The Economist today published its first ranking of distance-learning MBA programs (see The Socratic E-mail). I found this ranking rather fascinating.

In the interest of full disclosure, I have to say that I haven’t fully kept abreast of the distance-learning movement in higher education. I know that it’s there, but I thought it hadn’t quite caught on. I remember that it was all the rage for awhile – circa 1997-2000; however, I thought that most schools had come down in favor of the face-to-face education paradigm – arguing that the quality of the face-to-face model exceeded that of the distance model. For this reason, I was shocked to see some really reputable universities on that list.

But it also made me wonder: Is there an economic difference in the value of a distance-learning MBA degree versus a face-to-face MBA degree? I think it would be really interesting to examine some of the issues. There are several really interesting, and fruitful, angles to explore, including some of the following considerations:

1. cost differential to earnings differential – Is any difference in price between the two forms of education offset by ex post earning differentials? That is, distance-learning degrees might cost less, but are the benefits/salaries upon graduation significantly different?

2. quality of enrollees – Is there a difference in the “quality” of the “typical” student that enrolls in distance programs versus face-to-face programs? This might have an impact on ex post earning potential as we would expect higher quality inputs to receive higher quality outcomes. In economic parlance, this is a selection effect. If higher quality students are overwhelmingly choosing (selecting) to go to face-to-face programs, this can cloud our interpretation of any earning differential we find as we would, of course, expect higher quality students to eventually earn more money. Thus, it would not be the difference in the programs (distance versus face-to-face) that determines the outcomes but the ex ante sorting (the matching of high quality students with face-to-face programs and lower quality students with distance programs) that drives the results.

3. quality of curriculum – Is there any discernible difference in the quality of the offerings between the two programs? Do students in one program “learn” more than students in the other?

4. signaling value of the type of degree earned – Might there be any stigma among employers toward students who graduate with one type of degree versus another? Do the schools that offer the distance MBA programs require graduates of that program to reveal that their MBA is somehow different? Is the actual diploma that they earn different? Should it be different?

5. reputational impact of offering distance-learning programs – Do the schools that offer distance-learning programs bear any reputational costs? For example (and not to say that this is true, just a hypothetical), let’s assume for a moment that the students that do go to distance programs are somehow inferior on some quality metric. Now, you have two sets of graduates (distance graduates and face-to-face graduates) from the same school carrying the same brand (both sets of students went to Florida let’s say, which by the way is an exceptional institution). Now let’s assume that for whatever reason, the distance graduates end up doing poorly ex post – they aren’t as successful, their employers find them less capable, etc. Does that have a negative impact on the school? Also, does that have a spillover effect on the face-to-face graduates, who, when others find out they graduated from Florida, are then painted with the same brush as the face-to-face students. Face-to-face students who fork over big bucks to attend their MBA programs understand very well that the school’s overall reputation impacts them, and the value of their degree. So they should be concerned about the school’s distance offerings.

And Finally, and in my opinion one of the most interesting angles to pursue,

6. value of the social networks – It has been argued that one of the most valuable parts of receiving an MBA is the opportunity to network with, and befriend, the future captains of industry while on campus. Developing a strong social network can be extremely powerful for future business opportunities. One of the interesting things about distance-learning programs versus face-to-face programs is that it seems that the opportunities to network with classmates, professors, and industry-types who visit campus are greater for face-to-face students. So the question then becomes, to the extent that ex post earning differentials exist, what portion of those earning differentials could be associated with the added-value of the social networking benefits provided by face-to-face programs?

Anyhow, these are just a sampling of some of the interesting considerations associated with distance-learning programs. I’m sure there are many, many more.