Misunderstanding & Misrepresenting the “Costs” & “Economics” of Online Learning

The Fordham Institute has just released its report titled “The Costs of Online Learning” in which they argue that it is incrementally cheaper to move from a) brick and mortar schooling to b) blended learning and then c) fully online learning.


Accompanying this report is a blog post titled “Understanding the Economics of Online Learning” from the Quick and the Ed. http://www.quickanded.com/2012/01/understanding-the-economics-of-online-learning.html/comment-page-1#comment-78690

On first glance, both the report itself and especially the blog post from Quick & Ed display basic misunderstandings of the concept of “cost,” a very basic economic concept. I find this to be particularly disturbing in a blog post titled “understanding the economics of online learning.”

“Cost” refers to the cost of providing a service level of specific quality, which in education might be measured in terms of student outcomes. That includes all costs of achieving those outcomes, whether covered by public subsidy, or whether passed along to other participants in the system. A really good guide for understanding “costs” this type of analysis is Hank Levin’s book on Cost Effectiveness Analysis.

By contrast an “expense” is that which is expended toward providing some given level or portion of service. You can spend less and get less. You can spend more and get more. But getting Y quality service will cost you X, and no less than X (where X represents the minimum amount you would need to spend, given the most efficient production technology for achieving Y quality of service).  You can conceivably spend more than X for Y quality of service, but that would be, shall we say, inefficient.

Often to cover the full cost of any particular service, like public schooling for example, several parties incur expenses. It is assumed that the majority of the cost of brick and mortar schooling is covered at government expense. But, we all know that there are also fees for many things in some states (and districts), such as participation fees for sports, personal expense on school lunch, or transportation fees. Assuming attendance is compulsory, transportation fees are necessarily part of the cost of the education system whether covered by parents through fees (a tax by another name) or covered by the local public school district.

The “cost” of brick and mortar schools doesn’t change if we simply decide to cut transportation services while maintaining compulsory attendance laws. Rather, we pass along that expense to someone else – the parents. That expense is still there, and it may have even increased if we add in the cumulative parental expense on transportation (in effect, a tax for school participation).

What’s being compared in the online learning report is not “cost” but expenses on varied levels of service provision.

We might be generous here and set aside the thorniest issue and assume that the measured academic outcomes addressed by each option are the same regardless of model type or student served (likely a huge, unsupported assumption). But the outcomes of brick and mortar schooling include not only the measured academic outcomes, but any and all outcomes derived from the total expenses on brick and mortar schooling (those used in the study), including outcomes of athletic and arts participation, physical education, etc.  If the range of outcomes covered by brick and mortar schooling are broader, that should be taken into account in this type of analysis. That is, if brick and mortar schooling is providing more than just the core academic programs – including sports, clubs, arts, phys ed  – and online services are not – the analysis should either add these costs to the online service costs (what these things would cost if privately supplemented) or should subtract them from the brick and mortar cost. Otherwise this is a rather pointless apples to five course meal comparison (unless we also throw in a utility analysis and assume all of that other stuff to have zero utility… a suspect assumption).

One might argue… so what’s the big deal, the kid goes to school in the kitchen in their house, and the parent is simply in the next room working from home, as opposed to the child being in a brick and mortar school for the day. Well, even that’s not a $0 expense endeavor. To nitpick, it’s likely that the increased monitoring role of the parent in this case would reduce the parent’s work productivity to some extent – an opportunity cost. The opportunity costs become potentially much larger if the parent’s productivity depends more on not being at home, but they can no-longer be away from home. Then there’s the marginal increase to utilities associated with having the child at home and online, and potential increased food expense (a little hard to judge). Additional computer hardware, etc. This kind of “little” stuff adds up across large numbers of kids.

I do not see anywhere in this study (on quick glance) or in the post above, any discussion of the varied amount of expense (portion of cost) that would be passed along to someone else (parents) under each model in order to achieve the same outcomes.  This has to be accounted for in order to have a thoughtful conversation on public policy implications. In other words, the present study does little to advance thoughtful conversation on public policy implications of online and blended learning models. But with some additional work, perhaps it might.

It may not be feasible to construct a full tally of all of the “costs” passed along to someone else under each model, but it’s at least worth listing out what some/many of those things might be and the likely range of costs being passed along.

It may still be reasonable to make the argument that government expense can be reduced, but it’s not necessarily a reduction in the cost of the service, but rather a transfer of responsibility for covering that cost. It may be… though I’m not entirely sure… that the total cost is also reduced. But taking that next step in the analysis also involves evaluating the full costs of inputs and full range of outcomes achieved.

Spending less to get less doesn’t reduce costs. It reduces only expenditures and that distinction is important.



  1. Such a great collection of very valid points. I would raise a few more questions though: To what extent does moving the “cost” of educating our children from the public to individual parents serve to further stratify our society? In addition, what is the “cost” of that stratification. Does that then increase crime (and, therefore costs of prosecuting and/or incarcerating)? Health care costs? Or maybe giving more money to “the job creators” will have a positive effect on society. Who is to say?

  2. Thank you for pushing back on yet another scheme to reduce the public cost (and public benefit) of public education.

  3. I agree with Gabe. 1) Nice job explaining some basic and critical concepts. 2) Millions of families trying to do school at home, HA!, a nightmare.

  4. Disclaimer: I haven’t read the report yet.

    I suspect this report also makes the mistake a lot of reporting on online learning makes, which is to imagine that online learning is a monolith; i.e. it’s students sitting at a computer in their living room taking a course (or all of their courses). How online learning can happen is incredibly varied; it can be a student going to a computer lab during 6th period to work on her online course or it can be the aforementioned student at home. It can be a blended experience, within or between classes. It can be a student taking PE (yes, PE!) online to free up time to squeeze in an extra f-2-f AP class to pad the student’s college application. It can be a purely machine-based course, or there can be a human instructor attached to the course.

    So, ultimately, trying to do the analysis to produce a soundbite like, “online learning can be done at 2/3 the cost…” strikes me as an exercise in futility, and, frankly, quite dangerous.

    1. They do some breakout of alternative delivery models and components of expenditures, which helps somewhat in deconstructing the monolith. In the end they lump it into blended versus fully online.

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