Bryan Caplan  

Me and the Return to Education Literature

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Like Arnold, I take issue with Tyler's claim that:
The view that education is mostly about signaling is inconsistent with the established consensus on the returns to schooling and yet the writers at EconLog do not respond to this literature or, as far as I can tell, even acknowledge it.
Key problems:

1. Arnold and I have very different views.  If I understand Arnold's position correctly, he has doubts about the private return to education.  The evidence that Tyler cites is at least relevant to Arnold's position.  On this issue, I actually stand between Arnold and Tyler.  I'm willing to accept non-experimental evidence.  There's no need for scare quotes.  But Arnold does score some telling points against the existing literature  - and I've got some complaints of my own.  (Here and here are my two favorites).

2. My main complaint about education - that it's largely signaling - is totally distinct from Arnold's.  Here, the evidence Tyler cites is simply irrelevant.  The signaling model doesn't say that the private return to education is lower than it appears.  The signaling model says that the social return to education is lower than it appears.  I "acknowledged" this distinction very clearly in this early post, and repeatedly mentioned it since then.  Or see my labor economics lecture notes on human capital and signaling.

3. Tyler's post is especially weak because he forgets relevant empirical evidence that he previously used against me.  For decades, the return to education literature almost entirely failed to acknowledge the signaling model.  But in the last few years, this finally ceased to be true.  Tyler would have been correct to claim that I haven't responded to this literature.  So why haven't I?  The obvious reasons: (a) I've been busy with other projects, and (b) The new evidence I've had time to review isn't nearly strong enough to prompt me to recant.

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COMMENTS (5 to date)
Simon writes:

What about the recent Martorell and Clark paper on the signaling value of a high school diploma?

Their regression discontinuity estimates (based on last-chance standardized tests) suggest that there is no effect of receiving a diploma conditional on academic skills. Wouldn't the signaling explanation predict a huge effect here? How do you reconcile this with your views?

Brendan writes:

Has anybody conducted surveys asking bottom 50% grads from bottom 50% colleges whether knowledge learned in college has been useful at their ensuing line of work?

I think the median student fully accepts the signaling explanation of education, they just call it something else.

Bob Murphy writes:

Yeah I was confused by Tyler's claim too, Bryan. But are you really saying he is that completely off-base, or did he mean that the private-returns-to-education literature accounted for the signaling effect?

Rachel writes:

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ajb writes:

Funny how Bryan's rhetoric here is the opposite of his views on parenting or immigration.

Here he has a strong prior on signaling and says since it hasn't been clearly tested, he sticks by his theoretical intuition.

In contrast, on parenting, he dismisses the objections of others that their specific views of parenting haven't been fully tested (see his concession on untested Asian parenting or on other matters relating to how peer effects are important which is a clue to how parenting might work) and says that the default should be with the literature saying parenting doesn't matter.

On immigration, he dismisses the literature showing the low quality of hispanic immigrants and their lack of convergence to American bourgeois norms on education and income. He dismisses his own work on the irrationality of voters and how low quality immigrants might skew politics, and he disses Americans' preferences for controlling borders on moral grounds. He also won't deal with the problem of welfare exploitation by saying he's against welfare anyway. Concerns about the future -- given current political realities -- are just batted away.

I guess you're only free to dismiss the literature if your priors are just like Caplan's.

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