Arnold Kling  

Education and Cartel Membership

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Great Stagnation or Great Vaca... A Shortage of Safe Assets?...

Tyler Cowen writes,


It is an embarrassing question for signaling models to ask: with what lag do employers get a good estimate of a worker's marginal product? If you say "it takes 37 years" it is hard to account for all the recent changes in wage rates in response to technology, as discussed above.

Read the whole post.

More schooling can give you more skills. It can give you a signal of your ability (including your ability to conform). It also can give you membership in a cartel, to be a public school teacher, for example. I worry that it could be that growth in the cartel-membership value of schooling could account for some of the apparent long-term returns to schooling.

By the way, some of the studies that use instrumental variables to show a long-term return to schooling based on "natural experiments" are not persuasive. It turns out that if you look at the instruments, they are weak or questionable.


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COMMENTS (5 to date)
Steve Miller writes:

Most instruments are terrible.

Shangwen writes:

Consider those jobs whose current educational requirements are much higher than they were, say, 20 years ago. To what extent do they now differ? Many positions that now require graduate degrees were ably filled by people with undergrad degrees, diplomas, or little formal education beyond HS back then.

If you ask people who support these changes, they will hand-wavingly invoke technological change or global competition. But baseline exposure to technology has also moved up, and is hard to find people who can't be trained in your basic business software within a few days.

IIRC, Dr. Kling noted that physiotherapists in Maryland will soon be required to all have doctorates. Yet they are no different from those with undergrad rehab degrees who do competent work in other jurisdictions.

Mark Little writes:

Yes, very good.

The demand for schooling is based on multiple motives. In a previous comment to a post by Byran I listed some of these, in particular the "cartel-membership value" motive. (I called it the "white collar union card".) Byran replied that he didn't buy it.

The signaling model is valid and very important. But it's a shame that in intellectual debates we seem always to pit two partial and over-simplified paradigms against one another, while pretending not the notice the other facets of the problem. (In this case, naive years of schooling = "human capital" versus signaling model of education.)

@Shangwen:
Ditto. When all the jobs Y which smart people should fill require credential X, then all the smart people interested in careers in Y will obtain credential X, and it will come to be seen as natural and necessary that job Y requires credential X.

@Steve Miller:
True. When we can't do designed randomized experiments, we can only resort to methods like IV. But we seldom have instruments that are both valid and strong. Most instruments are weak, and most IV results are dubious. But don't give up--when observational data are all we have, an IV analysis is far better than the alternative. (Better a weak instruments analysis than a superstitious faith that correlation is causation; which is what most empirical "studies" amount to.)

Essen writes:

At the outset I acknowledge that the following example is not typical.
Let's take the example of a fighter pilot. As the aircrafts become faster and more maneuverable the demand on her grows in terms of quicker reflexes and tech awareness. The job requirements are scaled up in terms education and skill sets.
But somewhere it hits the ceiling. Enter the drone era. Now you need a teenager who is the star in a video game with similar controls as the drone backend.

Floccina writes:

With more and more people going to college doesn't it get harder and harder to find ambitious, intelligent, highly productive people who did not go to college?

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