Can online learning be a partial Rx for Higher Education’s Cost Disease?

If you are paying $70K a year to attend college, you’re paying for a lot more than to just sit in a big lecture hall – at least you should be getting a lot more. Now that the Covid-19 pandemic has closed schools around the country, many students are asking if Zoom classes are really worth $70K a year. (Yahoo News, 2020)

One consequence of the pandemic, one which may actually be a positive, is that it’s prompting students, parents, teachers, and government officials to start asking questions about the cost, the rapidly rising cost, of higher education.

Some say that online learning is just the Rx higher education needs to cope with what is sometimes called – The Cost Disease (Bowen, 2012).

To understand the Cost Disease and a related concept – Winner-Take-All-Economics (Frank, 1999), one might consider a case-in-point that’s less complicated than higher education. One case that has been used to explain both The Cost Disease and Winner-Take-All-Economics is the case of The Economics of the Opera.

Really good opera singers are hard to come by, but there are still quite a few. But, nevertheless, most of us can only name a very few great opera singers (e.g. the famous tenor Luciano Pavarotti). Furthermore, most operas have more than one singer, and to really enjoy great opera it helps to have the backing of a full orchestra.

Economists will tell you that live opera with multiple singers and a full orchestra is not going to be cheap. Not only do you have to provide the physical setting, you have to pay the opera singers, the orchestra musicians, the stage hands, the ushers, and so on. Some things may have become less expensive over time, but mostly live opera is very labor intensive. And, these labor costs are not going down if what you pay the laborers at least goes up with inflation.

So, when you compare the cost of attending a live opera performance with that of spending your time on things that have become more highly automated (e.g. watching videos of opera performances on YouTube), you’ll find the cost of the latter has decreased over time, while the cost of going to the opera has steadily increased, relatively speaking.

This is The Cost Disease, and it afflicts all industries that have a hard time, for one reason or another, with automating what ever it is that they are trying to produce, whether it be a physical product (e.g. a hand crafted violin) or a service (e.g. an opera performance).

Now, with products that consist mostly of information, there’s at least one cure for the Cost Disease, and that cure often entails Winner-Take-All-Economics.

Once again, in the case of the opera singer, one technique is to expand the size of the audience, which can be done for live opera by building bigger and bigger performance halls. (In the case of college teaching, we’ve been building bigger and bigger lecture halls.) Another technique for live opera performances is to broadcast the event live over television. Live commercial broadcasts don’t work too well for opera, however, because the tradition of opera pre-dates the idea of placing advertisements in the middle of the performance (maybe during intermission for long operas). But, other more recent performance oriented events do leave room for advertising (e.g. football).

Of course, if you switch to recorded opera, then there are many opportunities for advertising. And, the marginal cost or replaying an opera on YouTube is close to zero. But, as the name implies, the marginal cost of replaying an opera doesn’t count the cost of putting on the opera in the first place.

Also, some costs can go up if some opera singers (or some football players) become famous. On the production side, these are some of the winners in Winner Take All Economics. Importantly, most of the winners of Winner-Take-All-Economics are the opera fans (and football fans) who often don’t have to pay to see the show. If they do pay, then it comes in the form of having to watch an advertisement, in the case of football, or listen to a pledge break (as well as the cost of making a pledge), in the case of opera performances on public television.

There are many parallels here with college education, especially when that education consists of sitting in large lecture halls. One of the jokes we used to tell at Berkeley when I worked there was this: How many rows back do you have to sit in one of our big lecture halls before it becomes distance education?

Of course now, with the Covid-19 pandemic in full swing, the big lecture halls at UC Berkeley are sitting empty, as are the big lecture halls at other schools. Higher education can and is currently trying to make due with Zoom and recorded lectures. But I suspect that they are very eager to go back to business as usual, which could easily include going back to big lecture classes.

One take away here is that we have the means to automate the delivery of recorded lectures. And, as I’ve discussed in other blog posts, we have known of ways to help students organize small, face-to-face discussion groups around recorded lectures. So, my hope is that schools that still rely on large lecture halls for much of undergraduate education (I’m looking at you, Berkeley) will have started to think of ways to replace the large lecture hall as a result of the pandemic

Of course, there are many things associated with small classes and small college learning environments that we want to keep and make affordable.This article talks about some of those things, which we have lost for the time being. Small face-to-face classes with a professor, or perhaps small face-to-face study groups that do not require a professor, are some of the things we will want to restore once the pandemic ends.


Baumol, William

Baumol’s Cost Disease

Baumol’s cost disease (or the Baumol effect) is the rise of salaries in jobs that have experienced no or low increase of labor productivity, in response to rising salaries in other jobs that have experienced higher labor productivity growth. This pattern seemingly goes against the theory in classical economics in which real wage growth is closely tied to labor productivity changes. The phenomenon was described by William J. Baumol and William G. Bowen in the 1960s.[1]

Beshears, Fred

A Well Established Alternative To Large Lectures

The High Tech Small Study Group Saga

FMB note:

The basic idea of The High Tech Small Study Group (aka Tutored Video Instruction or Team Learning) is very simple:

1) Replace live lectures with small study groups of students.

