What Are the Rlevant Costs of Online Education?

Michael w Maher
University of California, Davis

Barbara Sommer
University of California, Davis

Curt Accredolo
University of California, Davis

Harry R Matthews
University of California, Davis

Abstract: This paper compares the costs of traditional lecture and online course offerings for a large undergraduate general education course at the University of California, Davis, and elaborates an important distinction between the costs of acquiring resource capacity and the costs of using that resource capacity in measuring the cost-effectiveness of online education. The cost of acquiring resource capacity closely relates to costs in university budgets; administrators use this concept for budgeting and cash flow analyses. However, the literature on the economics of education clearly recommends that cost-effectiveness measures be based on the costs of using resource capacity. Both measures of cost—the cost of acquiring and the cost of using resource capacity—have particular significance for evaluating technological innovations because such innovations involve substantial development costs that benefit repeated course offerings. This paper demonstrates that neither measure of cost, by itself, provides an accurate picture of the cost of technological innovation.

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