An Economic Model for Evaluating Costs and Benefits for Distance Education Programs

An Economic Model for Evaluating Costs and Benefits for Distance Education Programs

Jared Bucker
Copyright: © 2009 |Pages: 5
DOI: 10.4018/978-1-60566-198-8.ch105
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Distance education has to compete for scarce resources within an educational institution. Not only does a distance education program compete against more traditional forms of education; but, it also competes among countless options in the distance education field. In order to efficiently allocate these resources an educational institution must have an economic model with which to evaluate its distance education programs. This model must be able to assess all the costs and benefits of each program and investigate and identify factors which may yield empirical characteristics of financially successful programs, while conversely, avoiding any possible pitfalls. The development, analysis, and results of this proposed economic model could be used post hoc while modifying and proposing budgetary revisions. It is also hoped that this model can be used to continuously address fiscal solvency, while maintaining services and profitability.
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Least Cost Planning Model For Evaluating Distance Education

There is a model that does fit these requirements. It is called the least cost planning (LCP) model. It has been used extensively by the California Public Utility Commission in evaluating demand side management (DSM) programs for electric and gas utilities (TecMarket Works, 2004). This model uses standardized tests based on the perspective of those impacted by a DSM program (Mills, 2001). These tests are: the public purpose test, the participant test, the utility test, and the rate-payer test (CPUC, 2001a). Each program has costs and benefits; however, vary depending on the test and its perspective. The tests also use a Net Present Value (NPV) calculation which takes a discounted stream of cash flows to arrive at a value (CPUC, 2001b).

We can customize this model to compare all types of distance education (DE) programs, such as programs that subsidized broadband Internet access at home or programs that use special software. The model can also compare other types of educational programs to DE programs such as programs using satellite campuses or ones that are a combination of distance education and on-campus learning.

Key Terms in this Chapter

Demand Side Management (DSM): The planning, implementation, and monitoring of utility activities designed to encourage consumers to modify patterns of electricity usage, including the timing and level of electricity demand.

Full Time Equivalent Student: A standardized measure in which an educational institution measures how many students there are if all students were taking a normal course load. It is found by the total credit hours taken by all students by the standard course load.

Weekly Student Contact Hours: A standardized measure in which a census is taken during a period of time (a week) and positive attendance is measured.

Cash Flow: The cash inflows minus the cash outflows over a period of time.

Free Ridership: A person who will participate in a program whether incentives are offered or not.

Net Present Value (NPV): The present value of an investment’s future net cash flows minus the initial investment.

Least Cost Planning (LCP): An approach to resource planning that considers all cost and benefits of a program, including non-market impacts, using the discounted cash flow of the programs.

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