2) Give students in these groups a video of the lecture along with problem sets and study questions.

3) Give students training on how one manages study groups. (BTW: This training is something that many Student Learning Centers alread do. Facilitating the use of student study groups is not a radical idea.

4) Appoint one student to be the study group leader (i.e. “tutor”). Ideally, this student should have had study group leadership training.

John Seely Brown on Tutored Video Instruction

Bowen, William

The ‘Cost Disease’ in Higher Education: Is Technology the Answer?

by William G. Bowen
The Tanner Lectures
Stanford University
October 2012

The Potential for Online Learning: Promises and Pitfalls
by William Bowen
Published on Monday, October 7, 2013

To realize the potential and promise of online learning (and MOOCs), colleges and universities must be aware of the pitfalls while taking full advantage of the wonderful, if problematic, opportunities provided by ingenuity and technological prowess.

Bishop, Katie

We’re embracing tech during lockdown – but can it replace the classroom?

Families are using technology to keep things ‘normal’ during the pandemic but questions remain about what remote learning can teach us

by Katie Bishop

People who never expected – nor ever wanted – to use digital technology to communicate or work now must, and so they are learning how.’ Illustration: Erum Salam/The Guardian

Social distancing measures and the subsequent shift to remote working, socializing and school led to questions about the technology available to us, namely Zoom, which was labelled a “privacy disaster”. Yet amid the challenges of implementing technology into our home lives, families are having to embrace technology to keep things “normal”, and finding increasingly creative ways to stay organized and educated online along the way.

Briton, Derek

Review of:
Higher education in the digital age
William G. Bowen.
Princeton, NJ: Princeton University Press, 2013;
192 pp;
ISBN: 978-0-69115-930-0, cloth $26.95 USD.

Review by Derek Briton

In his Ethics (I.3,) Aristotle notes: “a well-schooled man is one who searches for that degree of precision in each kind of study which the nature of the subject at hand admits.” Accordingly, the opinions of econo­mists and administrators, who typically impose a rationalist calculus on all matters, can be easily dismissed as ill conceived. But in Higher Education in the Digital Age, William G. Bowen, who is both an economist and administrator, offers an argument that is not so readily dispatched. Bowen’s arguments are not only eminently readable, eloquent even, but also carefully constructed and well supported — he provides close to 160 endnotes, a compendium of information related to technology’s penetration of higher education, and his conclusion exudes an aura of benevolent inevitability, such that even those troubled by it will find it difficult to reject — more on that later.

David, Miram

Review of:
Higher Education in the Digital Age by William G. Bowen

6 June 2013

The two lectures, by one of the most internationally renowned economists of education, presented in direct conversational and readable fashion, are about the linked issues of the costs and productivity of higher education – the “cost disease”, as Bowen calls it – and how online education and Moocs can play a key role in making higher education affordable. While Bowen is concerned with the rising costs of higher education, it is in a very specific context – namely, residential undergraduate education for young people straight out of high school in the US, or secondary education in the UK. Interestingly, there has been a massive expansion of higher education over the past several decades, accompanied by transformations in both teaching and technologies, but Bowen and his fellow colloquium participants focus on a relatively narrow range of issues that are not to do with mass higher education, or indeed education for the masses (as Delia Langa Rosado and I dubbed it in 2006). They are not particularly concerned with social diversity or transformations in higher education to make it available to a wider constituency of social, cultural or ethnic groups. What we call widening participation or access to higher education in the UK is not a central concern of this debate; rather it is about how higher education can contribute to the increased productivity of both elite higher education and the subsequent labour markets – both of which, of course, are already being transformed through technological change. Equally interestingly, these lectures, which have been available online since the colloquium, and this subsequent publication, make scant mention of how socially transformative these Moocs can be.

Frank, Robert

Higher Education: The Ultimate Winner Take All Market?
by Robert H. Frank
Published 9/27/1999

Hierarchy in education is nothing new, of course, and it has always been important. But as we are all keenly aware, it has become far more important than in the past. Why this change? The short answer is that the economic reward for elite educational credentials has jumped sharply in recent decades.

Behind this jump lies the spread and intensification of what Philip Cook and I have called ‘winner-take-all markets’. These are markets in which small differences in performance (or even small differences in the credentials used to predict performance) translate into extremely large differences in reward.

Such markets have long been familiar in entertainment and sports. The best soprano may be only marginally better than the second-best, but in a world in which most people listen to music on compact discs, there is little need for the second-best. In such a world, the best soprano may earn a seven-figure annual salary while the second-best struggles to get by. In similar fashion, new technologies allow us to clone the services of the most talented performers in a growing number of occupations, thereby enabling them to serve ever broader and more lucrative markets.”

Robert H. Frank is the Goldwin Smith Professor of Economics at Cornell University. This paper was presented at the Forum for the Future of Higher Education, Aspen, Colorado, September 27, 1999.

