Is this forum still an Anti Trump Echo Chamber (Was: just a liberal echo chamber?) (3 Viewers)

A SIGNALING EXPLANATION

In 2001, the Nobel Prize was awarded to economist Michael Spence for a mathematical model of one explanation for these puzzles: signaling. The basic idea is that students go to school not so much to learn useful job skills as to show off their work potential to future employers. In other words, the value of education isn’t just about learning; it’s also about credentialing. Of course, this idea is much older than Spence; he’s just famous for expressing the idea in math.

In the signaling model, each student has a hidden quality—future work productivity—that prospective employers are eager to know. But this quality isn’t something that can be observed easily over a short period, for example, by giving job applicants a simple test. So instead, employers use school performance as a proxy. This works because students who do better in school, over the long run, tend to have greater work potential. It’s not a perfect correlation, of course, and there are many exceptions, but by and large, school performance predicts future work performance (and therefore earnings).

People often talk as if intelligence were the key element underlying both school and work performance. But ordinary IQ can’t be the whole story, because we have cheap and fast tests to reveal IQ. More to the point, however, raw intelligence can only take you so far. If you’re smart but lazy, for example, your intelligence won’t be worth very much to your employer. As Caplan argues, the best employees have a whole bundle of attributes—including intelligence, of course, but also conscientiousness, attention to detail, a strong work ethic, and a willingness to conform to expectations. These qualities are just as useful in blue-collar settings like warehouses and factories as they are in white-collar settings like design studios and cubicle farms. But whereas someone’s IQ can be measured with a simple 30-minute test, most of these other qualities can only be demonstrated by consistent performance over long periods of time.

Imagine interviewing a 22-year-old college grad for a position at your firm. Glancing down at her resume, you notice she got an A in the biology class she took during her sophomore year. What does this tell you about the young woman in front of you? Well, it doesn’t necessarily mean she understands biology; she might have retained that knowledge, but statistically speaking, she’s probably forgotten a lot of it. More precisely, it tells you that she’s the kind of person who’s capable of getting an A in a biology class. This is more than just a tautology. It implies that she has the ability to master a large body of new concepts, quickly and thoroughly enough to meet the standards of an expert in the field—or at least well enough to beat most of her peers at the same task. (Even if the class wasn’t graded on a strict curve, most professors calibrate their courses so that only a minority of students earn A’s.) In addition to what the A tells you about her facility with concepts, it also tells you that she’s the kind of person who can consistently stay on top of her workload. Every paper, project, and homework assignment has a deadline, and she met most if not all of them. Every test fell on a specific date, and she studied and crammed enough to perform well on those tests—all while managing a much larger workload from other classes, of course. If she got good grades in those courses too—wow! And if she did lots of extracurricular activities (or a small number at a very high level), her good grades shine even brighter. All of this testifies quite strongly to her ability to get things done at your firm, and none it depends on whether she actually remembers anything from biology or any of her other classes.

In other words, educated workers are generally better workers, but not necessarily because school made them better. Instead, a lot of the value of education lies in giving students a chance to advertise the attractive qualities they already have.

Caplan offers a helpful analogy. Suppose you inherit a diamond from your grandma, and you want to turn around and sell it. What can you do to fetch a good price? On the one hand, you could take steps to improve the diamond, perhaps by polishing it or cutting it into a more attractive shape. On the other hand, you could take the diamond to be inspected by a professional, who will then issue a certificate attesting to its quality. This will also raise the price, since most buyers can’t judge a diamond themselves, and without a certificate, they’re worried about getting swindled.

The traditional view of education is that it raises a student’s value via improvement—by taking in rough, raw material and making it more attractive by reshaping and polishing it. The signaling model says that education raises a student’s value via certification—by taking an unknown specimen, subjecting it to tests and measurements, and then issuing a grade that makes its value clear to buyers.

