Friday, October 19, 2012

How's That Revolution in Higher Education Going?

A couple of weeks ago I blogged about the for-profit higher education company Kaplan and its decision to close 9 campuses. At the time I suggested that maybe some of the rhetoric we've seen about the for-profit, online education sector "fundamentally changing" higher education was a little overblown.

Now comes news that the Granddaddy of Them All, the University of Phoenix, is in trouble as well:
Apollo Group to Lay Off 800 Employees and Close 115 Locations
There are a couple of important lessons here:

• In this election season, with lots of sound-bite rhetoric floating around, it's important to note that the private sector doesn't always do a better job of producing something. In this case, Phoenix has been in this game for a while. If their product were really better and more efficient than the current system of universities they would be growing, not shrinking. Having to close 115 locations sounds a bit like overreach - certainly not the "efficient allocation of capital" we're supposed to get from for-profit institutions.

• When Phoenix first came out, there was a lot of hoopla about how online education was going to bury the "bricks and mortar" model of education - that it would be radically more cost effective. We have since learned that this was pure fantasy. Online education can be just as expensive as in-person education. Phoenix opened its doors in 1976 and went online in 1989. They've had lots of time (and capital) to make this work.

• This looks more and more like a sector-wide problem. You can explain one company's problems as indicative of issues at that company - bad management, poor decisions, etc. But this trend appears to be hitting the whole for-profit industry - Phoenix, Kaplan, Career Education Corp & others. That's a sign that the business model isn't right.

All of this is not to say that online education is necessarily a good or a bad thing, or that it can't be a useful tool for educating. It does suggest that the radical steps that Phoenix and its kin have taken - pressing on-line education, tacking hard to the 'guide on the side, not sage on the stage' model that gets away from instruction by established experts, emphasizing convenience ├╝ber alles - have not played out as well as hoped (or feared) in the marketplace.

On this point, free-market pundits are correct: ultimately, the market (which is really just a way of saying "the behavior of a free public") determines outcomes. In this case, the public is speaking pretty clearly in favor of "old-style" education (how many established universities have closed recently?), even where that education is not motivated by profit and continues to enjoy some (if dwindling) level of public financial support.

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