Educational Signaling: A Fad Whose Time Has Come By Bryan Caplan

Noah Smith, writing for Bloomberg view, isn’t happy with the educational signaling “fad.” Here’s my point-by-point reply. Noah’s in blockquotes, I’m not.

Talk to economists, and you’ll find a large number who believe that

college — that defining institution of America’s privileged youth — is

mostly signaling. It makes sense, after all — don’t most people go to

college because they think it will get them a job? And honestly, when

was the last time you actually used any of the things you learned in

college at your job?

It does indeed “make sense.” And according to the only survey of which I know, economists in general are at least open-minded about educational signaling. But Noah strangely neglects to mention that empirical labor economists in general, and education economists in particular, rarely engage the signaling model. Human capital purism really is their dominant paradigm – and they studiously ignore the “when

was the last time you actually used any of the things you learned in

college at your job?” argument.

Possibly the biggest promoter of the signaling theory of education is George Mason University’s Bryan Caplan. Caplan believes so passionately in the model that he’s writing

a book about it, called “The Case Against Education.” He has already

written enough blog posts on the topic to make a small book! Caplan’s message is bound to appeal to people who dislike the

institution of college, whether because they think it’s too politically

leftist, or they’re worried about high tuition and student loans.

There’s something to this. It’s worth pointing out, though, that many defenders and fellow travelers of the signaling model are left-leaning sociologists.

But

there are some big holes in the case. Caplan’s GMU colleague, Tyler

Cowen, is rightfully skeptical of claims that college is mostly signaling. Let me add my voice to the skeptical chorus. First, intelligence isn’t that hard to spot. Performance on any

mental task — a standardized test or even a high school chemistry class

— will give an employer an immediate general idea of ability. No need

to waste four of your prime years on a signal that can be generated in

two hours.

I’ve said this. I’ve also criticized the many economists who think Supreme Court rulings on intelligence testing are a major cause of the rising educational premium.

So is college a way to signal conscientiousness and willingness to

work? Maybe. But an even better way to signal that would be to actually work at a job

for four years. One would think that if young people needed to do some

hard work to signal their work ethics, some companies would spring up

that gave young people real productive work to do, and provided evidence

of their performance. Instead of paying through the nose to send a

signal of your industriousness, you could get paid. But we don’t see

this happening.

Like most economists, Noah needs to be more sociological. In a cultural vacuum, working four years might be a great signal of work ethic. But no human being lives in a cultural vacuum. We live in societies thick with norms and expectations. And in our society, people with strong work ethics go to college and people with bad work ethics don’t.

Disagree? Just picture how your parents would react if you told them, “I’m not going to college. I’m just going to get a job.” In our society, your parents definitely wouldn’t respond, “That makes sense, because you’re such a hard worker.” Why not? Because in our society, most hard-workers choose college. If a hard-working kid refuses to copy their behavior, people – including employers – understandably treat him as if he’s lazy. Because lazy is how he looks.

Noah overlooks another key trait that education signals: sheer conformity to social norms. In our society, you’re supposed to go to college, and you’re supposed to finish. If you don’t, the labor market sensibly questions your willingness to be a submissive worker bee.

When you think about it this way, the whole idea of

college-as-signaling becomes a little absurd. People’s careers last for

35 to 45 years. But after you’ve been working for a while, prospective

employers can look at your work history — they don’t need the college

signal anymore. Caplan’s theory therefore is that many young people are

spending four years — and lots of tuition money — on something that

will only affect the very beginning of a career.

As I’ve explained before, getting your foot in the door may seem like a small step, but it’s invaluable nonetheless. Without the right degrees, it’s extremely hard to even start building an impressive work history for employers to judge. Furthermore, if Noah were properly sociological, he’d know that employers are quite slow to fire employees whose formal credentials overstate their job performance – and even slower to publicize their negative evaluations to the broader labor market. Economists may balk at the idea that a mere credential can durably raise your earnings, but everyone long saddled with incompetent co-workers says otherwise.

There are many other reasons to doubt the signaling theory of

college. A more likely explanation for college’s enduring importance is

that it provides a large number of benefits that are very hard to

measure — building social networks, broadening people’s perspective,

giving young people practice learning difficult new mental tasks and so

forth.

I’m glad to hear this. Noah inadvertently grants one of my key points: Most of education’s labor market payoff is unrelated to the material your professors explicitly teach you. Once you accept this heresy, you’re stuck with some combination of my multidimensional signaling story, and Noah’s amorphous, evasive “large number of benefits that are very hard to measure” story. If that’s the choice, my story will end up with the lions’ share of the mix. Noah is welcome to the leftovers.

Final challenge for Noah: If education’s rewards stem from this “large number of benefits that are very hard to measure,” why on earth would the payoff for graduation vastly exceed the payoff for a typical year of education? My explanation, of course, is that given the vast social pressure to cross educational milestones, failure to graduate sends a very negative signal to the labor market, leading to discontinuous rewards. What’s Noah’s alternative? Do schools really delay “building social networks, broadening people’s perspective,

giving young people practice learning difficult new mental tasks and so

forth” to senior year?