If you believe that human capital can be developed, Massive Open Online Courses are the future. I imagine the per-unit cost of production is low, much lower than brick and mortar colleges, and the opportunity cost is similarly low, whereas the output is theoretically high.
Colleges can really be thought of in two ways economically, the signaling or the human capital model. I think MOOCs can be beneficial, regardless of which model you buy into. The signaling model essentially is that college acts as a filter. It’s expensive, time-consuming, and reasonably intellectually challenging. As a result, it tends to remove the chaff from the wheat, and makes it so that diligent, conscientious, and smart people are the ones who graduate, who happen to be extremely employable. Things like test-score minimums, GPA requirements, writing assessments, etc. suggest that there’s elements to this being true. After all, college dropouts barely make more money than high school graduates, suggesting that if college is truly human-capital building, you’d likely see a more consistent level of growth throughout.
The other model of which to view college is through human capital building. People take classes and persistently learn things. This translates into employable skills. This is probably most true around things like accounting or computer science. Technical skills already exist before starting work, in large part, because the training has been done in colleges. When people attend more years of school, they tend to get smarter because school makes them smarter.
I think obviously there are elements of both models that ring true in discussions about college education, but I’d like to argue that in both model cases, MOOCs can be welfare enhancing.
The basic idea behind MOOCs is that they reduce the investment necessary to get educated, and provide some degree of proof of having done so. In some disciplines, this translates directly into projects whose merits can be assessed. If I’m trying to assess credibility, and it costs X dollars to pay Mr. University to assess it, and Mr. MOOC is significantly cheaper, and he may be potentially worse at it, there are probably some people who’ll spring for Mr. MOOC’s inexpensive service. The cost of gaining additional information may outweigh the benefit. A second element of why MOOCs can work is they can streamline more BS classes. It’s probably not the case that Latin is making or breaking someone’s college experience, but because it is part of the core, tuition pays the costs of people needing to take the classes, and since it’s nearly impossible to fire union labor, you’re unlikely to see adjustment or market corrections to hire the correct amount of Latin teachers. Universities can supplement MOOCs to minimize the need to hire more, allowing for them to be more streamlined, reducing costs spend to signal success.
The human capital value-add for MOOCs is more obvious. You learn stuff from these classes, and can use that stuff to increase value.
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