Inside Higher Ed, an online blog that features detailed analyses on developments in higher education in the USA (including a number of interesting reads on the developments at the University of Virginia – here and here — and the fundamental questions it prompts on the governance of higher education institutions there and elsewhere and, yes, the introduction of MOOCs has to do with governance), published last week an essay by Carlo Salerno on “The real economics of massive online courses” (since retitled “Bitter Reality of MOOConomics”). Salerno, a director with Xerox Education Services Group, as do others, claims that MOOCs (massive open online courses) are not sustainable.

Calling the Massive Open Online Course movement (instigated by MITx and by Stanford/Coursera) a craze, he makes two points.

First, „The overwhelming majority of college-goers today don’t enroll in higher education to get an education as much as they seek to earn a credential that they can successfully leverage in a labor market. Surely, the former is supposed to beget the latter, but it’s a hurdle that’s easily, and often, leaped.“ In other words, the times where education was a costly signal in terms of effort have gone. The assessment seems to support introduction of MOOCs although it seems far from clear what the value of some such credential could possibly be.

Second, students – by way of well-documented peer effects – are an important input to education: „For individual institutions, obtaining high quality inputs works to optimize the school’s objective function, which is maximizing prestige.“ So, if institutions care for their prestige, „colleges have a strong incentive to protect, or control, the quality of the degrees that they confer because successful graduates directly affect the institution’s prestige and the public’s perceptions about the value of its products.“ Selectivity, in other words, matters. Which essentially guts the promise of MOOCs all by itself.

Or does it?

In the end it is quite possibly all about relative positioning of higher education institutions. With about one third of the institutions being already in dire financial straits and more headed to financial unsustainability – at least in the USA (see here and links therein) — and about the same percentage of institutions financially strained world-wide, we are in the middle of a world-wide race to the bottom which will intensify the pressure to offer online courses, or to at least make them part and parcel of the course offerings.

I doubt MOOCs will really be an option for those institutions who like to think themselves as being at the top of the prestige pyramid, as Stephen King also seems to argue (see here, in particular the last paragraph). That’s because, in the end, even the most clever and accomplished teaching videos cannot compensate for the interactive learning that happens between teacher and student and among students. This form of interaction is the one with by far the most effective and efficient feedback.Which is what ultimately drives high-quality learning.