Review: Bryan Caplan’s The Case Against Education
Let’s start with a hypothetical.
Tomorrow morning the United States government, concerned with the amount of money newlyweds are spending on diamond engagement rings, enacts the Pro-Wedding Act of 2018: all prospective fiancées are granted $3000 towards buying an engagement ring.
Three years after this was enacted, would you expect the average price in America of engagement rings to be higher than today or lower?
The price would rise, right? And it would rise considerably because the main value of the ring to a couple is its very costliness—and if it costs the fiancé too little, it needs to be raised until it sufficiently high again. So ultimately the government’s subsidy would be a massive waste of money (at least from the perspective of society), and the price of rings would rise eventually to mostly just offset the subsidy.
The reason is that one of the main values of a diamond ring is “signaling.” The very fact that the diamond rings are expensive is what makes them significant as a sign of commitment and devotion.
What is signaling? To quote Scott’s definition of signaling: "a method of conveying information among not-necessarily-trustworthy parties by performing an action which is more likely or less costly if the information is true than if it is not true". In order to be effective, a signal must be 1) expensive and 2) hard to fake.
So what if we replace “diamond rings” with “college diplomas”? What if a great weight of the value of education lies not in the skills it teaches but in the signal it sends?
That’s the core argument Bryan Caplan makes in his new book, The Case Against Education.
Who is Bryan Caplan? I'm going to quote myself from a primer I wrote about Caplan:
"Playful, ebullient, kind, sportingly argumentative, and dressed unfashionably for comfort." --Will Wilkinson, answering the question “What is Bryan Caplan like in real life?”
Bryan Caplan wears shorts 10 months of the year. He is a professor at George Mason, and like Robin Hanson, associated with a loose organization of Masonomic bloggers. He blogs at http://econlog.econlib.org/ He is a cynical optimist and a recovering misanthrope.
If you have previously voraciously read Caplan’s blog posts on education, like I have for years, I don’t think there’s too much new here. It seems to me what the book adds is more supporting research and more addressing of counterarguments, which is good, but nothing that seems terribly new—more due diligence than new revelations, in other words.
I think I can safely and non-controversially say that signaling is a huge part of education. Frankly, it would be disingenuous to deny it. It does solve many puzzles, such as…
Why is it that students are paying top dollar for their education…but they cheer when class is cancelled? (Answer: they are paying for the credentials, not knowledge)
Why is so little of what a liberal arts education teaches actually pertinent to future jobs? (Answer: the education is mostly a filter to remove students who are not conscientious enough, smart enough, or conformist enough.)
Most of what we learn in say, college, has no direct bearing on our professions. Caplan: “What fraction of U.S. jobs ever use knowledge of history, higher mathematics, music, art, Shakespeare, or foreign languages? Latin?! […] This seems awfully strange: Employers pay a large premium to people who study subjects unrelated to their work.”
As I often tell my own undergraduate students, you will learn more about how to do your job in the first six weeks of actually doing your job than you will in four years of college.
So this more modest claim Caplan makes seems fairly defensible:
When this book defends the signaling theory of education, similarly, it does not claim all education is signaling. It claims a significant fraction of education is signaling [….] First: At least one-third of students’ time in school is signaling. Second: at least one-third of the financial reward students enjoy is signaling.
So yes, signaling is a big part of why education has such a big impact. Where Caplan becomes more controversial is when he says that, in his estimate, 80 percent of education is pure signaling. And, thus, while an individual may make personal, selfish gains from education (think of the happy fiancees who receive free money for rings), society as a whole actually loses from education.
The problem is that education can be personally beneficial, yet it is socially wasteful.
Let me repeat that because most of the objections I’ve encountered to the signaling theory of education seem to elide it:
The problem is that education can be personally beneficial, yet it is socially wasteful.
A smart high schooler would almost certainly personally benefit from a college education. And the government spending benefits the smart high schooler—but it doesn’t necessarily help society as a whole. Think of the diamond ring example I shared earlier—or imagine a concert where some folks stand to see the stage better, thus forcing the people behind them to stand to see the stage better. Soon everyone is no better off than they started although all have had to expend the extra effort.
What if, to take an example from Caplan, everyone had one fewer degree?
In this world, employers in need of a top-third worker would only require a high school diploma. The quality of labor would be certified about as accurately as now—at cost savings of four years of school per person.
In other words, what employers want is the best third, not necessarily a set education or degree. If the ‘best third” can be deduced as accurately by a different matter, than the education doesn’t matter.
