Costs and Economics of Distance Education (OMDE606)
The expansion of education and the emergence of the economics of education
In module 1 we discussed the expansion of education and the emergence of the economics of education. I particularly enjoyed the debate on whether education is an elixir or a snake oil. The promoter’s point of view was that education is good for the individual and the society. The opposing point of view is that education does live up to individual expectations nor promote economic growth.
"Is education an elixir or a snake oil?"
Prior to this discussion, I had never considered any negative or adverse outcomes of education. I am the only person in my immediate family to receive a college degree, so the pressure was on to achieve academically. In Wolf’s words, “The more educated you are, the more likely you are to be in work, to stay in work, and to enjoy stable, long term employment on a permanent contract” (Wolf, 2002, p. 25). I grew up with the understanding that you must get a college education in order to provide for your family and to be viewed as a success in today’s society. So in that regard, my foundational belief is that education is an elixir (good for the individual and society).
However, after reading Wolf’s article, I realized that there are some factors of education that could be considered overrated. For example, although the educated earn more, some may be just gifted in certain areas that contributed to their better income. As Wolf established, we cannot conclude that if everyone had the same education as the top earners, they would have the same incomes. Personal attributes contribute to a person success. Another aspect of education having an adverse effect on society (a snake oil) is the over-educated workforce. Too many college graduates and not enough jobs will decrease the wages of those jobs. In the meantime, Sallie Mae is reaching its hand out to help students get educated; while at the same time giving others a head start toward a life of debt and possible bad credit. One of my classmates responded that the focus seems to be on subject matter knowledge and metrics, but what is seriously lacking is teaching teachers HOW to teach... how to control a classroom, how to develop a lesson plan, how to deal with children who are not SPED, do not have an IEP, yet are disruptive (yes, trouble makers). This has led to a high attrition rate in the first few years of teaching.
Another classmate made reference to the growing problem of student debt stating that students owed over $1 trillion as of 2013, and the number was growing. Coupled with that were unfair lending practices, private institutions that steered students to expensive programs that were not likely to result in a job or career in the field, and a whole variety of problems (Martindale (2013). Considering all of the view presented in the discussions and my life’s experiences, I’m leaning toward the point of view that it may be beneficial to the economy if curriculum were structured toward employment.
Lastly, I found the concept of Net Return of Education very intriguing. Net Returns to Education is education spending (including what you don’t earn) as an investment. The Net Return to Education can be used in view of whether education is elixir or snake oil. The answer lies in whether the direct expenses and income forgone are worth the money spent on education or whether it is more beneficial to save that amount of money. There are so many factors when considering this concept but the debate opened my eyes to the various points of view I had previously contemplated.
Reference
Wolf, A. (2002). Elixir or snake oil? Cann education really deliver growth? In A. Wolf (Ed.), Does education matter? Myths about education and economic growth (pp. 13- 55). London: Penguin books
Martindale, S. (2013). Degrees of debt: Stories from student loan borrowers highlight urgent need for reform. ConsumersUnion policy and action from consumer reports. Retrieved from http://consumersunion.org/wp-content/uploads/2013/11/Degrees-of-Debt_2013.pdf
Human Capital Theory
Module 1 also covered the Human Capital Theory (HCT) and whether it is suitable to consider humans as capital. Human capital can be seen in the form of knowledge, skills, or values which yield income and other useful outputs (Schultz, 1961).
Over the years, society as a whole has evolved and made some considerable foundational reconsiderations. Namely that all humans should be treated equally and slavery is inhuman. From my perspective, HCT is the foundational principle that should have been acknowledge from the start. It was greed and mere evil that deterred this fundamental principle from being applied to all humans not just “free man”. As such, yes, from a capitalist or employer point of view, human beings can be seen as ‘capital’ having a contributory factor in the economy. As members of society expand their education and invest in their skills and knowledge, humans as "capital" can be seen as rational for investment in the economy.
While reading the article Investment in Human Capital by Schultz, T. W. (1961), I found myself focusing on the discriminatory practices and how slaves and the uneducated did not seem to benefit from their contribution as human an investment. I would have liked to further the conversation by discussing the impact of this disparity on the economy past and present.
