB),฀ the฀ number฀ of฀ schools฀ with฀ a฀ residency฀ requirement,฀and฀those฀using฀the฀high-est฀level฀of฀technology,฀respectively.

AACSB฀ accreditation฀ requires฀ that฀ full-time฀faculty฀members฀have฀terminal฀ degrees.฀This฀feature฀is฀one฀of฀the฀impor- tant฀factors฀distinguishing฀between฀busi-ness฀ schools.฀ Institutions฀ that฀ operate฀ by฀ hiring฀ mostly฀ part-time฀ instructors฀ and฀ facilitators฀ cannot฀ receive฀AACSB฀ accreditation.฀ It฀ should฀ be฀ noted฀ that฀ none฀ of฀ the฀ for-profit฀ schools฀ were฀ AACSB฀accredited.

A฀ part-time฀ residency฀ requirement,฀ even฀of฀short฀duration,฀is฀also฀an฀indi-cation฀of฀quality฀program฀standards.฀At฀ the฀least,฀with฀some฀sort฀of฀residency,฀ the฀ schools฀ can฀ know฀ that฀ the฀ online฀ student฀is฀most฀probably฀the฀same฀per-son฀ being฀ examined฀ and฀ graded.฀ In฀ all,฀ 23%฀ of฀ not-for-profit฀ schools฀ had฀ residency฀ requirements,฀ but฀ none฀ of฀ the฀ for-profit฀ schools฀ had฀ residency฀ requirements.฀ This฀ is฀ understandable฀ because฀ any฀ amount฀ of฀ residency฀ requirement฀ increases฀ costs.฀ Operat-ing฀ with฀ a฀ higher฀ level฀ of฀ technology฀ may฀ also฀ indicate฀ a฀ commitment฀ to฀ quality฀ standards.฀ A฀ larger฀ percent-age฀ of฀ the฀ not-for-profit฀ schools฀ used฀ the฀ latest฀ technology฀ in฀ comparison฀ to฀ the฀ for-profit฀ schools.฀ Of฀ course,฀ the฀single฀most฀important฀factor฀is฀the฀ either฀ listed฀ their฀ faculty฀ members฀ or฀ explicitly฀ identified฀ the฀ credentials฀ of฀

Conclusions฀and฀ Recommendations

Educators฀ and฀ researchers฀ have฀ answered฀the฀question฀of฀whether฀there฀is฀a฀ difference฀between฀online฀and฀on-ground฀ learning฀ in฀ different฀ ways.฀ If฀ the฀ aca-demic฀credentials฀and฀rigor฀of฀the฀online฀ teaching฀ faculty฀ are฀ lower฀ than฀ those฀ of฀ the฀ on-ground฀ teaching฀ faculty,฀ the฀ levels฀of฀quality฀of฀the฀educational฀expe-riences฀ will฀ differ.฀ Unfortunately,฀ there฀ is฀ no฀ national฀ or฀ international฀ faculty-฀ regulating฀ authority฀ for฀ all฀ institutions฀ and฀ their฀ degrees.฀ Some฀ of฀ the฀ various฀ regional฀accrediting฀organizations฀are฀lax฀ on฀ standards฀ when฀ considering฀ online฀ schools,฀particularly฀with฀respect฀to฀fac-ulty฀ credentials฀ and฀ consequent฀ compa-rable฀remuneration.฀In฀online฀education,฀ many฀of฀the฀accrediting฀bodies฀are฀self-serving฀ groups฀ sponsored฀ by฀ for-profit฀ online฀schools.

