The Signaling Theory
Often, we think about education as building “human capital”, that it’s teaching kids valuable skills that they can use to be productive later in life. Caplan’s main thesis is different: that the root cause of education is more about signaling than anything else.
He illustrates it with a few examples: suppose you’re at a law firm and you are hiring a summer intern. You get an application from a philosophy major, who graduated from Stanford.
You think “boy, they must be really diligent at doing fairly tedious and boring things.” If they didn’t graduate high school, you think “they must be stupid”. If they didn’t graduate high school but aced the GED you think “they must be lazy”.
All of these assumptions are built into our education system, which doesn’t really get at the heart of “building human capital”. Instead, it’s more about proving and differentiating yourself.
Caplan likens it to being at a concert, and deciding to stand up so you can see better. It’s better for you to stand up. But if everyone does it, suddenly it’s not so effective.
Today’s systems are like that. It’s the rational choice for each individual to get more education. But it mostly serves to let us stand out from the rest of the population. In effect, we might be better off with less spending on education!
Finding good workers
Companies systematically outsource indications of "skilled workers" to college and universities, rather than relying on this themselves. Instead of trying to issue an IQ test (which is illegal), they rely on colleges to use the SAT.
Caplan argues there are a number of traits of good workers:
Conformist – Good workers tend to have some measure of conformity. They are okay following norms and being told what to do. Wearing suits or having a short-cropped haircut are good examples of signaling that you are a conformist. It indicates that you will bear some cost in order to signal that you are willing to follow orders. The higher the cost, the better the signal.
Conscientious – Good workers will tend to be detail oriented, and do a good job of working through boring challenges and tasks. He argues that good grades are a good example of being conscientious.
Intelligent – Good workers will be smart enough to learn new skills and make good choices on the job. Though it's not a perfect measure by any means, Caplan argues that college entrance requirements (standardized test scores, grades) help employers screen for intelligence.
Caplan presents a lot of data related to this point too. He points out that employers pay college graduates 30-50% more salary, even if the graduates didn't major in a relevant field. Employers don't seem to care about how much material students actually retained, so they don't worry about any sort of 'exit exam'.
Alternatives to education?
I think Caplan makes a solid case that today's education system is far too expensive for what most attendees actually get from it.
But I found myself wondering... what would a better system look like?
Caplan seems to think that top tier students should continue to attend top tier universities. If you have the opportunity to go to Harvard, the financial returns typically justify the attendance.
Where he takes a different approach is with middling students, or ones who might be inclined to pursue a liberal arts degree. Caplan makes the case that these students should instaed either pursue vocational schools, or at the very least, STEM majors.
These discussions left me wondering if there's a far more radical model all together. When I think of the core parts of education that really helped me succeed, they are:
- great reference materials
- a very motivated peer group
- lots of hands-on building
Most high schools today don't seem to optimize for these three ingredients, and teaching in general is not considered to be a high-status profession in the U.S.
Going even a step further, you could imagine that instead of trying to focus on teaching of material, we could find some way to make gaining credentials cheaper. Instead of paying $200,000 to attend a private university for four years... could you become a mechanic or a doctor or an attorney for a much lower cost?
Maybe. There's a fundamental mismatch here: that the harder a credential is to attain, the greater the weight of the signal.
The book left me with more questions than answers when it comes to techniques for improving today's educational model... but all that said, I think the signaling theory is very sound. It helps explain a number of the entrenched interests in today's education system.