What I have gleaned from an historical perspective is that as economies change (agricultural, industrial, informational) – so too do labor requirements and economic theory in that at the onset of the transition from the industrial (post WW II) to knowledge-based society, economic theory changed its perspective to understand how human capital is another economic measure.
As knowledge and skills became the tools by which people do their work means that education as both a commodity and qualification has also changed. So previously one might be able to get one degree and have one job or a few jobs in one industry over the span of a person’s career. Today, however, there is much more mobility within the workforce – and a need for individuals to pursue lifelong learning as a way to remain competitive in the workforce. An individual could see it from the perspective of workplace “Darwinism” as a means to compete and survive.
The screening theory is intriguing in this respect as Huelsmann points out how education became a means of not qualifying people for positions - but rather was used as a way to screen workers.
The models of externalities and education in a web of relationships were useful. I had been wondering about how women not being in the workforce impacted HCT, which the World Bank's diagram helps show, suggesting that although investment in HCT may be linear, the output may not be because they are influenced by such "externalities."
What has been stressed is that the human capital theory remains a static notion in how investing in human capital (education & skill development), leads to more productivity and economic growth. But as Wolf points out - will continual growth always be measured by education?
Magnet Economy
Brown & Lauder's (2006) article about the magnet economy relates the human capital theory to social justice and social cohesion. Some of the key highlights:
On p. 26 they describe the "evolutionary model" from physical (body) to mental (brain) labor, and stress that it is no longer capital ownership which generates wealth, but application of knowledge. They too see a type of workforce Darwinism occuring (positional competition p. 41).
The shift means that the new raw material is knowledge and not cheap labor, and that symbols are more valued than raw materials. This shift removed global barriers where military/blood wars became knowledge wars. Huelsmann pointed out the example of Sputnik and what it meant economically, but more importantly, militarily. There seems to be a theme developing between the knowledge society, military and new technologies
From this perspective, the military plays a huge role in driving the knowledge society and required skill level. We are seeing how when military return from duty or retire - they are being recruited by colleges and universities to either teach or get another degree - so the civilian workplace can benefit from their skill level.
At some point, knowledge work will become standardized.
Interesting to note that emotional intelligence (Goleman) will play more of a role between workforce competition of behavioral competetence versus creative intellect. Therefore, intellectual capital will remain a major driver of human capital and economic and social development. Question is to see - on what level.
DE & Human Capital
The link between human capital theory and distance education is that DE became a vital educational provider for many developed/developing nations which required its workforce to transform from "physical" producers to "brain" producers. In doing our mock group assignment, it was interesting to read and use Perraton's "Golden Goose or Ugly Duckling Article" and then the OECD database to graph the data. First of all - it's amazing to see how much data is actually lacking; and so to find consistency in countries with data was a difficult task. It was also interesting to read how global crisis (OPEC, food shortages) impacted the ability for education to grow in the 1970s (thereby inversely keeping literacy rates lower in some regions of the world). Also how open universities funded by federal governments outside the US were considered important in developing DE and not leaving it to privatization, thereby giving it a legitimacy (Perraton, p. 8). And this was all based on the economies of scale, which for many years, has been a successful business model. It seems, however, as new technologies are developed, how efficient will DE remain? This seems to becoming one of the underlying themes of this course.
Huelsmann emphasizes in 2/4/10 conference notes that it is not only individual abilty and access, but also policies in terms of "mobilizing cognitive resources" and "equal opportunities". It seems like there is a shift happening in terms of the concept of "mass labor" to accessibility to "equal" opportunity.
The Economics of DE
It's hard to critique the formulas of distance education, especially when the logic - well, makes sense and has a proven track record. The one thing I did think about when reading Rumble's book is that working for a state agency requires one to use "their" model and so I was wondering how this would be done to ensure that the appropriate methods used by Rumble and Huelsmann were being used. This is important for budget officers, etc. to understand the different cost models for DE. I know our University is thinking about offering more DE to keep some of the overhead and capital costs down - but it makes me wonder - would they cost it appropriately?
It would be interesting to use a case study, such as UMUC, as a way to understand how they develop its budget and submit it to USM, the Chancellor and State Legislature for approval.
Perraton's cube to discuss average cost formula is helpful in understanding the relationship between widening access, improving quality while reducing average cost per student through volume, media sophistication and interactivity. The main point learned here is that DE's strategic advantage is that it has lower variable costs per student. So far, it seems that variable costs are often the result of producing supplementary course materials via text (study guides), audio (cassettes) and other "tactile" objects created and mailed to students. In other words, tangible materials which they cannot access in an online format.
