Economic arguments about education often conflate human capital, ability bias, and signaling.  Since I am a big fan of Roderick Long’s exhortation to “Whip conflation now!,” I decided to do something to squelch this conflation.  Namely: Produce a clarifying table.

The first three entries are polar cases.  They’re worth discussing even if no one believes them because you can use these polar cases to categorize actual positions.  Think of them as primary colors.

For the record, I have actually encountered many believers in the Pure Human Capital model, a few believers in the Pure Ability Bias model, and zero believers in the Pure Signaling model. 

Normal
0

false
false
false

MicrosoftInternetExplorer4

Model

Effect of Education on Income

Effect of Education on Productivity

Notes

Pure Human
Capital

WYSIWYG

WYSIWYG

Education
may raise productivity by directly teaching job skills, but character
formation, acculturation, etc. also count.

Pure Ability
Bias

Zero

Zero

“Ability”
includes not just pre-existing intelligence, but pre-existing character,
acculturation, etc. 

Pure Ability Bias
is observationally equivalent to a Pure Consumption model of education.

Pure Signaling

WYSIWYG

Zero

Pure
educational signaling can consist in (a) learning and retaining useless material, (b) learning
but not retaining material regardless of usefulness, (c) simply wasting time in ways that less productive workers find relatively painful, leading to a positive correlation between education and productivity.

1/3 Pure
Human Capital, 1/3 Pure Ability Bias, 1/3 Pure Signaling

2/3*WYSIWYG

1/3*WYSIWYG

A good
starting position for agnostics.

.1 Pure
Human Capital, .5 Pure Ability Bias, .4 Pure Signaling

.5*WYSIWYG

.1*WYSIWYG

My
preferred point estimates.  I know they’re
extreme, but my book will explain my reasons and try to win you over.

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Bonus: From now on, I will link to this table whenever conflation of human capital, ability bias, and signaling becomes an issue.