1. Education is a Signal of Ability Citizenship: Consumer Economics

2. About the Unit In the Consumer Economics Unit we will be exploring the following questions: How do banks and other financial institutions make money? What is a public company? What are public services? What is the purpose of education? Why is employment important? What effect does income inequality have?

3. Education is... Education is a signal of a person’s ability and willingness to do hard work and contribute positively to the economy. The subject area of a person’s degree and their knowledge of it are of less importance when applying for many jobs. The fact that they hold a specific educational credential (degree) signals an ability and willingness to do hard work.

4. Supporting Information http://www.huffingtonpost.com/jonathan -d-fitzgerald/the-real-value-of-a- colle_b_1297297.html? http://www.huffingtonpost.com/jonathan -d-fitzgerald/the-real-value-of-a- colle_b_1297297.html?

5. Historical Examples 1963 - The “information of economics” problem is introduced showing how it’s a problem when one party in a transaction has more information than the other. 1970’s - The answer to the “information of economics” problem is proposed, stating that in an economic transaction if one party in the transaction has more information than the other it would be beneficial for that information to be shared between parties. Example (The Job Interview) - If an employer is interviewing a potential employee, the employee is likely to provide the employer with information about their education or training that makes them qualified or unqualified for the job. Example (The Job Screening OR Credit Check) - If an employer is interviewing a potential employee, the employer may ask questions to gain information about the education or training that makes them qualified or unqualified for the job. OR a lender may ask questions to gain information about the credit history of a borrow that makes them a trustworthy or untrustworthy borrower. 1976 - Screenings are introduced as a way to induce a party that is involved in a transaction to give up information as part of the process of potentially completing the transaction. 2001 - The men involved in the introduction and application of these ideas, Michael Spence, George Akerlof, and Joseph Stiglitz win a Nobel Peace Prize in Economics for their work.

6. Summary Education is a signal of a person’s ability and willingness to do hard work and contribute positively to the economy.