There’s a story about education, most prominently promulgated by Thiel, that claims it’s mostly about signalling that you’d be a good employee. People invest long years in education not to learn specific subjects that they’ll later apply in their daily work, but as a sort of certificate, an insurance policy that they’ll be employable. As more people go to college, the value of the signal decreases, and various forms of grad school become the next golden ticket, and on the story goes. People are willing to invest as much in education as the delta in salary between jobs available to college/grad school graduates and those without degrees, which is really high amount.

Consider, too, that a lot of the careers these people are going for are what Megan McArdle calls mandarinate jobs, they are also to a large extent bullshit jobs propped up by non-market demand.

OK. So, the usual story about education and wealth is that economic growth produces more wealth, which allows more ability to invest in education. Hence first world countries have longer and more specialized educational tracks, and that’s a good thing.

But if we take the signalling/insurance story of education seriously, things look different. Instead, a certain sort of economic recovery would be associated with decreased investment in education, since it would generate opportunities to do well for yourself without spending more time in the signalling loop. Similarly, a prolonged Great Stagnation would be expected to be associated with increased educational investment as people felt more strongly that they needed the mandarinate jobs. In a funny way, in our modern economy, educational investment may be inversely correlated with economic health.

A minor version of this reasoning is embedded in the cliche that people go back to grad school when the economy is bad, but I haven’t heard this observation generalized further.

Man, mandarinization is a heck of a drug, once you see it in the economy you can’t unsee it. I’m surprised it hasn’t made its way into thinkpieces, given we’re happy to criticize *other* countries’ two-track economies.