Using Behavioral Economics to Predict the Future of Education

0 Flares Twitter 0 Facebook 0 0 Flares ×

With all the excitement around MOOCs, such as those offered by Coursera and EdX, and free lessons like Khan Academy and Codeacademy, many people wonder what will happen to traditional universities. Some educators fear that these free online courses may destabilize the education industry. But as with Mark Twain’s famous quote, the reports of the university’s death are greatly exaggerated.

First, consider how poorly MOOCs retain their students. Research shows that MOOCs have dropout rates hovering around 90 percent, and completion rates averaging about 13 percent. Compare these statistics to the national averages: 22 percent of students graduate from for-profit colleges, 55 percent at public institutions, and 65 percent at private nonprofit colleges.

So what does it all mean? The science of behavioral economics offers a few clues. I think a large part of the answer lies in a psychological phenomenon called the IKEA effect. The IKEA effect says that, “When people use their own labor to construct a particular product, they value it more than if they didn’t put any effort into its creation, even if it is done poorly.” In other words, one reason why students don’t complete MOOCs is that they did not have to physically invest as much in the course (dealing with traffic, finding parking, walking to class, engaging in discussions, etc.) and so they perceived the free online courses as having lower value, making it easier to drop out or do less work.

When we look at costs, we can see a similar effect with the theory of loss aversion. Loss aversion “refers to people’s tendency to strongly prefer avoiding losses to acquiring gains.” In this respect, students would be more worried about losing money than about gaining a degree, and the greater the costs of that education, the more likely students would be to continue. If we compare traditional community colleges, state colleges and universities, and private nonprofit colleges, we can see that the greater the costs, the higher the completion rates – 45, 55, and 65 percent, respectively.

So we can make a broad generalization. The more an online course costs, the better completion rates it will have compared to cheaper courses; the more physical effort a student has to put into a course, the higher the completion rate compared to courses that require less physical investment.

This generalization also gives us some ideas on how to improve online schools and courses. If they are free, start charging. If they already cost money, then we must get students to engage physically with their courses, thereby increasing its perceived value.

Just as the emergence of online colleges in the 1990s has not significantly eroded more traditional brick-and-mortar schools, neither does the emergence of free MOOCs threaten traditional institutions. All things being equal, the psychological and behavioral aspects of perceived value tell us that these institutions will continue to be around for a long time to come.

Written by Michael Sherrillo
Michael is a Matriculation Coordinator with Ashford University blog.

Popular Posts

  • Top 7 Reasons Why You Should Pursue Your MBA If you’re a college graduate, returning to school for your Master of Business Administration (MBA) might not appeal to you. After all, you’ve already spent four years on your Bachelor’s degree. Wh. . . November 24, 2014
  • Best Courses to Become More Marketable Most universities are composed of typical colleges such as the College of Health Care Studies, Business, Education, and Liberal Arts. Within these colleges are various majors a student can choose,. . . September 17, 2013
  • 5 Tips for Transferring Credits One of the best ways to accelerate your graduation day is to transfer credits. But many students find the transfer process very long and complicated. It doesn’t have to be so scary. Here are five . . . November 14, 2013
  • Explore Exciting Jobs in Healthcare You love to help people. You are interested in the science of the human body. And you believe in the value of a healthy lifestyle. If these traits describe you, then you ought to consider a career i. . . March 12, 2014
  • Business School Accreditation — What’s the Difference? When searching for a business school, you may notice that some business programs are accredited by different organizations with acronyms like AACSB, IACBE, and ACBSP. It’s easy to get lost in an alpha. . . May 23, 2014
  • 5 Great Education Documentaries The documentary is an underrated genre in the film industry, often described as one for those who are so “crazy” about a topic, they have to make a film about it. However, some of these “crazy” peop. . . July 12, 2013
  • Words of Advice for Graduates One of my favorite times of the year is commencement. I always enjoy seeing students walk across the stage to celebrate their achievement. When students get close to graduation, you can sense their en. . . March 10, 2014
  • The Five Toughest Interview Questions Job interviews are nerve wracking for just about anyone, whether you are a seasoned professional or a recent college graduate. The key to calming those nerves is preparation and practice. Prepare for . . . August 30, 2013
  • Choose a Relevant Degree Business, English, Law – these are perennial subjects for degree programs, and they’ve stood the test of time. When students enroll in these programs, they already have some idea of what they’ll stu. . . February 5, 2014
  • Advanced Degrees: Which Fields Provide the Highest Paying Jobs? Every spring it’s in the news: colleges are raising tuition. Higher tuition means students will be carrying a larger debt into the workforce, which cuts into their income. Choosing the right field o. . . September 9, 2013
Tags: ,

1 Star2 Stars3 Stars4 Stars5 Stars (No Ratings Yet)
Loading ... Loading ...