What this means, then, in Caplan’s words:
To be maximally blunt, we would be better off if education were less affordable. If subsidies for education were drastically reduced, many could not longer afford the education they now plan to get. If I am correct, however, this is no cause for alarm. It is precisely because education is so affordable that the labor market expects us to possess so much. Without the subsidies, you would no longer need the education you can no longer afford.
You know what’s an incredibly useless skill? Spelling.
If you were an employer at an accounting firm and learned that a potential applicant had won the Scripps National Spelling Bee while in high school, would that make the applicant more or less appealing?
It would make them more appealing, naturally, even though the skill is all but useless in accounting—the applicant is more appealing not because of the skill she brings to the table but because what the victory tells us about her.
So let me recap the argument in my own words: traditionally, we see education as doing four things:
It adds new skills and knowledge to a student. (e.g., I now know basic calculus)
It transforms a student and “builds character.” (e.g., critical thinking skills and greater tolerance)
It connects a student with valuable peers, potential employers, and mentors. (i.e., social capital)
It reveals the kind of person a student is (i.e., it takes a fairly smart, fairly hard-working, fairly well-socialized young adult to earn a BA; therefore, this young adult would make a good employee)
In Caplan’s opinion, education is almost entirely #4; the vast majority of the value of education is pure signaling. In an interview, he says (emphases added):
[The] whole educational process filters out the people who wouldn't have been very good workers. So people who are lower intelligence, lower in work ethic, lower in conformity--those people tend to not do very well in school. They drop out. They get bad grades. And that's why the labor market cares.
A very simple way of explaining it is think about two different ways to raise the price of a diamond. One way is by cutting it very beautifully so that it is actually a better diamond. Another way, though, is you put on that funny monocle thing and you look at it and you appraise it. These are both ways that you can raise the price of a diamond. So, cutting the diamond can raise the price. But also a very credible appraisal can raise the price as well. And the human capital story basically says that schools take these diamonds-in-the-rough and it cuts them very nicely and then that's why they are more valuable. And signaling says, no, no, no: what's going on is students show up to school basically as well as they are going to be, and then what the school does is it puts them through a bunch of tests and it makes them jump through a lot of hoops, and then it certifies them and certifies their quality. And that's why employers actually care. Now of course, any sensible person will say: Well, there's some truth to both stories. But, so the real question is not: Is it all human capital or is it all signaling? The question is: What's the balance? The general view among most active labor economists is that signaling is basically irrelevant[…]; it's maybe 5%, 10%; it's something that we can pretty much forget about. My view, though, is signaling is more like 80%.
Students do NOT work any harder than they used to. The average college student only studies 12 hours a week.
Caplan’s notion, then, is that education is mostly about #4—revealing the kind of person you are: “Much schooling doesn’t raise productivity; it’s just hoop-jumping to show off your IQ, work ethic, and conformity.”
In other words, education is about signaling: rewarding people who display their worth even if the display itself is wasteful. If the signaling model is correct, however, it means that education actually has negative externalities. These can cancel out any positive externalities, or even imply that government is subsidizing waste. While the private return to an individual can be great, the amount of money that we spend on education as a society can be a huge waste.
As Alexander Mengden summarizes Caplan’s argument:
Similarly, if you get a better education, this will make you look better to potential employers and thereby increase your economic opportunities. But it will also make others look bad in relation to you and thereby decrease their employment opportunities. So, if by having more and better education, you can only increase your economic position by decreasing others’ position by the same proportion, if everybody got more and better education, nobody would be better off.
I’m going to address some of the more common objections here. What is offset in quotes is from Caplan; otherwise I’ll try to paraphrase Caplan.
Okay, so what you learn in college is not immediately applicable, but you learn something more important: how to think
Caplan argues—convincingly, in my opinion—that this is mostly not true. Students learn a specific subject, but when asked to apply their thinking cross-curriculum, it mostly fizzles. He discusses an experiment that asked university students to apply their statistical and methodological skills learned in a class into real world examples. They did very poorly.
The point is not merely the college students are bad at reasoning about everyday events. The point is that college students are bad at reasoning about everyday events despite years of coursework in science and math. Believers in “learning how to learn” should expect students who study science to absorb the scientific method, then habitually use that fruitful method to analyze the world. This scarcely occurs. By and large, college science teaches students what to think about topics on the syllabus, not how to think about the world.
On his blog, Caplan cites:
[M]any students are only minimally improving their skills in critical thinking, complex reasoning, and writing during their journeys through higher education. From their freshman entrance to the end of their sophomore year, students […] improved these skills, as measured by the CLA [Collegiate Learning Assessment], by only 0.18 standard deviations...