Of course, these two processes aren’t mutually exclusive. While labor economists tend to downplay the signaling model, it’s well known as an explanation and is popular among sociologists of education. No one claims that signaling explains the entire value of education. Some learning and improvement certainly does take place in the classroom, and some of it is critical to employers. This is especially true for technical and professional fields like engineering, medicine, and law. But even in those fields, signaling is important, and for many other fields, signaling may completely eclipse the learning function. Caplan, for example, estimates that signaling is responsible for up to 80 percent of the total value of education.

IMPLICATIONS OF THE SIGNALING MODEL

“I have never let my schooling interfere with my education.”—Mark Twain

The signaling model can explain all the puzzles we saw earlier. Clearly it explains why both students and employers are more interested in credentials (getting good grades and degrees from good colleges) than learning per se, even though, like Robin, they could get top-quality learning entirely for free. [Robin Hanson, one of the co-authors, audited classes at Stanford rather than enrolling and paying tuition. -MT] It also explains why no one is particularly bothered when curricula are impractical or when students forget what they learn—because it’s not the knowledge itself that’s as important as showing that you have the generic ability to learn and complete schoolwork. Signaling also explains the sheepskin effect, where actually earning a diploma is more valuable than the individual years of learning that went into it—because employers prefer workers who stick around and finish what they start.

As is often the case with these “hidden motive” explanations, things that seem like flaws (given the official function) actually turn out to be features (for the hidden function). For example, the fact that school is boring, arduous, and full of busywork might hinder students’ ability to learn. But to the extent that school is primarily about credentialing, its goal is to separate the wheat (good future worker bees) from the chaff (slackers, daydreamers, etc.). And if school were easy or fun, it wouldn’t serve this function very well. If there were a way to fast-forward all the learning (and retention) that actually takes place in school—for example, by giving students a magic pill that taught them everything in an instant—we would still need to subject them to boring lectures and nitpicky tests in order to credential them.

Signaling also explains a lot of things we don’t see (that we might expect to see if school were primarily about learning). For example, if the value of a college degree were largely a function of what you learned during your college career, we might expect colleges to experiment with giving students a comprehensive “exit exam” covering material in all the courses they took. Sure, it would be difficult, and there’s no way to test the material in the same depth as final exams given at the end of each semester. But if employers actually cared about knowledge, they’d want to know how much students actually retain. Instead, employers seem content with information about students’ generic ability to learn things (and complete assignments on time).

Remember the puzzle where nations don’t get as much value out of school as individual students do? Well the signaling model explains why. The more school is about credentialing (rather than learning), the less the nation as a whole stands to benefit from more years of it. If only a small amount of useful learning takes place, then sending every citizen to an extra year of school will result in only a small increase in the nation’s overall productivity.

Meanwhile, when you’re an individual student within a nation, getting more school can substantially increase your future earnings—not because of what you’ve learned, but because the extra school helps distinguish you as a better worker. And, crucially, it distinguishes you from other students. Thus, to the extent that education is driven by signaling rather than learning, it’s more of a competition than a cooperative activity for our mutual benefit. Sure, we’d like school to be a place where we can all get better together, but the signaling model shows us that it’s more of a competitive tournament where only so many students can “win.”

“Higher education,” says Peter Thiel, a tech billionaire famously critical of college, "sorts us all into a hierarchy. Kids at the top enjoy prestige because they’ve defeated everybody else in a competition to reach the schools that proudly exclude the most people. All the hard work at Harvard is done by the admissions officers who anoint an already-proven hypercompetitive elite. If that weren’t true—if superior instruction could explain the value of college—then why not franchise the Ivy League? Why not let more students benefit? It will never happen because the top U.S. colleges draw their mystique from zero-sum competition."

All of this suggests that we reconsider our huge subsidies and encouragements of school. Yes, there are benefits to credentialing and sorting students—namely, the economic efficiency that results from getting higher-skilled workers into more important jobs. But the benefits seem to pale next to the enormous monetary, psychic, and social waste of the education tournament.