More on this book
Community
Kindle Notes & Highlights
by
Bryan Caplan
Read between
January 22 - April 11, 2018
If you apply your knowledge of Roman history, Shakespeare, real analysis, or philosophy of mind on the job, you have an odd job.
Learning doesn’t have to be useful. Learning doesn’t have to be inspirational. When learning is neither useful nor inspirational, though, how can we call it anything but wasteful?
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.14
Critics often paint the signaling model of education as weird or implausible. But the model is just a special case of what economists call “statistical discrimination”: using true-on-average stereotypes to save time and money.17 Statistical discrimination is everywhere. The elderly pay higher life insurance premiums because the elderly tend to die sooner. Cab drivers are more willing to pick up a young man in a suit than a young man in gang colors because the latter is more likely to rob him. Statistical discrimination may be unfair and ugly, but it’s hardly weird or implausible. Why is it any
...more
What are modern model workers like? They’re team players. They’re deferential to superiors, but not slavish. They’re congenial toward coworkers but put business first. They dress and groom conservatively. They say nothing remotely racist or sexist, and they stay a mile away from anything construable as sexual harassment. Perhaps most importantly, they know and do what’s expected, even when articulating social norms is difficult or embarrassing. Employers don’t have to tell a modern model worker what’s socially acceptable case by case.
The right lesson to draw is not that the signaling model is wrong, but that education signals more than intelligence. Most of the model’s friends learned this lesson long ago. Kenneth Arrow, as usual, knew it from the start. “Higher Education as a Filter” calls education a signal of ability, and explicitly states that ability depends on “socialization” as well as intelligence.30 Or as Peter Wiles succinctly said one year later, “What employers need is intelligent conformism, or great independence and originality within a narrow range.”31
Signaling and hirer’s remorse. Becker’s critique also naively assumes that employers automatically dismiss any worker who falls short of expectations. Labor regulations and lawsuits aside, firms are not run by robots.37 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
...more
If you single-mindedly focus on graduates’ paychecks, education turns lead into gold. Waiters walk in; economic consultants walk out. For teachers, it’s so tempting to take credit—to gaze on our former students in their mortarboards and gloat, “I amaze even myself.” If teachers were honest with ourselves, we would be slower to self-congratulate. Do we really transform waiters into economic consultants—or merely evaluate whether waiters have the right stuff to be economic consultants?
By analogy, both sculptors and appraisers have the power to raise the market value of a piece of stone. The sculptor raises the market value of a piece of stone by shaping it. The appraiser raises the market value of a piece of stone by judging it. Teachers need to ask ourselves, “How much of what we do is sculpting, and how much is appraising?” And if we won’t ask ourselves, our alumni need to ask for us.
Geometry is the most common of all math courses: over four-fifths complete it in high school. Yet the subject, featuring countless proofs of triangles’ congruence, is notoriously irrelevant. Geometry rarely pops up after the final exam, even in other math classes. Algebra I, which teaches students graphing and one- and two-variable equations, has many practical applications. Most students, however, continue on to Algebra II, which largely exists to prepare students for calculus.6 Calculus, in turn, gets you into college. Once college begins, however, you’ll probably never differentiate another
...more
Americans’ staggering ignorance may not be a death blow for human capital purism, but it is an awkward fact. If we learn so little in school, why do employers so heavily reward education? The simplest response is that employers, like teachers, grade on a curve. Intermediate literacy and numeracy horrify intellectuals. From an employer’s point of view, however, intermediate is way better than basic—or below basic.
The authors infer that education raises “crystallized intelligence” but not “fluid intelligence.” A better interpretation, though, is that education improves some specific skills without increasing intelligence at all.
Education seems to pay. Human capital purism advances a single explanation: education pays because education teaches lots of useful job skills. A tempting story . . . until you stare at what schools teach, what students learn, and what adults know. Then human capital purism looks not just overstated, but Orwellian. 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. When you mention these awkward facts, educators speak to you of miracles: studying anything makes you better at everything. Never
...more
Consider Bill Gates, Harvard’s most famous dropout. He plainly had the raw talent to finish his studies. Gates was already a prize-winning programmer by his sophomore year.4 It’s unsurprising, then, that he out-earned run-of-the-mill college dropouts. To scan Table 3.1, then announce, “Gates would have earned 73% more if he’d finished college,” is obtuse.
Many researchers have recalculated the education premium after correcting for IQ and other measures of cognitive ability. Almost all the research has two conclusions in common. First, IQ pays. Holding education constant, an extra point of IQ raises earnings by about 1%.6 Second, holding IQ constant, the education premium shrinks but never vanishes.
