This is the fifth in a series on the economics of higher education. The first four posts in this series can be found here:

Higher Education and Covid-19
Why Emergency Cost Cutting in Higher Ed is So Damaging
Should Colleges Merge?

Why Colleges Will Not be Replaced by Online Education

As I wrote a few months ago, the product we offer in higher education is a bundle of related goods, even if we focus on the classes and degrees. Is it possible (or prudent) to separate the different items in the bundle, and sell them separately? While many have suggested that online programs are inferior because online teaching is just not the same as in-person, the more important question is this one: Can we separate coursework from the rest of the university functions?

I am thinking about this after reading a short article by Michael Munger and listening to a podcast interview with him on EconTalk. Munger suggests that, even if we could outsource the classroom to the videos and homework offered by most textbook companies, there would still be four other functions that remain at a university. Munger points to four other products that we are selling. Broadly, those are:

  1. Coordinated academic work (The clocktower)
  2. Sports & Tribalism (The stadium)
  3. Social Connections (The student union)
  4. A signal of worth/accomplishment (The admissions office and registrar)

His main point is that, even apart from the essential classroom experience, colleges and universities do much more, and that these things work well together:

“At their best—and the institutions that survive will have to have a best-level experience—the experience of college students is multiplicative and synergistic: a college is not the sum of the four buildings, but their product. An online degree, an online dating service, a professional sports team in your city, and a proficiency certificate from Microsoft are not a la carte alternatives to a college degree.”

Michael Munger, “After the Virus, Universities will Survive.”

When I have approached this topic before, I have noted that the online classroom experience is inferior. I still believe that, but it does look like we will move toward a more mixed equilibrium. So why can’t we have a college without all of these functions? The bundling is not necessary, but there are really big gains from serving all of these functions.  Note that every one of these functions reinforces the other. The reputation of the school, moreover, increases the value of each of these bundled elements. What that means is that an entrepreneur who wants to find a way to “disrupt” higher education would find herself fighting to overcome her inability to serve some of these valuable functions that her competitors serve as a matter of course.

I think this is the core insight that makes me optimistic about the survival of a place like Hope College, but no as optimistic about higher education overall. Even if the higher education apocalypse all comes to pass, and all students end up doing a substantial amount of their course-learning in some kind of digitally-mediated way, the residential college still makes a lot of sense. Russ Roberts, in the podcast, makes a similar point, in saying that colleges act like “finishing schools.” We train young people to be independent adults, and a lot of risk-averse parents are willing to pay money for a place that does that well.

So what kind of school survives the coming digital competition? It has to be schools that:

  1. Offer a particular, safe, community as a main selling point.
  2. Emphasize mentoring faculty-student experiences.
  3. Can offer very high-quality teaching, but also integrate their best online competitors.
  4. Offers real experiential technical skills in those fields that require them.

The Ivy League schools will always be able to do all of this, but what about a second or third-tier comprehensive college, or a community college with limited community? It is going to be a hard sell. Same thing for that third-tier state institution in a rural setting.

I am also optimistic that as long as there is a demand for Christian colleges, you will have some explicitly religious institutions surviving when the economics just don’t make a lot of sense. There is a strong enough distrust of the wider higher education landscape among conservative evangelicals and Catholics, that I expect some of those flagship institutions, like Wheaton or Ave Maria, to last better than their more generic counterparts with a less loyal base of support.

These are just predictions. I am sure there is a possible future in which the innovations make all tuition-funded residential colleges obsolete, but I am betting (with my career) that in the long run, Hope College exists right alongside Coursera.

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