Also - important to note that while lowering costs per students is offset by expanding the system - which then raises costs. So - is there a point when DE "peaks" in terms of cost effectiveness? Rumble suggests this may be the case - will ask for clarification in conference.
Approaches to Costs
So far we have binary costs - fixed and variable. There can also be semi-variable costs, which have a certain threshold. Therefore, you can increase volume without raising costs, but once you reach the threshold (class size) and need to add another class, then these costs increase. Marginal costs are the costs of adding one more student into the equation (affecting variable cost per student).
Depreciation versus annualization. It's easy to understand the concepts and how to apply them. But it has not been well explained as to what variable or indicator you are looking at in terms of comparing the two. I've had to do some more research on this and ask my colleagues questions about this. Ironically, in theory it's easy to understand, but in application it's confusing!
There has also been some inconsistency with numbers provided, which also makes the learning curve a little bit more challenging. This can be frustrasting and annoying when the information provided you is not correct. But I suppose - this happens when actually costing possible projects - so another lesson learned!
Concept of classifying costs is not new - but the way it was described is quite helpful in making the determination where fixed costs are buildings (capital), time of managing director (operating); while variable costs are materials (capital) and tutoring (operating). The buildings and materials are about capturing costs and number, while the staff costs are about cost and time.
The difference between modeling and ingredients approach is useful, particularly as it relates back to Keegan's definition of DE and the 5 elements. Rumble's four-system process flow model helps visualize the various elements of creating and maintaining DE courses.
What's interesting when reading all this practical application of costing is wondering how much "trial and error" had to occur before accurate costing models captured the true cost-effectiveness of DE. It also makes me wonder how to cost for Web 2.0 technologies within these models.
Good versus Bad Lives
Rumble's (2007) paper on Social Justice introducing Honderich's (2002) theory on individuals having a good life emphasizes society's role in enabling its citizens to not experience "bad lives." This definitely has many socialistic overtones because in the US the basic interpretation of the HCT is that one has equal opportunity to success in life, and if you do not succeed, then it is the individual's fault and not society's. Amazing to see this type of debate playing out in the UK where they are trying to link tax structure to DE and privatization. Rumble emphasizes the role of social morality and it is indeed this type of "moral" thinking which leads some policy makers to believe that "omitting to do something good is less blameworthy than doing something wrong" (p. 173). It becomes a question of which is the lesser evil - "commission or omission" (p. 173).
This reminds me of the current economic crisis - why is our federal government giving the money directly back to the banks (responsible for this disaster) rather than the people (masses of laborers)? Where is the social justice in that? Also, education in this article is discussed in the tone of "education for all" - but what role does quality play in this debate? I think this goes back to privatization and how it leads to various levels of quality.
In all, I agree with Rumble's premise that societies have a moral obligation to educate its people. It's amazing to see how some societies are able to do that quite well, and while others, with no fault of their own, are not able to because of geography, political system, and even "acts of God" such as earthquakes, drought and food shortage. I suppose when you're thinking about human survival, education may be the last thing on your mind. This is all the more reason for distance education to pursue its mission of "education for all."
It was refreshing, however, for an economist to discuss distance education from a moral standpoint and not simply based on numbers and money.
Hidden Costs
My colleague posted a question today regarding hidden costs and how to relate it back to institutional budgeting, which is something I had been thinking about as it relates to our university. The answer: program budgetary cost versus program system cost. Based on Huelsmann's answer it seems like there are a few other variables to consider: costs to the student, hidden system costs because there is no charge (yet there functionality continues with lights, heating, etc.) as well as sharing resources. Also, there is a difference between an economic approach, which is what we have been learning, versus a budgetary method.
So then - how do you convince decision makers to incorporate an economic approach into the institutional budgetary model? But Huelsmann points our in his response to Christine that there is also a political element to "selling" a DE program to policy makers. If they know the true costs - then such programs may never be approved. Therefore, it comes down to efficiency and effectiveness (quality) which helps explains Huelsmann's reason for continuing to use Rumble's book (which was another question I had since it's an old, but obviously, applicable resource).
It seems like that in terms of the economics of distance education, there are long-standing economic theories which have stood the test of time. I wonder if they will continue to do so (and probably will since they are economic-based).
As a way to better understand this, I focused my capstone research on mobile learning, which you can read more about in the Capstone Reflection section.