Some Economics of Online Learning

Who benefits and how much?

From a search of online learning, e-learning, distance education and MOOCs in text, audio and video formats, there is more material on the web than most people will have time to access. And more flows in daily. Journals on this topic include the Journal of Online Learning and Technology, the American Journal of Distance Education, the Canadian Journal of Learning and Technology, and the International Journal of Instructional Technology and Distance Learning, amongst others. Online learning is a rapidly growing field of interest, which can relate to traditional educational systems as well as to those training people for artistic, industrial and other types of activity.

The following looks at some of the costs and benefits of online learning with implications for how traditional university models may change. One aspect to keep in mind in any comparison of distance learning with on campus learning is to understand how they differ. If I watch the Wimbledon tennis championship on television, it is a markedly different experience from attending the championship live, where I can enjoy the matches, mix with the spectators, visit the bars and eat strawberries and cream. Or, if I buy a meal in a restaurant, it is not the same as staying in a hotel with all its facilities including eating in its restaurant. Contrasting these alternatives is a case of apples and oranges, which is also the case for online and on campus courses.

I start by focusing on the three main players of the educational system, the students, the faculty and the university.


Students are required to pay a fee for an online course if they wish to receive a certificate which states that they have completed the lectures, quizzes and written assignments. They may also have to grade the assignments of other students. As an option, a written text may be offered for purchase. Anyone not wishing to fulfill these requirements can access the lectures for no charge, although registration is required. Thus the reports show that several thousand people from around the world are often registered, but only about five to ten percent receive a certificate. Many, like myself, take them for free, out of interest and because of the convenience.

Aside from these direct costs which are low, students can access the material in their own time. They do not have to travel to the lectures or reside away from home or on campus. Convenience and time is acquired for other activities. The main costs for on campus students are fees, residence, if away from home, and foregone income from having full or part-time employment. All three items are reduced or eliminated for online students.

At the same time, some features of the on campus experience are missing, such as the interaction with students and faculty, and the use of athletic and other facilities offered on campus. Interaction with other students does take place online as witnessed by the popularity of social media, and athletic opportunities are often available elsewhere. Direct comparison of online and on campus courses is an apples and oranges situation. They are not the same. Each offers something different from the other.

Another online advantage is that students find it easy to interact at negligible cost with other students taking the same course. They can form discussion groups, create online forums and identify issues which they want to question or dont understand. They feel connected and not isolated. A number of professors emphasise that they have improved their courses by altering the format or material of their inclass as well as their online lectures as a result of listening to and accessing student forums.

Online connection to the internet is not free. It requires owning some form of hardware and paying for wired or wireless access. A printer may also be useful.


The fixed upfront costs of developing the material for delivery online is one of the main costs to the online lecturer. If the person is employed by a university then it is a university salary cost. If the course is delivered by a firm like Coursera, then it is a firm cost negotiated between the teacher and the firm. The Kahn Academy provides instruction online for free for tutoring a student.

These upfront costs can be high but are spread over the number of students taking the course in the current and future years. It is similar to the costs of producing a film where the cost per film are high but the cost per viewer depends on the number of people who watch the production. Since a lecture is a type of video performance, viewers are used to the values incorporated in TV productions. Just putting a camera in a classroom with a teacher is not enough to hold an audience. My admittedly limited viewing has seen cheap unappealing productions from distinguished academics, and those with outstanding production values from lesser known people. Software such as Desire2learn is available to help format lectures.

Duke University Professor Cathy Davison, the instructor of a recent MOOC, which I accessed, writes “We spent an estimated 40 hours a week from May 2013 through January 2014 working on the MOOC — and that’s before the course even begins. The investment in time makes sense for me, since I am passionately interested in innovation in higher education, and (meta again) I wanted to learn about making a MOOC inside and out”. 

The posting from which this quotation is taken is worth reading as one view of the costs and related issues

In Canada, the University of Waterloo is at the forefront of developments. Professor Katherine Acheson in the Department of English has commented as follows:

“The situation with the development of online courses is different now, overall, than it was when the University of Waterloo started its distance education program. Online courses no longer necessarily imitate in-class courses. They are developed using technologies that offer affordances that classrooms can’t. Group work is enabled, potential for content is expanded, contact with the instructor and with other students can be richer. (There are down sides too.) At this point I am not sure that we have enough experience with this model (both the costs and the quality) to come to conclusions. 

But it is apparent that building the infrastructure and cultivating the talent to use the new technology well can be costly. It’s unbelievable to me the amount of admin, space, time, expertise etc. required to produce courses that are really cutting edge. And all online courses are delivered through a Content Management System (we use Desire2Learn) — also used as adjunct to in-class courses. It is expensive and extremely frustrating as it does not always work.”


Costs are incurred in developing the courses, arranging their delivery, both of which involve capital as well as operating costs. It would be interesting to know whether the development costs are treated as capital or operating costs. Athabasca University in Alberta is primarily an online university. Contrasting its financial statements with that of an online university would be one way of making a comparison. While universities publish statements which are available online, comparisons might be difficult, since almost all universities offer some online courses in conjunction with on campus courses, and on campus courses may involve some online features.

A personal note — as far back as 1990, I gave up having regular office hours. Instead I was available by email to interact with students and if desired would arrange an in person meeting at our mutual convenience. It worked more efficiently for both student and teacher, and many issues could be resolved by email. Other faculty did the same. In fact a visit to faculty offices in many departments today finds them unoccupied, as faculty work at home and attend the university mainly for teaching and administrative duties such as committee meetings. Many non-academic businesses no longer offer individual offices but provide shared space which can be used when needed. A university could save on building costs by reducing the number of offices in many faculties. Online teaching should reduce the need for more buildings and may allow existing buildings to be rented out to other users.


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