Economists฀ know฀ that฀ the฀ market฀ mechanism฀is฀a฀remarkable฀process฀and฀ that฀ given฀ seller฀ competition฀ and฀ buy-er’s฀knowledge,฀it฀will฀ultimately฀result฀ in฀the฀most฀efficient฀outcome.฀However,฀ the฀caveat฀is฀buyer’s฀knowledge.฀If฀the฀ buyer฀ is฀ not฀ fully฀ informed,฀ then฀ the฀ seller฀can฀fool฀the฀buyer฀into฀purchasing฀ an฀inferior฀product฀or฀service.฀Faculties฀ of฀ legitimate฀ institutions฀ everywhere฀ must฀ immediately฀ take฀ command฀ and฀ provide฀ intelligent฀ leadership฀ for฀ the฀ public.฀They฀cannot฀afford฀to฀allow฀the฀ greed฀of฀corporate฀management฀and฀the฀ one-dimensional฀assessment฀movement฀ to฀ depreciate฀ the฀ full฀ value฀ of฀ the฀ aca-demic฀ process.฀ Furthermore,฀ only฀ the฀ full-time฀ faculty฀ can฀ stop฀ avarice฀ dis-guised฀ as฀ better,฀ cost-effective฀ practic-es.฀ If฀ faculties,฀ independently฀ and฀ col-lectively,฀ do฀ not฀ stand฀ against฀ avarice,฀ then฀ultimately฀all฀faculty฀members฀will฀ become฀ interchangeable฀ employees฀ of฀ enterprise.฀ If฀ faculties฀ do฀ not฀ fight฀ to฀ maintain฀ academic-quality฀ standards,฀ then฀ most฀ higher฀ education฀ will฀ con-tinue฀ to฀ suffer฀ significant฀ decline฀ over฀ time.฀Already,฀part-time฀adjunct฀instruc-tors฀ with฀ lower฀ credentials฀ are฀ being฀

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trative฀staffs฀or฀to฀executives฀of฀for-profit฀฀ corporations.฀ Both฀ theory฀ and฀ empiri-cal฀ evidence฀ show฀ that฀ the฀ pecuniary฀ interests฀of฀commercial฀institutions฀and฀ some฀ not-for-profit฀ administrations฀ try฀ to฀disguise฀and฀sell฀an฀inferior฀product฀ in฀a฀mass฀market฀to฀maximize฀apparent฀ competitiveness฀ and฀ net฀ revenues.฀ If฀ such฀organizations฀remain฀unrestrained,฀ it฀ will฀ be฀ to฀ their฀ economic฀ advantage฀ to฀dilute฀the฀value฀of฀the฀faculty฀expert฀ and฀ to฀ increase฀ the฀ class฀ size,฀ under฀ the฀ claim฀ of฀ equivalency.฀ This฀ is฀ tak-ing฀ place฀ because฀ faculties฀ have฀ relin- quished฀their฀rightful฀academic฀author-ity.฀Online฀delivery฀of฀higher฀education฀ is฀here฀to฀stay฀(Carnevale,฀2000,฀2005).฀ It฀is฀a฀useful฀mechanism฀for฀delivering฀ quality฀ higher฀ education,฀ but฀ the฀ acad-emy฀ needs฀ to฀ better฀ inform฀ the฀ public฀ of฀the฀quality฀differences฀in฀online฀pro-grams.฀Furthermore,฀the฀academy฀needs฀ to฀promote฀the฀honest฀recognition฀of฀its฀ credentials.฀ Whenever฀ ฀ fellow฀ faculty฀ members฀create฀new฀pedagogies฀whose฀ uses฀ of฀ capital-intensive฀ resources฀ appear฀to฀have฀a฀bigger฀market฀potential,฀ all฀faculty฀members฀must฀ensure฀that฀the฀ creation฀ is฀ not฀ used฀ to฀ depreciate฀ the฀ scholarly฀ process฀ and฀ inhibit฀ academic฀ value.฀The฀banner฀of฀academic฀freedom฀ remains฀fragile฀and฀can฀be฀guarded฀only฀ by฀scholars฀themselves.