With a large sample of more than 2,300 students, we observe no statistically significant gains in critical thinking, complex reasoning, and writing skills for at least 45 percent of the students in our study….37 percent of students reported spending less than five hours per week preparing for their courses.
So if I’m a smart high schooler, should I just skip college?
Absolutely not. In the signaling model, studying irrelevancies still raises in come by impressing employers. To unilaterally curtail your education is to voluntarily leap into a lower-quality pool of workers. The labor market brands you accordingly.
So if I’m a poor student, should I just skip college?
Caplan advises everyone but terrible students (or folks who don’t want a full time job) to complete high school. However, he suggests only strong students or special cases go to college. For weaker students, college is normally a bad deal.
And a graduate degree? “Don’t get a master’s degree unless the stars align—the “degree return” on Masters is a paltry 2.6 percent.
If employers only care about the signal, why don’t they create a cheaper test?
When you start a new job, why do employers make you type in your job experience even though they already have that information in the resume?
Answer: it is easier for them if you do it.
So why would they come up with easier ways? They already get the signal they want--someone else has paid the price.
Why not just hire an 18-year-old with a high SAT score rather than making them sit through four years of college?
Caplan posits that intelligence alone is not a very helpful trait in a worker—in fact, intelligence without social conformity and diligence can be detrimental to the work place. So that’s why schooling has so much drudgery, so much obeying of rules, so much requirement of turning things in on time—to weed out those who cannot “stay in the lines.”
So why does school have to go on for years?
Simple: Even a lazy weirdo can pretend to be hard-working and conformist for a few months. Now suppose an employer wants people at the 90th percentile of conscientiousness and conformity. He's got to set the educational bar high enough that 89% of people give up despite the rewards. Especially in an environment where government heavily subsidizes education, that could easily mean you have to get years and years of school to distinguish yourself from the pack.
“Why wouldn’t employers simply hire a bunch of people for a trial basis rather than depend on credentials? If the signaling model were true, why wouldn’t employers hire a bunch of high school kids and save everyone the trouble.“
One of Caplan’s explanations is firing aversion—most employers really, really hate firing people. In fact, they’ll hire consultants to tell them who to fire, even if they already know who they need to fire, just to give them a pretext. Caplan:
If you hire based on credentials, you never even have to meet most of the subpar candidates. If you hire based on trial-and-error, in contrast, you get to know a lot of people, then dash their dreams. Once again, a boss who foresees his own psychological reaction tailors his strategy accordingly.
But education is good for society!
“Education’s powers of social transformation are galactically overstated.” Caplan makes a pretty convincing case for education as a consumption good—that is, rich countries have a lot of education for similar reasons that rich countries drink a lot of wine and eat a lot of chocolate. Once you take into account the sheepskin effect (that is, the premium for completing a degree), it seems pretty small. Caplan admits he has some difficulty studies that firmly support his conclusion, mostly because they approach the issue with the assumption that education builds skills.
Papers asking “If the average college grad didn’t go to college, how much money would they make?” are plentiful. Papers asking “If the average college grad didn’t go to college, what are the odds they’d be in the workforce?” are nearly nonexistent.
What about…
There’s lots of counter-arguments he addresses that I won’t get into here, but he does a fairly good job of addressing many of them. If you have a specific question, I’ll look it up and see if I can find his response.
So what’s the longterm impact of the book? If Caplan is correct, then what?
When I argue education is largely wasteful signaling, most listeners yield. Popular resistance doesn’t kick in until I add, “Let’s waste less by cutting government spending on education.” You might think conceding the wastefulness of education spending would automatically entail support for austerity, but it doesn’t. The typical reaction is to confidently state, “Education budgets should be redirected, not reduced.”
[….] Prudence [however] dictates a two-step response: Step 1: Stop wasting resources. Step 2: Save those resources until you find a good way to spend them. Not wasting resources is simple and speedy. Later:
A moderate reform is to stop requiring useless coursework. Make history, social studies, art, music, and foreign language optional.
It is unfathomable to me, however, that this becomes conventional wisdom. As a thought experiment, imagine what it would mean if the majority of Americans wholly bought into this. What would that world look like? Can you see it? I cannot. I simply cannot imagine it; it breaks my brain. I wonder what it would take to shift the Overton Window this far.
In one of his last chapters, Caplan discusses “Social Desirability Bias.”:
Human beings don’t like expressing --or believing--ugly truths. Instead, we gravitate –in word and thought—to views that “sound good.”
Education is a perfect trap for the social desirability bias, explains Caplan—it appeals to platitudes and universal benevolence, it conflates the personal gain of the educated with the assumption of a society gain, and it appeals to an elite culture which has been enamored with mass education since the 19th century.