History serves many purposes. One important element is to teach the mistakes of the past in an effort to avoid making those same mistakes in our future. Secondly, to serve as a reminder of the accomplishments of our descendants. During my journey through public education, I was never taught the economic impact of the disparity placed on minorities. While reading this article, I couldn’t help but wonder whether the effects of the disparity of health and education for minorities had been hidden due to an agenda developed to justify a system based upon the debasement and economic exploitation of minorities.
I surmise that without the capital raised by the stolen labor of unwilling captives, and capital extracted through inhuman means, we would not have realized the economic growth of which America is so proud. Contrary to Schultz, I believe that this disparity is the most distinctive feature of the economic system.
Reference
Schultz, T. W. (1961). Investment in Human Capital. American Economic Review, 51, 1-17.
Module 2 covered the various techniques of cost analysis as it relates to distance education course development. It was interesting to see how each factor is classified and considered in the scope of the process of developing a course. I particularly enjoyed Assignment 2 which provide a hands-on opportunity to cost a course.
Below are a few terms and topics I explored while learning how to cost model a course.
Modeling Costs
Modeling a course is recommended due to the various uncertainties involved in course development. Modeling costs is conducted by creating a mathematical equations to represent cost behaviors. Modeling the cost behavior requires classifying aggregated costs and placing termed figures in a mathematical equation.
Expenditures
Expenditures for the course can be analyzed into four categories. These factors were termed by Levin (1983) as “ingredients” needed to formulate a budget.
These expenditures can be further categorized:
Classifying Cost Items
Costs are classified to facilitate cost analysis. Cost can be further categorized into direct and indirect costs which will help with the cost modeling process.
Direct Costs includes:
Indirect Costs: include overheads which do not arise directly from a specific course
Direct and Indirect Costs can be further categorized:
Operating Costs consumed within the same financial year in which the costs are incurred
Depreciating Capital Costs
Because capital costs denotes a value consumed over several years, the incurred cost should be charged proportionally to the periods it is consumed. This is done by the following methods:
Total Cost Equation
Total costs = Fixed costs + Variable costs
TC(N) = F+V*N
Average Cost Equation
Average costs per student = Total Costs / Number of students
AC(N) = TC/N
AC(N)= (F + V x N) / N = (F/N) + (V x N) / N
Hence:
AC(N)= F/N + V
"Is education an elixir or a snake oil?"
Prior to this discussion, I had never considered any negative or adverse outcomes of education. I am the only person in my immediate family to receive a college degree, so the pressure was on to achieve academically. In Wolf’s words, “The more educated you are, the more likely you are to be in work, to stay in work, and to enjoy stable, long term employment on a permanent contract” (Wolf, 2002, p. 25). I grew up with the understanding that you must get a college education in order to provide for your family and to be viewed as a success in today’s society. So in that regard, my foundational belief is that education is an elixir (good for the individual and society).
However, after reading Wolf’s article, I realized that there are some factors of education that could be considered overrated. For example, although the educated earn more, some may be just gifted in certain areas that contributed to their better income. As Wolf established, we cannot conclude that if everyone had the same education as the top earners, they would have the same incomes. Personal attributes contribute to a person success. Another aspect of education having an adverse effect on society (a snake oil) is the over-educated workforce. Too many college graduates and not enough jobs will decrease the wages of those jobs. In the meantime, Sallie Mae is reaching its hand out to help students get educated; while at the same time giving others a head start toward a life of debt and possible bad credit. One of my classmates responded that the focus seems to be on subject matter knowledge and metrics, but what is seriously lacking is teaching teachers HOW to teach... how to control a classroom, how to develop a lesson plan, how to deal with children who are not SPED, do not have an IEP, yet are disruptive (yes, trouble makers). This has led to a high attrition rate in the first few years of teaching.
Another classmate made reference to the growing problem of student debt stating that students owed over $1 trillion as of 2013, and the number was growing. Coupled with that were unfair lending practices, private institutions that steered students to expensive programs that were not likely to result in a job or career in the field, and a whole variety of problems (Martindale (2013). Considering all of the view presented in the discussions and my life’s experiences, I’m leaning toward the point of view that it may be beneficial to the economy if curriculum were structured toward employment.