How can education be so irrelevant yet so lucrative? There exists one clean explanation—call it the wheat/chaff theory—that doesn’t appeal to signaling. In this story, education is a mixture of high-paid wheat (literacy, numeracy, critical thinking, technical training) and unpaid chaff (history, Latin, gym, French poetry). Schooling is lucrative because official statistics take “real” classes and “real” majors and lump them together with “Mickey Mouse” classes and “Mickey Mouse” majors.
Throughout the world, public-sector workers tend to be more educated than private-sector workers.56 In the United States, 52% of government employees have a bachelor’s degree or more, versus 34% for private employees.
Human capital purists often protest, “Why on earth do workers signal ability with a four-year degree instead of a three-hour IQ test?” My response: employers reasonably fear high-IQ, low-education applicants’ low conscientiousness and conformity. Other critics of the education industry, however, have a more streamlined response: American employers rely on educational credentials rather than IQ tests because IQ tests are effectively illegal.
Graduation tells employers, “I take social norms seriously—and have the brains and work ethic to comply.” Quitting tells employers, “I scorn social norms—or lack the brains and work ethic to comply.” If you graduate, the signaling model says the market will lump you with the winners and pay you a special diploma bonus—often called a “sheepskin effect” because diplomas used to be printed on sheepskin. If you quit, the signaling model says the market will lump you with the losers and withhold the sheepskin’s reward. After all, employers won’t know why you failed to finish your degree. They’ll
...more
To weigh the power of human capital versus signaling, however, we must zero in on occupations with little or no plausible connection to traditional academic curricula. Despite many debatable cases, there are common jobs that workers clearly don’t learn in school. Almost no one goes to high school to become a bartender, cashier, cook, janitor, security guard, or waiter. No one goes to a four-year college to prepare for such jobs. Yet as Figure 4.1 shows, the labor market pays bartenders, cashiers, cooks, janitors, security guards, and waiters for high school diplomas and college degrees.
The signaling theory of education is a special case of what economists call “statistical discrimination”: using true-on-average stereotypes to save time and money. Safe young male drivers pay exorbitant insurance premiums because hiring private detectives to rate riskiness person by person is not cost-effective. Prudence makes insurers play the averages.
The more fundamental reason why signals durably affect pay, though, is employers underreact to what they learn. Why? Because they want to match pay and perceived productivity without seeming unfair.50 When employers spot poor performance, they could swiftly respond with wage cuts, demotions, or terminations. The catch: such “unfair” measures are bad for morale—and make employers feel guilty.51
Stingy raises are less odious, but stingy raises year after year create “inequitably” large pay spreads for workers with the same job description. Most firms avoid such inequities with formal pay scales: every job has a pay grade, and every pay grade has a salary range.52 Unless they change jobs, good workers eventually max out, and bad workers eventually min out. This process is slower than it sounds because few firms base raises on merit alone. Instead, firms tend to give across-the-board raises to all their workers, then tack on merit raises for high achievers.53 In the long run, employers
...more
Economists are so eager to argue education is underrated they neglect a strong reason to think education is overrated: reverse causation. Instead of “When countries invest more in schooling, they get richer,” the real story could be, “When countries get richer, they consume more schooling.” Almost everyone buys reverse causation at the personal level. Why do the rich spend more money on fancy prep schools and bloated college tuition? Because the rich have more money to spend.
When I argue with mainstream labor economists, they grow frustrated. “Is everything signaling? I have trouble believing workers can’t find a cheaper way to certify their quality,” they say. I’m tempted to snap, “Is everything human capital? I have trouble believing studying Latin makes you a better banker.” My constructive answer, however, is: Of course everything isn’t signaling. Students definitely learn useful job skills. School lasts over a decade. It would be amazing if students didn’t learn something useful before they left. My claim is that education is mostly signaling. Given all the
...more
How much does your alma mater’s rank matter? Research is oddly mixed.75 The consensus point: where you study is less important than what you study. As some early researchers said, “While sending your child to Harvard appears to be a good investment, sending him to your local state university to major in Engineering, to take lots of math, and preferably to attain a high GPA, is an even better investment.”
Incidentally, 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.
