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You want a better view at a concert. What can you do? Stand up. Individually, standing works. What happens, though, if everyone copies you? Can everyone see better by standing? No way.
The Nobel committee hailed Michael Spence’s work on signaling as his prize-winning discovery and added: An important example is education as a signal of high individual productivity in the labor market. It is not necessary for education to have intrinsic value. Costly investment in education as such signals high ability.
When humans work side by side, they develop fraternal feelings for one another. As long as their business is not in jeopardy, many employers retain moderately subpar employees indefinitely. And even if the boss is bereft of empathy, most of their employees won’t be. Disgruntled workers are less productive workers. Any boss who “deprives someone of their livelihood” has to fear the blow to remaining workers’ morale.
When you skip class, your relative performance suffers. When your teacher cancels class, everyone learns less, leaving your relative performance unimpaired.
For history, civics, science, and foreign language, few Americans grasp the ABCs. The claim that schools “teach these subjects” is an overstatement. Schools only “teach of these subjects.” After years of exposure, American adults know history, civics, science, and foreign languages exist. That’s about it.
Researchers teach subjects how to answer Question A. Then they immediately ask their subjects Question B, which can be handily solved using the same approach as Question A. Unless A and B look alike on the surface, or subjects get a heavy-handed hint to apply the same approach, learning how to solve Question A rarely helps subjects answer Question B.35
Despite the importance of transfer of learning, research findings over the past nine decades clearly show that as individuals, and as educational institutions, we have failed to achieve transfer of learning on any significant level.
their results also undermine the view that students gain general reasoning skills. Students primarily improve in the very tasks they study and practice. Even this isn’t guaranteed; humanities majors’ verbal reasoning barely budged.
Most of what schools teach has no value in the labor market. Students fail to learn most of what they’re taught. Adults forget most of what they learn.
a comprehensive review of earlier studies found that correcting for IQ reduces the education premium by an average of 18%.7 When researchers correct for scores on the Armed Forces Qualification Test (AFQT), an especially high-quality IQ test, the education premium typically declines by 20–30%.8 Correcting for mathematical ability may tilt the scales even more; the most prominent researchers to do so report a 40–50% decline in the education premium for men and a 30–40% decline for women.9 Internationally, correcting for cognitive skill cuts the payoff for years of education by 20%, leaving
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The highest serious estimate says that once you correct for intelligence and background, correcting for attitudes (such as fear of failure, personal efficacy, and trust) and personal behavior (such as church attendance, television viewing, and cleanliness) further cuts the education premium by 37%.
On the reasonable assumption of 30% cognitive plus 15% noncognitive ability bias, dropping out of high school cuts income by almost 15%, a college degree boosts income by 40%, and a master’s degree boosts income by almost 70%.
econ majors earn almost as much as engineers.50 I assure you that my profession makes near-zero effort to train our undergrads for the job market. We’re easy on our students, even at elite schools like Berkeley and Princeton. Frankly, most econ professors practice a variant of the old Soviet adage, “We pretend to teach, they pretend to learn.” During four years of study, our better students acquire only two marketable skills: elementary statistics, and ability to calculate a present discounted value.
The less reliably you measure X, counterintuitively, the greater X’s true effect.
the labor market pays bartenders, cashiers, cooks, janitors, security guards, and waiters for high school diplomas and college degrees.
The nonacademic premium, in contrast, presumably reflects something close to pure signaling. What is signaling’s share? The Solomonic verdict just divides the nonacademic premium by the combined premium. This works out to nearly 100% signaling for high school, and 80% for college.
Some prominent economists find that boosting national education slightly impoverishes countries rather than enriching them.
At the global level, a typical year of personal education seems to raise personal income by 8–12%. A typical year of national education, in contrast, seems to raise national income by only 1–3%. While these ranges are compatible with a wide range of human capital signaling splits, signaling consistently overshadows human capital. If King Solomon had to announce a precise human capital/signaling split, 20/80 again sounds about right.
Table 4.3: Signaling in Sum
An inflation-adjusted return of 10% is excellent. A 7% return is very good—about average for stocks. Five percent is pretty good. Three percent is so-so. Two percent is poor. One percent or less is awful.
The out-of-pocket cost of a year of four-year college—tuition, fees, books, and supplies minus aid—sums to $3,662.59 Adding the cost of room and board more than triples this figure; the average price of on-campus living was another $8,890.
As long as your state’s best public school admits you, there’s no solid reason to pay more.
When your education rises, you shouldn’t merely foresee yourself with a higher salary. You should foresee a spouse with a higher salary. This is good news for strong students, because marriage is one of the purest forms of trickle-down economics. A lot of your spouse’s extra money becomes your extra money by financial osmosis.
the marriage market is probably the strongest reason to pay for expensive private schools. Going to Harvard may not get you a better job but almost certainly puts you in an exclusive dating pool for life. Admittedly thin research on this topic confirms the obvious: one research team finds that over half of women’s financial payoff for college quality comes via marriage.108 There is nothing counterintuitive about the idea that schools improve your spouse more than they improve you. If you go to Harvard, you’ll be the same person, but you’ll meet the elite.
Folk wisdom says, “Don’t marry for money. Go where the rich people are, and marry for love.”
Go to high school unless you’re a terrible student (or don’t want a full-time career).
Go to college only if you’re a strong student or special case.
Don’t get a master’s degree unless the stars align.
Most Ph.D. students have spent their entire lives at the top of the class, yet half wander off before they defend their dissertations.
When researchers check, they consistently verify that human health and status go hand in hand.
At the national level, it’s not clear that education increases living standards at all, much less that education makes countries’ living standards increase at a faster rate.
Only 3–5% of rapes, robberies, and aggravated assaults—and less than 1% of property crimes—lead to jail time.
To detect subsidies’ downside for social justice, you must dwell on the opportunities the poor have lost because of credential inflation. When most Americans didn’t finish high school, dropouts faced little stigma in the labor market. The stigma is now severe. When few Americans finished college, high school grads could plausibly work their way up the corporate ladder. No longer. The main difference isn’t that “the economy changed,” but that education rose, so workers need higher credentials to compete.
I am much more dubious than I was when I wrote Capitalism and Freedom that there is any justification at all for government subsidy of higher education. The spread of PC [political correctness] right now would seem to be a very strong negative externality, and certainly the 1960s student demonstrations were negative externalities from higher education. A full analysis along those lines might lead you to conclude that higher education should be taxed to offset its negative externalities.
Owing to these perverse incentives, almost any political idea that becomes popular tends to remain popular.
When researchers compare working students to comparable nonworking students, work has a clear upside and no clear downside.
According to one intriguing study, looser child labor laws cut education and crime; locking work-oriented students in school makes them “act out.”
despite years of study, most adults are historically illiterate. Either they never learned basic history, or they swiftly forgot what they learned. If a world of historical ignorance is scary, you should be scared already, because that’s where we live. Second, humans’ ability to transfer knowledge from one domain to another—such as from history to policy—is poor.
Force-feeding ideas and culture to recalcitrant youths often sparks resentment rather than appreciation. Did you ever listen to glum high school students read Shakespeare aloud? [shudders] FREDERICK: [shudders] What alternative is there? BRYAN: Patience. Young philistines have a lifetime to reconsider their intellectual apathy.
“the average unemployment benefit was about $300 per week in 2010, 2011, and 2012.”
On the disconnect between academic science and technological innovation, see, e.g., Niskanen 1997.
