The Case Against Education

1
The Case Against Education

• Prof. Bryan CaplanDepartment of Economics and
  Mercatus CenterGeorge Mason Universitybcaplan_at_gm
  u.edu

2
Education Immortal Beloved

• Education is one of the Holy Trinity that
  everyone is supposed to want more and better of
  (other two health care and the environment).
• Its also a rare example of an issue where
  economists and the public agree that were not
  investing enough.
• Standard return to education estimates are pretty
  high. Economists assume this proves that
  education builds human capital.
• Rate of return estimates dont even count the
  positive externalities that economists think that
  education has to have.

3
The Big Puzzle

• When you actually experience education, though,
  its hard not to notice that most classes teach
  no job skills.
• What fraction of U.S. jobs ever use knowledge of
  history, higher mathematics, music, art,
  Shakespeare, or foreign languages? Latin?!
• What does this have to do with real life?
• This seems awfully strange Employers pay a large
  premium to people who study subjects unrelated to
  their work.

4
The Signaling Explanation

• Its easy to explain these facts, however, using
  the signaling model of education.
• Main idea Much schooling doesnt raise
  productivity its just hoop-jumping to show off
  your IQ, work ethic, and conformity.
• Key assumptions
• (1) differences are hard to observe
• (2) differences correlate with the cost of an
  observable activity.
• (3) higher productivity workers have lower costs
  of performing observable activity
• In signaling models, the market rewards people
  who show their stuff even if the display itself
  is wasteful.

5
Why Signaling Matters

• Beauty of the signaling model It works even if
  students, workers, and employers dont understand
  it.
• Who cares? Signaling models imply that education
  actually has negative externalities. These can
  balance out any positive externalities, or even
  imply that government is subsidizing waste.

6
Whats Wrong With Education

• Question Who cares if education builds human
  capital or just signals it?
• Answer Signaling models imply that education
  actually has negative externalities.
• Concert analogy.
• These negative externalities can balance out any
  positive externalities, or even imply that
  government is subsidizing waste.
• Social return versus private return.
• Note Signaling ? education bubble.

7
Objections Answered

• Signaling models are widely dismissed on a priori
  grounds.
• Wed just do IQ tests instead.
• Employers know true productivity after a few
  months.
• There has to be a cheaper way.
• Learning how to learn.
• Character formation.
• Signaling explains some otherwise very puzzling
  facts, and the a priori objections only apply to
  the most simple-minded versions of the theory.
• Its rhetorically easier for libertarians to join
  the pro-education chorus, then insist that the
  free market will give us more and better
  education. But the truth is more complicated.