Lastly, I found the concept of Net Return of Education very intriguing. Net Returns to Education is education spending (including what you don’t earn) as an investment. The Net Return to Education can be used in view of whether education is elixir or snake oil. The answer lies in whether the direct expenses and income forgone are worth the money spent on education or whether it is more beneficial to save that amount of money. There are so many factors when considering this concept but the debate opened my eyes to the various points of view I had previously contemplated.
Reference
Wolf, A. (2002). Elixir or snake oil? Cann education really deliver growth? In A. Wolf (Ed.), Does education matter? Myths about education and economic growth (pp. 13- 55). London: Penguin books
Martindale, S. (2013). Degrees of debt: Stories from student loan borrowers highlight urgent need for reform. ConsumersUnion policy and action from consumer reports. Retrieved from http://consumersunion.org/wp-content/uploads/2013/11/Degrees-of-Debt_2013.pdf
Human Capital Theory
Module 1 also covered the Human Capital Theory (HCT) and whether it is suitable to consider humans as capital. Human capital can be seen in the form of knowledge, skills, or values which yield income and other useful outputs (Schultz, 1961).
Over the years, society as a whole has evolved and made some considerable foundational reconsiderations. Namely that all humans should be treated equally and slavery is inhuman. From my perspective, HCT is the foundational principle that should have been acknowledge from the start. It was greed and mere evil that deterred this fundamental principle from being applied to all humans not just “free man”. As such, yes, from a capitalist or employer point of view, human beings can be seen as ‘capital’ having a contributory factor in the economy. As members of society expand their education and invest in their skills and knowledge, humans as "capital" can be seen as rational for investment in the economy.
While reading the article Investment in Human Capital by Schultz, T. W. (1961), I found myself focusing on the discriminatory practices and how slaves and the uneducated did not seem to benefit from their contribution as human an investment. I would have liked to further the conversation by discussing the impact of this disparity on the economy past and present.
History serves many purposes. One important element is to teach the mistakes of the past in an effort to avoid making those same mistakes in our future. Secondly, to serve as a reminder of the accomplishments of our descendants. During my journey through public education, I was never taught the economic impact of the disparity placed on minorities. While reading this article, I couldn’t help but wonder whether the effects of the disparity of health and education for minorities had been hidden due to an agenda developed to justify a system based upon the debasement and economic exploitation of minorities.
I surmise that without the capital raised by the stolen labor of unwilling captives, and capital extracted through inhuman means, we would not have realized the economic growth of which America is so proud. Contrary to Schultz, I believe that this disparity is the most distinctive feature of the economic system.
Reference
Schultz, T. W. (1961). Investment in Human Capital. American Economic Review, 51, 1-17.
Module 2 covered the various techniques of cost analysis as it relates to distance education course development. It was interesting to see how each factor is classified and considered in the scope of the process of developing a course. I particularly enjoyed Assignment 2 which provide a hands-on opportunity to cost a course.
Below are a few terms and topics I explored while learning how to cost model a course.
Modeling Costs
Modeling a course is recommended due to the various uncertainties involved in course development. Modeling costs is conducted by creating a mathematical equations to represent cost behaviors. Modeling the cost behavior requires classifying aggregated costs and placing termed figures in a mathematical equation.
Expenditures
Expenditures for the course can be analyzed into four categories. These factors were termed by Levin (1983) as “ingredients” needed to formulate a budget.
- Human Resources: Cost covered include salary and wages, insurance, taxes, etc.
- Premises and Accommodations (land and buildings):
- Equipment and Furniture: Fixed assets, not a consumable, useful life of more than one year.
- Stocks, Supplies, Consumables and Expenses: Inventory such as raw materials, work in progress, and supplies)
These expenditures can be further categorized:
- Recurrent expense: baseline expenditures
- Non-recurrent expense: short-term project expenditures
Classifying Cost Items
Costs are classified to facilitate cost analysis. Cost can be further categorized into direct and indirect costs which will help with the cost modeling process.