Some฀ corporations฀ operating฀ for-฀ profit฀firms,฀under฀the฀guise฀of฀universi-ties,฀are฀currently฀causing฀havoc฀among฀ the฀poorly฀informed฀public.฀Most฀of฀these฀ companies฀ have฀ online฀ degree฀ courses฀ that฀ are฀ taught฀ exclusively฀ by฀ adjunct฀ part-time฀ instructors฀ who฀ frequently฀ have฀ not฀ earned฀ terminal฀ degrees฀ from฀ reputable,฀highly฀accredited฀universities฀ in฀ the฀ fields฀ they฀ teach.฀ The฀ latest฀ ter-minology฀used฀by฀the฀for-profit฀schools฀ refers฀to฀the฀teaching฀faculty฀as฀ facilita-tors฀ or฀instructors.฀ Consequently,฀ with฀ few฀ exceptions,฀ most฀ of฀ these฀ facilita-tors฀ come฀ from฀ a฀ pool฀ of฀ underem-ployed฀ quasi-academics฀ or฀ moonlight-ing฀ corporate฀ employees.฀ Accordingly,฀ they฀are฀paid฀for฀piecework฀at฀a฀low฀rate฀ of฀compensation.฀The฀usual฀claim฀made฀ by฀ the฀ for-profit฀ purveyors฀ of฀ online฀ degrees฀ is฀ that฀ their฀ courses฀ are฀ bet-ter฀ because฀ they฀ are฀ taught฀ by฀ practic-ing฀professionals฀who฀work฀full-time฀in฀ the฀ field฀ they฀ teach.฀ The฀ sales฀ promo-tion฀strategy฀used฀by฀these฀firms฀is฀that฀

the฀ students฀ are฀ more฀ likely฀ to฀ acquire฀ the฀ latest฀ knowledge฀ and฀ skills฀ from฀ people฀ directly฀ employed฀ in฀ corporate฀ positions.฀ Unfortunately,฀ this฀ specious฀ argument฀has฀been฀allowed฀to฀continue฀ unabated.฀It฀is฀championed฀on฀the฀Web฀ sites฀and฀in฀the฀marketing฀brochures฀of฀ these฀ institutions.฀ This฀ bogus฀ claim฀ is฀ at฀the฀root฀of฀a฀multibillion฀dollar฀scam฀ and฀has฀succeeded฀in฀selling฀to฀millions฀ of฀ customers฀ and฀ thereby฀ flooding฀ the฀ workforce฀ with฀ questionable฀ degrees.฀ Such฀degrees฀certify฀adulterated฀knowl-edge฀ at฀ best.฀ This฀ has฀ been฀ the฀ real฀ social฀cost฀of฀online฀education฀over฀the฀ past฀10฀years.฀Students฀graduating฀from฀ these฀colleges฀believe฀that฀they฀received฀ a฀good฀education฀because฀they฀enjoyed฀ the฀ experience฀ and฀ learned฀ something.฀ These฀ former฀ students฀ do฀ not฀ realize฀ that฀ they฀ could฀ have฀ learned฀ more฀ if฀ they฀ had฀ been฀ exposed฀ to฀ higher฀ aca-demic฀ standards฀ and฀ full-time฀ faculty฀ with฀real฀credentials฀and฀qualifications.

Most฀legitimate฀institutions฀with฀truly฀ equal-quality฀online฀programs฀have฀not฀ proclaimed฀ their฀ academic฀ superiority฀ and฀have฀not฀distanced฀themselves฀from฀ general฀ online฀ vendors.฀ Even฀ a฀ casual฀ review฀ of฀ current฀ marketing฀ materials฀ of฀legitimate฀academic฀institutions฀illus-trates฀ how฀ not-for-profit฀ universities฀ have฀tried฀to฀compete฀with฀the฀for-profit฀ schools฀by฀using฀much฀of฀the฀same฀word-ing.฀ Unfortunately,฀ this฀ often฀ includes฀ such฀ pronouncements฀ as฀ that฀ their฀ instructors฀ are฀ better฀ qualified฀ because฀ they฀ come฀ from฀ real-world฀ working฀ environments,฀ potentially฀ leading฀ to฀ the฀ misinterpretation฀ that฀ their฀ instruc-tors฀ are฀ part-time฀ academics฀ ฀ working฀ for฀lower฀compensation฀than฀those฀who฀ have฀ earned฀ legitimate฀ credentials.฀ To฀ successfully฀respond฀to฀the฀competition,฀ legitimate฀ universities฀ need฀ to฀ inform฀ potential฀ consumers฀ of฀ the฀ deceptive฀ practices฀ and฀ misleading฀ claims฀ of฀ their฀ competitors฀ and฀ thereby฀ appro-priately฀ distinguish฀ the฀ equal-quality฀฀ product฀in฀the฀competitive฀marketplace.฀ The฀genuine฀institutions฀of฀higher฀edu-cation฀ have฀ not฀ publicly฀ denounced฀ the฀ purveyors฀ of฀ watered-down฀ online฀ degrees฀ by฀ clearly฀ stating฀ the฀ coun-terargument฀ of฀ higher฀ academic฀ stan-dards.฀ Indeed,฀ a฀ few฀ of฀ the฀ otherwise฀ reputable฀ universities฀ have฀ unwittingly฀ abandoned฀ their฀ standards฀ for฀ online฀

