Arnold Kling  

Thoughts on Education

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Tyler Cowen raises a good argument about the signaling model.


Education is good for more than getting a good first job offer right off the bat.

Presumably, relying on education as a signal causes firms to make mistakes when they first hire. Over time, as they correct these mistakes, wage differentials should shrink as workers gain experience. This effect may be difficult to measure in practice. But my guess is that you will not find such an effect. Like Tyler, I am skeptical about the signaling story. I prefer a credentialism story. See point 2 below.

Noah Smith writes,


Since as a toddler you can't possibly pay to educate yourself, anyone who does end up footing the bill for your education will probably end up not seeing a positive return on their investment. So if education is purely private, we will probably end up with a lot less human capital investment than is optimal (or that your grown-up self will wish you'd received as a toddler).

Some comments.

1. This may be a good argument for government subsidization of education. However, it does not explain why government should provide education. In the United States, government provision has produced monopolization and, in particular, politically powerful teachers' unions. This makes it less than clear whether spending more on education produces benefits that are not captured by private interests. In our area, we are seeing cutbacks in school programs as counties struggle with under-funded teacher retirement plans. I would like to see the public-goods rationale for that phenomenon.

2. The relationship between education and earnings is not entirely market driven. Within the government sector, pay grade is affected by education levels. Government also has educational credentials that affect many professions, including teaching, health care, and law. That is why I do not look to signaling as the explanation for the returns to schooling. For signals of ability, there are alternatives available. But strict credential requirements leave no alternative.

3. Students are heterogenous. Incomes earned by the average college graduate are not the same as the returns on the margin for a given individual. I will repeat myself here, but I do not see research on education as addressing the issue effectively. Observational studies only tell you about averages. Randomized controlled trials are needed to study marginal effects.

4. Very little of the research on the returns to education is conducted, reviewed, and published within an institutional setting that is scientifically objective. Does the Department of Education wish to publicize negative results? Universities? Left-leaning think tanks? My guess is that the ratio of funding received by education-promoting researchers to that received by education skeptics is more than 100 to 1.


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COMMENTS (7 to date)
J Storrs Hall writes:

One thing that may bridge the gap here is the theory that higher education may be actually imparting useful knowledge and skills -- by teaching cognitively expensive signalling behaviors to the students. These range from politically correct patterns of speech to snobbery in wine, music, and cigars.

see http://www.foresight.org/nanodot/?p=3766

On the other hand, it isn't clear that all signalling is a dead loss (to society as a whole). The peacock's tail is the classic case of signalling in the evolutionary regime; yet we enjoy it as one of the wonders of nature. So with music, wines, etc. But I do think PC is a dead loss.

Adam writes:

In my view, your response #3 is backwards. The majority of what gets published in the returns to education literature is based on some sort of instrumental variables approach. By construction these estimates can only measure the effect on the marginal student who was 'pushed' into more education due to changes in the instrument (see the literature on "local average treatment effects"). You might not like IV, and you might not like observational studies (there are plenty of good reasons not to), but I don't think your critique applies. Perhaps I'm missing part of your argument, since you don't provide a link to how you are "repeating yourself".

Noah writes:

However, it does not explain why government should provide education.

True. That's a topic for another day.

I think in principle there is no well-understood reason why government should provide rather than simply subsidize education. In practice, it seems hard to monitor government contractors. And we also see few nations that have successfully implemented a voucher system. But those are not hard-and-fast reasons, just reasons for my own misgivings about vouchers.

R Richard Schweitzer writes:

Noah States:

". . . anyone who does end up footing the bill for your education will probably end up not seeing a positive return on their investment." (emphasis added)

That statement is not confirmed by historical experience in open societies.

The Post-WWII period is a prime example of sustained civic, cultural, technical and living standards enhancements.

Of course, now that that instrumentality has become institutionalized, it has taken on functions of its own and of those who "operate" it.

That is probably the principal defect of what has come to be known as our "Educational System;" it was once a distibuted and diverse civic instrument of advancement, which has now become an institution

eric writes:

AK: "Incomes earned by the average college graduate are not the same as the returns on the margin for a given individual. I will repeat myself here, but I do not see research on education as addressing the issue effectively. Observational studies only tell you about averages. Randomized controlled trials are needed to study marginal effects."

Here's a study that looks at that issue:

http://www.nber.org/digest/dec99/w7322.html

Bryan Willman writes:

Two real problems with these debates at least as they apply to college.

First, some fraction of students do indeed learn useful things that lead to high rewards they most likely otherwise would not have achieved. The issue is not whether education will help all people (it won't), or some people (it will), the issue is will it help the particular person of interest (me or my child) and that will depend a very great deal upon the person and the field of study.

Second, perhaps college serves not so much as a signaling instrument as a market stratification instrument. So, perhaps higher-than-expected rewards go to the 30% of the population that has done something the other 70% hasn't. When many people didn't graduate from high school, graduating from high school could serve that purpose. Now almost everybody graduates from high school, so college serves that role. Creating a system in which everybody goes to college might not actually enrich the newly enrolled, but instead "raise the bar" for "elite status" to graduate school, or membership on a team that won some contest, etc.

That is, it's not simple signaling ("I finished college therefore I'm a good worker bee and you should hire me") but rather *relative* signaling ("I finished an MS in Comp Sci in a year when there were only 59 such graduates in the US, people like me are rare so you have to hire me and pay me a great deal".)


Glen S. McGhee, FHEAP writes:

Hal Hansen is mounting an attack on both signal theory and credentialism using a strong historical comparative analysis of Germany and USA.

Here's where the shallowness of current views becomes clear, as well as the depth of the problems we face.

http://eric.ed.gov/ERICWebPortal/detail?accno=ED433292

His avowed goal is to "recast the history of American education," and he does.

Hal Hansen's Dissertation Summary
http://www.h-net.org/~business/bhcweb/publications/BEHprint/v028n1/p0019-p0024.pdf

Much of this is reprised and updated in the most recent issue of Research in Social Stratification and Mobility, "Rethinking Certification Theory and the Educational Development of the United States and Germany." 2011

He is, perhaps by his own definition, a skeptic. And the educational-governmental complex has acted accordingly. Only once in a generation do we even get to see a David Labaree or Randall Collins lecture. Who would hire a Hansen? No one.

For that matter, I know of NO funding for higher ed accreditation reform. There is none. Not 100 to 1, but none.

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