Direct Costs includes:
- Direct costs of course development
- Direct Costs of presentation the course
Indirect Costs: include overheads which do not arise directly from a specific course
Direct and Indirect Costs can be further categorized:
- Fixed
- Variable Costs: costs which vary with number of students
- Capital: a non-recurrent expense with a useful life of several years
- Provide a benefit only during the current accounting period. (i.e salaries, wages, utilities, consumables)
- Operating costs can be recurrent or non-recurrent
Operating Costs consumed within the same financial year in which the costs are incurred
Depreciating Capital Costs
Because capital costs denotes a value consumed over several years, the incurred cost should be charged proportionally to the periods it is consumed. This is done by the following methods:
- Simple depreciation: divide the cost by the number of years the items is to be used.
- ·Social Discount: depreciation plus forgone interest of un-depreciated amount
- ·Annualization: accounts for the forgone interest while producing identical rates over the years the item is used. Using forgone interest results in drastic differentiating rates while the value consumed is basically the same in each year.
Total Cost Equation
Total costs = Fixed costs + Variable costs
TC(N) = F+V*N
Average Cost Equation
Average costs per student = Total Costs / Number of students
AC(N) = TC/N
AC(N)= (F + V x N) / N = (F/N) + (V x N) / N
Hence:
AC(N)= F/N + V
Cost Effectiveness of Distance Education Institutions
In Module 3 we discussed the cost effectiveness of distance education institutions. First we made the distinction between cost efficiency and cost effectiveness. The phase coined by Drucker was very helpful in understanding the distinction. He stated that 'efficiency is about doing things right and effectiveness is about doing the right things' (cf. Mace, 1996).
Efficiency can be defined as doing things right to achieve the optimal relation of inputs and outputs (or outcomes). Professor Hülsmann describes efficiency and effectiveness in terms of a family relationship. There is the family of efficiency concepts; efficiency is always relating input and output (there is cost efficiency, production efficiency, and technical efficiency and so on. It is always relating inputs and outputs. Then there are effectiveness concepts. They are taken at the output side and do not relate to inputs. You can be effective without efficient.
Internal efficiency can be improved in two ways:
· increasing the output with the same set of inputs (technical efficiency);
· reducing the costs of inputs while keeping the output unchanged (economic efficiency, cost- or price-efficiency).
As such, a procedure is efficient if it maximizes the output/input ratio. This can be done through two methods:
· production efficiency: achieving more output for a given input
· economic efficiency (or cost-efficiency): reducing the costs of inputs for a given output; input is measured in monetary terms
As Drucker stated Effectiveness is concerned with doing the right things. Effectiveness will result in achieving the set goals. In the distance education arena, outcome measures should relate to learning gains. This can be specified by indicating whether the goal is achieved, or by specifying a percentage of the achievement. Because we all achieve goals by different means; however, it may not necessarily be the most efficient way.
The question was posed whether one can be effective but inefficient. The follow example was given as part of the discussion:
In distance education, for example, your degree-program might be cost-effective but your students might remain unemployed. This shows that effectiveness depends on the specified goals: a program may be judged as effective by internal standards when students pass their degree and pay their fees; the same program may fail by external standards, e.g. if students are not productively absorbed into the labor market.)
More specifically, cost effectiveness refers to the most efficient way to achieve a set goal. It maximizes the ratio of outcomes/costs of inputs. In the distance education environment, cost per learning gain can be considered as a cost-effectiveness measure.
The use of assessments can be used as a method of cost-efficiency and cost-effectiveness are to measure outputs and outcomes:
· If no educational assessment is involved, we would refer to cost-efficiency, e.g. cost per student would be an efficiency measure.
· If educational assessment is involved, we would refer to cost-effectiveness, e.g. cost per graduate would be an effectiveness measure.
References:
Rumble, G. (1997). The costs and economics of open and distance learning. London: Kogan PagE.
Mace, J. (1978). Mythology in the making: is the Open University really cost-effective? Higher Education, 7(3), 275-308
Efficiency and Cost-Effectiveness Ratios
Typically cost per student is measured by dividing all the total costs of the system by the number of students. However, not every student graduates and high drop-out rates have a negative impact on the cost-effectiveness measures of ODL. The following equations examines them both:
Efficiency Ratio
The efficiency ratio is defined as cost per student in DE divided by cost per student in conventional education. Professor Hülsmann explained that as long as cost per student in DE is smaller, the efficiency of DE is greater than the efficiency of conventional education. When you increase the cost in DE, the ratio increases in the sense that it gets closer to 1 but this means that the relative efficiency of DE is decreasing. 'Increasing' means not always 'getting better'
If efficiency ratio = 1 then both systems are equally efficient
If efficiency ratio >1 then ODL is less efficient
If efficiency ratio <1 then ODL is more efficient.