programs,฀ whose฀ standards฀ of฀ quality฀ are฀ not฀ the฀ same฀ as฀ those฀ for฀ their฀ on-ground฀programs.฀This฀circumstance฀is฀ evident฀when฀courses฀are฀taught฀by฀less฀ qualified฀ instructors.฀ For฀ true฀ equiva-lency฀to฀exist,฀the฀individuals฀hired฀for฀ teaching฀ online฀ courses฀ must฀ have฀ the฀ same฀expertise฀and฀academic฀legitimacy฀ as฀ the฀ on-ground฀ full-time฀ faculty,฀ and฀ anything฀ less฀ is฀ a฀ deceptive฀ means฀ to฀ lower฀cost฀to฀increase฀net฀revenue.

The฀ e-learning฀ approach฀ has฀ devel-oped฀ as฀ a฀ powerful฀ alternative฀ for฀ fac-ulty฀ to฀ lead฀ academic฀ studies,฀ but฀ its฀ true฀potential฀may฀not฀be฀realized฀until฀ the฀administrators฀of฀all฀universities฀are฀ forced฀to฀require฀their฀online฀faculty฀to฀ meet฀the฀academic฀standards฀of฀the฀full-time฀faculty฀(Carnevale,฀2001).฀Perhaps฀ in฀ the฀ future,฀ computer-based฀ artificial฀ intelligence฀ will฀ become฀ a฀ reality฀ that฀ will฀ surpass฀ great฀ minds.฀ Until฀ then— regardless฀ of฀ whether฀ it฀ is฀ asynchro-nous฀ or฀ synchronous—online฀ distance฀ education฀ will฀ require฀ professors฀ with฀ legitimate฀credentials.฀In฀the฀meantime,฀ the฀ uninformed฀ public฀ is฀ purchasing฀ millions฀ of฀ inferior฀ educational฀ experi-ences฀ from฀ purveyors฀ of฀ degrees฀ that฀ are฀based฀solely฀on฀the฀Internet.฀These฀ vendors฀ are฀ artificially฀ lowering฀ costs,฀ thereby฀substantially฀increasing฀profits,฀ by฀using฀low-paid฀online฀instructors฀or฀ facilitators฀ to฀ dialogue฀ with฀ students,฀ instead฀ of฀ having฀ tenured฀ and฀ creden-tialed฀faculty.

Faculty฀ members฀ may฀ ask฀ three฀ questions:฀

1.฀How฀ do฀ faculty฀ members฀ identify฀ degree฀programs฀ that฀are฀cost฀ effective฀ when฀offered฀online?฀The฀answer฀comes฀ to฀ their฀ university’s฀ top฀ management฀ and฀stop฀the฀process฀of฀watering฀down฀ standards฀ in฀ online฀ programs?฀ Faculty฀ members฀must฀refuse฀to฀assign฀courses฀ to฀ instructors฀ who฀ have฀ substandard฀ credentials.฀ Full-time฀ faculty฀ members฀ must฀ refuse฀ to฀ allow฀ exploitative฀ part-time฀pay฀scales.฀For฀a฀course฀of฀action,฀

