But.. For now, Moocs are a quite high fixed-cost business. Putting a class up in a mooc is not quite as much work as writing a textbook, but it's nowhere near as easy as teaching a new class. If you're tempted, beware! Preparing, taping, editing and uploading a lecture is not the same as walking in, telling a few jokes, and getting through the week. Fixing anything that went wrong or updating is costly too.

Part of the high fixed costs lie in the limitations of the software. This is still version 1.0 stuff. Quizzes and assessments are key to the success of a class, and these are still particularly rudimentary. On Coursera, really, not much more than multiple choice and numerical entry works well. Coursera software does not allow parts to questions, or students to try question 1, get a hint, solve it, see the answer, and then go on to question 2 which builds on question 1. You can't even cut and paste pictures. As an instructor, taking those "prove x theorem" or "how do you resolve y puzzle" problems and turning them into meaningful multiple choice or numeric entry questions is the hardest part. Artificial intelligence programs reading text entries, guiding the student to different material based on his misunderstandings, and so on... this is all personal flying jet packs dreams.

John Cochrane on the economics of MOOCs. He speaks from experience, having taught one himself.

The first generation online courses I've taken are still in a very rudimentary form, perhaps because they are quick and dirty ports of real-world classes. They recall some of the first generation mobile apps which were simply wrapped websites. If you were to build a class from scratch for a MOOC, as an experience, you'd make many different choices than if you were trying to just convert a class that was taught in the traditional sense. Just as native apps have come to dominate the mobile phone experience, the next generation of online courses, built from the bottom up to be an online experience, will make today's online courses look primitive. The issues, of course, is that the tools are limited so far, and building such an experience is a high upfront fixed cost.

Companies like Coursera and Udacity need to arm instructors with the tools to build a great experience at a lower investment of time and money. That will come. The benefits come downstream: once constructed, an online course can be spread to a near infinite number of students at a fractional marginal cost. This has always been the chief appeal of online instruction to me, the ability for great instruction to achieve massive leverage and scale.

Of course an online course can't replace an intimate lecture taught by a great professor at a prestigious school like Stanford or Harvard or one of our nation's top universities. That's not the point. Most kids in the world, for a variety of reasons, won't ever have the opportunity to get that level of instruction. Many will get either poor instruction or none at all. For them, the difference in educational capital from a well-constructed MOOC will be massive.

We're still in the early early stages of the impact of MOOCs. It's likely their early struggles will have people dismissing them prematurely. In the long run I'm still quite bullish on their societal impact.