Cost-Effectiveness Ratios
Cost-effectiveness ratios may measure institutional effectiveness such as the number of graduates, or scores in learning. In the distance education environment, the strategy is to deliver education parameters such as unit costs and success rates.
Now, we can recalculate the efficiency ratio on the based on cost-effectiveness
Cost-effectiveness is an efficiency measure for comparing two systems on the basis of a specific cost-effectiveness measure (in this case cost per graduate). An increasing efficiency ratio means it approaches 1 which is the point when the efficiency advantage is lost. If the efficiency ratio decreases in the transition from the cost per student to the cost per graduate measure, ODL still is more efficient even with the dropout.
Efficiency can be defined as doing things right to achieve the optimal relation of inputs and outputs (or outcomes). Professor Hülsmann describes efficiency and effectiveness in terms of a family relationship. There is the family of efficiency concepts; efficiency is always relating input and output (there is cost efficiency, production efficiency, and technical efficiency and so on. It is always relating inputs and outputs. Then there are effectiveness concepts. They are taken at the output side and do not relate to inputs. You can be effective without efficient.
Internal efficiency can be improved in two ways:
· increasing the output with the same set of inputs (technical efficiency);
· reducing the costs of inputs while keeping the output unchanged (economic efficiency, cost- or price-efficiency).
As such, a procedure is efficient if it maximizes the output/input ratio. This can be done through two methods:
· production efficiency: achieving more output for a given input
· economic efficiency (or cost-efficiency): reducing the costs of inputs for a given output; input is measured in monetary terms
As Drucker stated Effectiveness is concerned with doing the right things. Effectiveness will result in achieving the set goals. In the distance education arena, outcome measures should relate to learning gains. This can be specified by indicating whether the goal is achieved, or by specifying a percentage of the achievement. Because we all achieve goals by different means; however, it may not necessarily be the most efficient way.
The question was posed whether one can be effective but inefficient. The follow example was given as part of the discussion:
In distance education, for example, your degree-program might be cost-effective but your students might remain unemployed. This shows that effectiveness depends on the specified goals: a program may be judged as effective by internal standards when students pass their degree and pay their fees; the same program may fail by external standards, e.g. if students are not productively absorbed into the labor market.)
More specifically, cost effectiveness refers to the most efficient way to achieve a set goal. It maximizes the ratio of outcomes/costs of inputs. In the distance education environment, cost per learning gain can be considered as a cost-effectiveness measure.
The use of assessments can be used as a method of cost-efficiency and cost-effectiveness are to measure outputs and outcomes:
· If no educational assessment is involved, we would refer to cost-efficiency, e.g. cost per student would be an efficiency measure.
· If educational assessment is involved, we would refer to cost-effectiveness, e.g. cost per graduate would be an effectiveness measure.
References:
Rumble, G. (1997). The costs and economics of open and distance learning. London: Kogan PagE.
Mace, J. (1978). Mythology in the making: is the Open University really cost-effective? Higher Education, 7(3), 275-308
Efficiency and Cost-Effectiveness Ratios
Typically cost per student is measured by dividing all the total costs of the system by the number of students. However, not every student graduates and high drop-out rates have a negative impact on the cost-effectiveness measures of ODL. The following equations examines them both:
Efficiency Ratio
The efficiency ratio is defined as cost per student in DE divided by cost per student in conventional education. Professor Hülsmann explained that as long as cost per student in DE is smaller, the efficiency of DE is greater than the efficiency of conventional education. When you increase the cost in DE, the ratio increases in the sense that it gets closer to 1 but this means that the relative efficiency of DE is decreasing. 'Increasing' means not always 'getting better'
If efficiency ratio = 1 then both systems are equally efficient
If efficiency ratio >1 then ODL is less efficient
If efficiency ratio <1 then ODL is more efficient.
Cost-Effectiveness Ratios
Cost-effectiveness ratios may measure institutional effectiveness such as the number of graduates, or scores in learning. In the distance education environment, the strategy is to deliver education parameters such as unit costs and success rates.
