1. The Signs of Signaling
Prof. Bryan Caplan Department of Economics and Mercatus Center George Mason University

2. The Case Against Education
My magnum opus on education is forthcoming in 2017 from Princeton University Press.
Central thesis: The signaling model of education is much more empirically relevant than mainstream labor and education economists think.
For conceptual clarity, let’s start with a review.

3. Signaling vs. the Competition
Pure human capital view: Education raises income by raising skill.
Pure signaling view: Education raises income by certifying skill.
Extreme education skepticism (a.k.a. “pure ability bias view”): Education raises neither skill nor income.
Story
Effect on Skill
Effect on Income
Pure Human Capital
WYSIWYG
Pure Signaling
Pure Ability Bias
1/3 each
1/3*WYSIWYG
2/3*WYSIWYG

4. The Ubiquity of Useless Education
Strongest reason to believe in power of signaling: look at curricula.
In U.S., only 30% of high school course hours spent on English and math. Over 40% on arts, foreign language, history, social studies…
Similar patterns for U.S. college majors: <25% of graduates have credibly vocational majors. Engineers ~5%.
Measured learning: In U.S., researchers who measure adult literacy, numeracy, and knowledge of civics, history, science, and foreign languages find shockingly low scores.

5. Level and Origin of Foreign Language Competence
Typical U.S. high school student does 3 full years of foreign language.
Look at self-reported foreign language competence of U.S. adults:

6. The Relevance of Relevance
Common response: “Irrelevant” studies teach students “how to think,” “how to learn,” or raise their general intelligence.
Transfer of learning and expertise literatures.
Measuring informal reasoning.
Fade-out and hollowness of IQ gains.
Discipline/socialization.

7. The Handsome Rewards of Useless Education
Ubiquity of useless education is not puzzling if market rewards education poorly.
But at least in U.S., market rewards education very well.
Remains true after making array of adjustments:
Ability bias
Wheat vs. chaff
Government credentialism/licensing/“IQ laundering”

8. Further Evidence Sheepskin effect
Malemployment and credential inflation
Speed of employer learning
Education premium: personal vs. national

9. First-Hand Experience Counts: You Might Be Signaling If…
You bother to enroll or pay tuition.
You worry about failing the final exam, but not subsequently forgetting what you learned.
You don’t think cheating is “only cheating yourself.”
You seek out “easy A’s.”
You rejoice when teachers cancel class.

10. What’s Wrong With Signaling?
Question: Who cares if education builds human capital or just signals it?
Answer: Signaling models imply education has negative externalities. Social return<<private return.
Concert analogy.
Policy implications:
Drastically cut education spending.
Make education much more vocational.