David Autor Signals Wit and Insight
By Bryan Caplan
I don’t normally associate MIT with “funny,” but David Autor’s notes on signaling definitely qualify:
Testing signaling versus human capital models of education
Does it seem plausible that education serves (in whole or part) as a signal of ability rather than simply a means to enhance productivity?
• You obviously learn some valuable skills in school (engineering, computer science, signaling models).
• Many MIT students will be hired by consulting firms that have no use for any of these skills. Why do these consulting firms recruit at MIT, not at Hampshire College, which produces many students with no engineering or computer science skills (let alone, knowledge of signaling models)?
• Why did you choose MIT over your state university that probably costs one-third as much? Is this all due to educational quality, or is some of it credentialism?
Harder question: How do you go about empirically distinguishing the human capital from the signaling model?
1. Measure whether more educated people are more productive? (Would be true for either model.)
2. Measure people’s productivity before and after they receive education- see if it improves. (Conceptually okay, very difficult to do.)
3. Test whether higher ability people go to school? (Could be true in either case- certainly true in the signaling case.)
4. Find people of identical ability and randomly assign some of them to go to college. Check if the college educated ones earn more? (Both models say they would.)
5. Find people of identical ability and randomly assign them a diploma. See if the ones with diplomas earn more. (A pure test of signaling.)
Funny – and insightful too.