Kahlenberg, Richard

Profs in the Cloud
The perils and promise of online learning.
By Richard D. Kahlenberg
May/ June 2013

Higher Education in the Digital Age
by William G. Bowen
Princeton University Press, 200 pp.

William G. Bowen, the former president of Princeton University, is a giant in the field of higher education, having written ground-breaking books in recent decades on affirmative action at selective colleges, class inequality in higher education, the factors that improve college completion, and the role of sports at universities. He has now turned his sights on two of the most important issues facing colleges: the problem of exploding costs and advances in technology as a possible cure.

Higher Education in the Digital Age, a slim and highly readable volume, is built around Bowen’s Tanner Lectures at Stanford University and includes reactions from four astute observers, Stanford President John Hennessy, Harvard education professor Howard Gardner, Columbia humanities scholar Andrew Delbanco, and Daphne Koller, president of the for-profit online education company Coursera. The collection of voices provides a thoughtful and provocative discussion of the emergence of online education, which Hennessy says is hitting colleges and universities with the force of a “tsunami.”

Morrison, Nick

Reopening Schools Is As Much About Economics As It Is About Education
Nick Morrison

Schools are key to strategies to end the coronavirus lockdown – but reopening them is just as much an economic decision as an educational one.

And the debate over when the students should go back to the classroom highlights the often unacknowledged truth that schools are as much about childcare as they are about education.

Strassler, Karen

What We Lose When We Go From the Classroom to Zoom
Like other utopian dreams, the fiction of equality has its value.

By Karen Strassler
Dr. Strassler teaches anthropology at Queens College.

May 4, 2020

When life was normal, my students and I gathered in classrooms.

My favorites are the small intimate ones where we face each other around a seminar table and conversation flows easily. Midsize classes meet in a square room with windows along one side. Around this time of year it becomes unbearably hot in the afternoon, as the spring sunshine streams in. My students slouch drowsily in those uncomfortable chairs with built-in desks, arranged in haphazard rows, while I pace at the front of the room, trying to arouse their interest in some arcane anthropological subject. Sometimes I’m successful. Introductory classes are held in a large lecture hall, and from my vantage point at the bottom of the room, I see rows of students fanned out neatly before me. I recently started wearing prescription glasses so I could distinguish their faces, which were beginning to smudge together as a result of encroaching middle age.

Straub, Richard

Managing in an Age of Winner-Take-All
by Richard Straub
April 07, 2015

Over the last 250 years, waves upon waves of scientific and engineering advances have brought about an accelerating rise in living standards that even the two deadliest wars in history could not reverse. In recent decades, the digital revolution, propelled by Moore’s Law, has delivered the most far-reaching yet of general purpose technologies: digital connectivity, which is transforming the entire economy by augmenting the power of the human brain just as surely as steam, the internal combustion engine, and electricity transformed the world by augmenting human brawn.

But as stunning as humankind’s technical achievements have been, they have been only half the story of progress. The advent of the modern organization and the practice of management constitutes a “social technology” that has been equally transformative.

Watts, Linda

Review of William G. Bowen’s “Higher Education in the Digital Age”
by Linda Watts
November 30, 2013 in Volume 3

HETL Note: We are pleased to present our next installment in the International HETL Review (IHR) book review series. The book review provides a detailed examination of William G. Bowen’s book titled “Higher Education in the Digital Age” and adds a scholarly commentary to complement the author’s ideas. Linda S. Watts highlights the key issues raised by Bowen, most importantly the role of and impact of technology in general and specifically online learning on education and educational systems alike. The review navigates through Bowen’s book, maps the important points and gives additional support to some of them by referring to current developments – leaving it to the reader to enjoy reading the book itself and draw their own conclusions.

Yahoo News

$70k for Zoom classes? Virus crisis leaves US students miffed
by yahoo news

The cost of a university education in the United States has long been eye-watering, with a year costing tens of thousands of dollars.

But as the coronavirus crisis settles in, students — many of whom take out huge loans to finance their degrees — are wondering how to justify spending $70,000 a year on…. Zoom classes.

They feel like they’re getting the raw end of the deal, and are demanding that their colleges be held to account.

“We’re paying for other services that the campus offers that aren’t digitized,” says Dhrumil Shah, who is doing a Master’s degree in public health at George Washington University.

Zvack, Susan

William G. Bowen. Higher Education in the Digital Age. Princeton: Princeton University Press, 2013. ISBN 9780691159300. $26.95.

Susan Zvacek
Fort Hays State University

This slim volume comprises William Bowen’s 2012 Tanner Lectures on Human Values at Stanford University, and includes responses from John Hennessy, President of Stanford; Howard Gardner, a Harvard University psychologist; Andrew Delbanco, Director of American Studies at Columbia University; and Daphne Koller, Stanford professor of computer science and co-founder of Coursera. Bowen presents two lectures, the first addressing “the cost disease” facing higher education, and the second discussing the prognosis that technology, specifically online education, can cure that disease, entering among other debates the efficacy of massive open online courses (MOOCs).

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