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bers฀demand฀that฀the฀issue฀be฀addressed฀ within฀ their฀ faculty฀ senate฀ and฀ other฀ collective฀faculty฀bodies฀of฀authority.฀

3.฀How฀ can฀ a฀ quality,฀ not-for-profit฀ university฀ compete฀ against฀ a฀ for-profit฀ university฀ that฀ operates฀ with฀ low-cost,฀ substandard,฀part-time฀instructors?฀Again,฀ we฀suggest฀that฀the฀faculty฀members฀take฀ the฀lead฀by฀informing฀the฀administration฀ about฀the฀opportunity฀for฀valuable฀counter-฀ marketing฀campaigns.฀Students฀enroll฀in฀ university฀programs฀to฀earn฀degrees฀that฀ will฀have฀currency฀in฀the฀marketplace.฀If฀ the฀ public฀ is฀ given฀ the฀ real฀ information฀ regarding฀ price฀ and฀ quality,฀ they฀ will฀ make฀ appropriately฀ rational฀ decisions.฀ Likewise,฀ the฀ managements฀ of฀ employ-ing฀ organizations฀ do฀ not฀ wish฀ to฀ hire฀ people฀ who฀ have฀ obtained฀ substandard฀ educations฀ and฀ meaningless฀ diplomas.฀ Therefore,฀the฀best฀way฀for฀quality-con- scious฀universities฀to฀compete฀is฀to฀iden-tify฀ the฀ credentials฀ of฀ all฀ their฀ online฀ professors฀ and฀ clearly฀ distinguish฀ their฀ authentic฀standards฀of฀quality.฀Over฀time,฀ this฀ method฀ will฀ result฀ in฀ significantly฀ increasing฀online฀enrollments฀in฀quality-฀ conscious฀ universities฀ and฀ decreasing฀ enrollments฀ in฀ the฀ programs฀ of฀ exploit-ative฀profiteers.

The฀technology฀of฀online฀learning฀has฀ matured.฀Online฀higher฀education฀can฀be฀ offered฀in฀the฀form฀of฀an฀equal-quality฀฀ and฀ equal-standard฀ learning฀ experi-ence฀and฀can฀be฀an฀economically฀viable฀ option฀ for฀ many฀ colleges฀ and฀ universi-ties.฀ However,฀ the฀ genuine฀ academic฀ institutions฀must฀distinguish฀their฀prod-uct฀from฀that฀of฀the฀profiteers฀by฀candid฀ marketing฀ that฀ counters฀ the฀ profiteers’฀ deceptive฀marketing.฀By฀using฀the฀strat- egy฀of฀differentiation,฀the฀genuine฀aca-demic฀institutions฀can฀not฀only฀maintain฀

their฀ rigorous฀ academic฀ standards฀ but฀ also฀ successfully฀ market฀ their฀ product฀ in฀ a฀ globally฀ competitive฀ environment.฀ However,฀the฀current฀direction฀is฀toward฀ depreciation฀ of฀ faculty฀ and฀ lower฀ aca-demic฀ standards.฀ If฀ faculty฀ members฀ everywhere฀do฀not฀assert฀their฀claim฀to฀ the฀ real฀ quality฀ standards฀ and฀ simulta-neously฀show฀their฀administrations฀how฀ to฀ properly฀ compete฀ and฀ prosper,฀ the฀ public฀and฀the฀scholars฀will฀both฀lose.฀

NOTES

Dr.฀David฀E.฀Smith ’s฀research฀interest฀is฀inter-national฀marketing.

Dr.฀Darryl฀J.฀Mitry ’s฀research฀interest฀is฀inter-national฀economic฀development.

Correspondence฀ concerning฀ this฀ article฀ should฀ be฀ addressed฀ to฀ Dr.฀ David฀ E.฀ Smith,฀ National฀ University,฀ 3390฀ Harbor฀ Blvd,฀ Costa฀ Mesa,฀ CA฀ 92626.

E-mail:฀dsmith8@nu.edu฀

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