Selfishly speaking, this is no cause for celebration. What’s so great about changing your own priorities? Suppose education caused us to spend less time with our families and more time working. It’s unclear why this shift would count in education’s favor. Socially speaking, however, the welfare state makes even voluntary unemployment a burden to others. Idlers get more than they produce via programs like Medicaid and food stamps; workers get less than they produce owing to levies like income and payroll taxes. This doesn’t mean it’s “best for society” to make everyone work. Stay-at-home
...more
Back in 1950, when adult male dropouts outnumbered high school grads two to one, the U.S. murder rate was no higher than today.53 Signaling’s elegant explanation: Back in 1950, the average dropout stood at the 33rd percentile of achievement, so employer stigma against dropouts was mild. Today, the average dropout stands at the 10th percentile of achievement, so the employer stigma against dropouts is severe, making crime an appealing substitute for honest toil.
Would'nt have guessed this many dropouts in essentially my father's generation
In our society, even incurable snobs rank vocational students above high school dropouts. The signal vocational ed sends is weak, not bad.
Another complaint is that children are too immature to know a bad deal when they see it. As a father of four, I don’t demur. But we normally rely on parents to protect kids from their own childishness. Under current U.S. law, moms and dads can already employ their sons and daughters on almost any terms they please.23 The natural rationale is that few want to mistreat their flesh and blood. Exceptions notwithstanding, parents are children’s best guardians. Once we trust them to decide whether they’re fairly compensating their kids, why not trust parents to decide whether someone else is fairly
...more
For public policy, however, selfish returns are a distraction; social returns alone matter. Since stigma hurts only selfish returns, wise policy analysts ignore it. Instead, they compare skills students learn in class to skills students learn on the job. Frankly, there’s no comparison. Doing any job teaches you how to do a job.
High school dropouts aren’t the only kids who learn how to do zero jobs. After graduation, plenty of high school and even college students taste how unqualified they are. Think of the timeless question, “What can you do with an English degree?” For many, as we’ve seen, the answer is: be a bartender, cashier, cook, janitor, security guard, or waiter. Literally speaking, of course, no one uses their English degree to guard a warehouse. The real story is their education prepared them for no realistic occupation, so they learned how to guard warehouses on the job.
Instead of fearing a dystopian future, we should gawk at our dystopian present. In modern societies, achievement-oriented kids spend almost two decades in school.
Harvard University’s Steven Pinker sadly reports that the best students in the world yawn at the best teachers in the world: A few weeks into every semester, I face a lecture hall that is half-empty, despite the fact that I am repeatedly voted a Harvard Yearbook Favorite Professor, that the lectures are not video-recorded, and that they are the only source of certain material that will be on the exam. I don’t take it personally; it’s common knowledge that Harvard students stay away from lectures in droves, burning a fifty-dollar bill from their parents’ wallets every time they do.5
Today’s Americans spend about four times as much on tobacco and five times as much on alcohol as they do on reading.
Apparently not. In the data, the well-educated are only microscopically more liberal. In the General Social Survey, people place themselves on a seven-step scale, where 1 is “extremely liberal,” 4 is “moderate,” and 7 is “extremely conservative.” An extra year of education seems to make people .014 steps more liberal.27 Taken literally, over seventy years of education are required to shift ideology a single step. Statistical corrections make this effect look stronger, but it stays weak.28
Critics who highlight educators’ leftist leanings usually have an ideological ax to grind (or swing): “Leaving education of the young in the hands of ‘politically correct’ ideologues endangers our democracy. School should be a vibrant marketplace of ideas, not a center for indoctrination.” Though they’re right about the imbalance, it’s a paper tiger. Even extreme left-wing dominance leaves little lasting impression. Contrary to the indoctrination story, education doesn’t progressively dye students ever brighter shades of red.38
am an economist and I am a cynic, but I’m not a typical cynical economist. I’m a cynical idealist. I embrace the ideal of transformative education. I believe wholeheartedly in the life of the mind. What I’m cynical about is people. I’m cynical about students. The vast majority are philistines. The best teachers in the universe couldn’t inspire them with sincere and lasting love of ideas and culture. I’m cynical about teachers. The vast majority are uninspiring; they can’t convince even themselves to love ideas and culture, much less their students. I’m cynical about “deciders”—the school
...more
For I have neither wit, nor words, nor worth, Action, nor utterance, nor the power of speech, To stir men’s blood. I only speak right on; I tell you that which you yourselves do know. —Shakespeare, Julius Caesar
All very weird, yet it all makes sense. Employers can’t afford to give every applicant a chance. They need rough-and-ready ways to decide whom to interview and whom to hire. In our society, academics are the focal metric. It’s intrinsically appealing, since academic success calls for a blend of brains, toil, and submission.
