As we approach the commencement of the academic semester, it is evident that a significant portion of teaching at universities is still online. Large lectures, for example, are being streamed or recordings are being posted online. It is time to get students back into the classroom. Online ‘studies’ are just no substitute. There are many benefits from being on campus – student life can be fun – but one of the main reasons to get students back into the classroom is to spur competition between them. From our research on teams and incentives, observability drives competition. On-campus studies are better, in part, because it aids observability.

Study online creates opaqueness. Someone in their bedroom cannot see how much study their peers are doing; they have limited opportunity to see what other students know. A student at home then tends to take themselves as a reference point. Someone at home can think, if I do not feel like studying, surely everyone else feels the same. In the dark, a student will infer what others know (and how much effort they are putting in) from their own efforts and understanding. This reduces the incentive to study. This indolence breeds more; at home, students can find themselves in a downward spiral of studying less and less.

Competing to be top dog

In the classroom, this cycle can work the other way. In any primary school class, invariably there are several kids competing to be the top dog. When one answers a teacher’s question correctly the others try harder next time to prove themselves. Similarly, year 12 students compete with one another to be top in a subject or dux of the year. Universities are full of those primary school top- dog wannabes. In a tutorial or lecture, students can see what a peer answering a question correctly or pushing the instructor’s analysis to the next level. Competition induces effort, which facilitates learning, which encourages more effort from others and the student themselves. Economic modelling suggests being able to observe the efforts of others can increase the total effort exerted by over 1000 times.

Students in class are frenemies – their rivalry lifts the learning of the cohort. To be clear, universities are not for the fainthearted; they are institutions of judgement. Unlike primary school (or the HSC), rankings at university matter; they indicate greater competences, leading to better jobs and higher lifetime pay.

Observing their own understanding

Assessments play a role in enhancing observability of peer effort and inducing competition amongst students. Grades allow a student to observe their own understanding but also their relative ranking – how are they going compared with their peers? Assessments that make peer-to-peer comparisons easier facilitate more competition. This is one advantage of examinations, aside from the obvious one of avoiding cheating using AI. When everyone sits the same exam, your performance is directly comparable to your peers. If you did not do well compared to everyone else, you should work harder. This incentive can be lost with bespoke assessments; maybe underperformance was due to choosing the wrong project or maybe the marker did not like your topic. Different assessment breeds excuses for poor performance, fuelling lower effort and the downward cycle that brings.

University instructors also need to consider using other assessments that increase observability. In- class presentations are a traditional assessment that works well in many disciplines and that allows students observe each other. Releasing of average grades from small stakes assessments is another. Students should not be allowed to think that their mediocre performance is the norm.

Both formal and informal

To be sure, students also need to learn to collaborate with one another, both formally in assessments like group projects, but also informally in study groups and the like. Being on campus is better for collaboration too. When working on a group project, there is a temptation to freeride on others’ efforts. This is mitigated by in-person interactions; peer effects and pressure are stronger in- person. Our research also shows that incidental interactions are critical in transferring knowledge. Students learn from each other. Without the opportunities for these informal interactions before and after class, or in the coffee shop, an important learning experience is lost. Finally, competition once again plays a role. Study groups are often a critical learning activity; studying harder and knowing more allows someone to get into a study group with better students.

We must get students back on campus

The mode of teaching and the way universities assess learning creates incentives, or otherwise, for students to put in effort. A lack of observability between peers is a recipe for a lack of effort, and hence poor learning. It is vital that a concerted effort to get students back on campus is made now, relatively soon after the COVID lockdowns. To not do so not only hurts the learning of current students, and their potential lifetime earnings, it hinder the long-term productivity of the country. Any delay, moreover, just makes the adjustment to study back on campus more difficult, perhaps even preventing it from happening altogether.

Vladimir Smirnov received his PhD from the Australian National University in October 2002. His main areas of interest are in the economics of contest, collusion and innovation. He has published in leading economics journals such as the Rand Journal of Economics, Journal of Economic Dynamics and Control and Games and Economic Behavior. Vladimir is an experienced educator, having taught mathematical economics, microeconomics and the economics of regulation.

Andrew Wait is a professor in the School of Economics at the University of Sydney. Andrew’s research interests include industrial organisation and organisational economics. Andrew has published in the Rand Journal of Economics, the International Journal of Industrial Organization and the Journal of Law, Economics and Organization. He is the co-convenor of the Annual Organizational Economics Workshop. Andrew is a co-author of the introductory economics textbook ‘Essentials of Microeconomics’.