February 2, 2006
Arnold Kling
Tyler Cowen speculates
Men are born beasts. But education gives you a peer group, a self-image, and some skills as well. Getting an education is like becoming a Marine. Men need to be made into Marines. By choosing many years of education, you are telling yourself that you stand on one side of the social divide. The education itself drums that truth into you.
I think that this hypothesis says that education's effects should differ across people of different temperaments.
Apart from the specific hypothesis, what is notable is that Tyler dismisses, at least implicitly, the notion that the actual content of education accounts for its value. That would seem to imply an enormous profit opportunity: come up with a way to provide the mysterious benefit of education at less cost.
As he points out, that has always been a weakness of the signalling literature. If education is nothing but a signal, then it would pay an entrepreneur to come up with a more efficient signalling mechanism.
As long as we're just speculating, let me suggest another hypothesis. Education is supposed to increase our ability to learn. It is not that we accumulate useful knowledge in school, but we build up the mental equivalent of muscles. But many people stop learning at some point in life, resulting in mental atrophy.
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I know you mentioned that you thought the accreditation cartel will be difficult to break (see Will the University Survive?), however as you mention above, what are the pool of economically-viable alternatives? Is there a market for a podcast + OpenCourseWare mash-up? I think: yes.
Note: Abolishing AT&T's State-granted cartel did not destroy communications. Nor will the same occur if the State is removed from certifying "knowledge" and "education."
Arnold writes:
"If education is nothing but a signal, then it would pay an entrepreneur to come up with a more efficient signalling mechanism."
The use of the most obvious alternative signalling method -- IQ testing to find diamonds in the rough -- was made quite onerous to employers by the Supreme Court's Griggs v. Duke Power decision in 1972.
Regarding IQ testing for employment: the high tech industry is almost doing this now. After a cursory review of the CV, interviews often involve "puzzles" that the candidate must solve and talk through on the spot. Sometimes the puzzles are related to job tasks, much of the time they are not. The test simultaneously measure intelligence and communication skills, which is what the employer is looking for.
One thing that some tech companies do to get an edge is hire away students with high skill at (relatively) high salaries before they graduate. This cuts out some of the possible "overhead" of the signalling mechanism.
I am sketchy as to why signaling and the human capital model can't be complements. The degree is a signal of acquisition of human capital, thus reducing the informational asymmetry of the hiring process.
If education is nothing but a signal, then it would pay an entrepreneur to come up with a more efficient signalling mechanism.
*efficient markets fallacy alert* The public hasn't had time to absorb be education-as-signaling thesis. This is an untapped opportunity. An entrepreneur could start up a school that screens for IQ, and basically puts students through hell -- difficult topics involving critical thinking, research, and teamwork, without any grade inflation. It would be cheaper because you wouldn't necessarily need well-educated professors. That would be extremely powerful signaling, and if it failed, so does the signaling thesis. This is actually something I've wanted to try out and would if I could get investment.
However, if someone tried that, I think we all know what would happen: it would go unaccredited and, if not shut down by the education cartel, would be vilified by a compliant media demonizing the commercialization and "unprofessionalism" of this cheaper alternative.
Arnold writes:
"If education is nothing but a signal, then it would pay an entrepreneur to come up with a more efficient signalling mechanism."
Isn't that the purpose of professional exams, such as the Chartered Financial Analysts (CFA(R))?