Now, we can recalculate the efficiency ratio on the based on cost-effectiveness
Cost-effectiveness is an efficiency measure for comparing two systems on the basis of a specific cost-effectiveness measure (in this case cost per graduate). An increasing efficiency ratio means it approaches 1 which is the point when the efficiency advantage is lost. If the efficiency ratio decreases in the transition from the cost per student to the cost per graduate measure, ODL still is more efficient even with the dropout.
Module 4 & 5 Costing Educational Technologies: Mass Media
This module focuses on the more traditional media (such as radio and television) used to bridge the communications gap in DE. We will begin with classifying media, then move on to the Cost-structure of specific media. One-way traffic in the form of pre-produced course materials sent from the supporting organization and involving students in interaction with texts; this can be described as simulated communicationThis module focuses on the more traditional media (such as radio and television) used to bridge the communications gap in DE. We will begin with classifying media, then move on to the Cost-structure of specific media. With the emerging of digital technologies, media (or educational technology) cost-effectiveness has become a major factor in DE. Classifying media Our module overview provided the following summary of the types of media provided. Interactive Computer Marked Assignments (ICMA) Computer-generated test questions or exercises that can be assessed by the program, using concealed multiple choice questions or alpha-numeric or graphic input that can be interpreted in order to give the student feedback and an appropriate score. - Editing work includes checking the wording of interactive assignments which is a quick and rather straightforward task. Computer-based Tools (Ctools) Commercially available packages such as spreadsheets, statistics packages, computer-aided design tools etc. - Editors are involved in the discussion about computer tools but not directly involved in their production. Computer-based Resources (CRes) Electronic information resources e.g. encyclopaedia, databases, library resources, image banks,etc. structured, indexed and searchable. Computer Assisted Learning (CAL) Computer-based tutorials including Simulation/Modelling packages. - Editors are not generally involved in the production of this type of material except to provide the important role of critical reader/development tester. Multimedia CAL Similar to CAL but with more presentational characteristics of multimedia. - Multimedia products vary considerably in their content and the amount of time required for study (SLH). The complexity of the content is not necessarily related to study time, and the mix of skills required to produce multimedia products varies with their content. Conferencing tutorial (CMC): Simultaneous networked text-only tutorial, with tutor and students connected via data lines to exchange 'discussion' usually only capable of transmitting text, not voice or graphics. Holmberg classified media as 'one-way-traffic media' and 'two-way-traffic media' (Holmberg, 1995, p.2).
I find it interesting to witness so closely the evolution of technology. While Holmberg describes media attributes as one-way traffic (simulated) and two-way traffic (real), Moore & Kearsley predicts that media will play a minor role in affecting learning outcomes." (Moore & Kearsley, 1996, p.65). References: Moore, M., & Kearsley, G. (1996). Distance Education: A Systems View. Belmont: Wadsworth Publishing Company. Holmberg, B. (1995). Theory and Practice of Distance Education. London/New York: Routledge. Hülsmann, T. (2000). The costs of open learning: a handbook (Vol. 2). Oldenburg: bis. Media Equivalence Media equivalence relates to which extent cost-effectiveness comparisons can be reduced to cost-comparisons. Determining the cost of media is illustrated by the ‘cost per hour of student learning’ as the unit of measurement (cost/SLH (medium). The purpose of cost per learning hours is to compare the cost of various media learning tools. During journey through higher education, I always wondered who determined how much time is sufficient for me to successfully complete a course. Although SLH is used by learners for the selection of courses and by facilitators to determine the appropriate amount of reading, as a student myself, I never considered those factors. My only concern was to finish the course successful. However, this course clearly exemplifies the importance of SLH. I could barely keep up with the amount of reading required for this course. Media equivalence is useful in modeling cost for a course. Fixed costs of development of one hour of student learning and aggregate variable cost per student are factors when modeling the cost per student learning hour. Another method endorse by Tony Bates is Yet, another method by Professor Hülsmann's focuses on the fixed costs of developing an hour of learning in a given medium and may be more suitable in cases where the context of application is still uncertain. References: Moore, M., & Kearsley, G. (1996). Distance Education: A Systems View. Belmont: Wadsworth Publishing Company. |
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