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> Computers can't grade everything... Papers are out of the question.

I'm currently taking a Coursera class where I write an essay each week. Then my essay is reviewed and graded by 4 other students. I grade 4 other students' essays. This works really well.

Conversations with other students and faculty are a critical part of a college education. Certainly indispensible for sci-tech. Decades later I'm still remembering valuable tips and tidbits that profs threw at me during out-of-class discussions. If you come to class prepared, you can raise questions that can double the effectiveness of a course.

People just there for a degree might manage with online courses. People who love learning and are absorbing a discipline? Not so much. And thus, maybe, higher education will once again live up to its best potential ... not cranking spare parts on an assembly line.

Not only are conversations and discussion critical, so is the feedback the professor gains from the students. Many online-replacement articles are student centric - I have not yet seen an article that analyzes the impact on those who teach.
You're having a conversation right now, aren't you? I don't see why the medium makes such a huge difference.
Disruptive technologies typically a) have weaknesses, and b) offer a product that is inferior in some respect.

That doesn't stop them decimating the old industries. Online education is more flexible, more accessible and far cheaper than traditional education.

Issues like "how to mark papers" are soluble. Cheating in exams can be resolved the same way other organizations solve it: by running some exams in controlled environments. Plenty of organizations do this now: the institute of actuaries, the international baccalaureate, etc.

If I could short traditional universities it would be the trade of the decade.

One thing that concerns me about this is how will research get funded. Currently undergraduate students cross-subsidize research.
Increasingly what the tuition dollars actually fund is layer after layer of bloated administration.

Teaching and research are generally the first thing to get cut when budget cuts loom, never the hordes of junior associate vice subdeans.

Even when you get a research grant a large percentage of it (30-50%, sometimes) gets chopped off for "overhead" (i.e., the aforementioned hordes of administrators).

I don't know if MOOCs per se are the answer -- likely they're part of it, but not the whole solution. However, I do know that higher ed is ripe for disintermediation.

Basically, you've got a group of customers who are used to paying tens of thousands of dollars for a service, while the people who actually produce the service are getting paid a very small percentage of that. The situation is especially striking when it comes to large lecture classes of the sort common at the various campuses of Enormous State University. You've got sections of 250 students or more (maybe a thousand or more students across all section), each of whom is paying on the order of a thousand bucks to sit in a large lecture hall and listen to the professor. So maybe $250K per section, or a million for the whole course. The adjunct professor teaching the course is probably getting paid ~$2k-3k per section. If that reminds you of the situation that formerly prevailed in music and book publishing, it should.

Accreditation is the sticking point. That's going to have to be revamped or an alternative mechanism will have to be devised.