Yesterday Ed Glaeser and I debated “All government support of higher education
should be abolished” for the Soho Forum.  Many thanks to Gene Epstein for organizing, and Ed for being a great sport, great scholar, and great guy.  Here’s my opening statement.  I’m happy, of course, to post anything Ed would like me to run.

Why should higher education
receive government support?  There are
two main arguments.

The first is the economic
argument.  Government support is
allegedly economically beneficial not merely for individual students, but for
society as a whole. 

The second is the
humanistic argument. Economic effects aside, government support is vital for
the promotion of intrinsically
valuable ideas, culture, and values. 

If I merely supported
spending cuts, I’d only need to argue
that both the economic and humanistic arguments are overrated.  Since I advocate full separation of college
and state, however, I’ve got to go further. 
And I do. 

My book, The Case Against Education, maintains
that both the economic and humanistic arguments are deeply wrong.  Economically speaking, subsidizing higher
education is like subsidizing polluting industries.  It’s probably good these industries exist,
but the free market tends to produce too much,
not too little.  The humanistic argument
is similarly flimsy; while I share the humanists’ ideals, higher education
simply isn’t very persuasive or transformative. 
The vast majority of college students arrive as philistines and leave as

Since Ed and I are both
economists, I’ll focus on the economic argument.  The standard story says that college is great
place to “build human capital.” 
Professors supposedly spend four years pouring useful job skills into
their students.  Why should we believe
this?  Because college graduates outearn
high school grads by over 70%.  Employers
aren’t stupid.  If college didn’t build
tons of human capital, why would the labor market shower rewards on college

This is a convincing
story… until you remember what college professors actually teach.  Sure, there are a few majors that regularly
prepare their students for the world of work, like engineering and computer
science.  But most of what college students study is simply irrelevant in the
labor market.  In real life, how often do
you use history, government, literature, foreign languages, psychology,
philosophy, or higher mathematics?  By
and large, students can safely forget such material after the final exam,
because it never comes up again as long as they live.   And forget it they do. 

These observations are so
obvious you might wonder how anyone can deny them.  Think about your own educational experience:
How many thousands of hours did you spend studying foreseeably useless
material?  Economists’ standard response
is simply to double back to the labor market. 
If college coursework were largely irrelevant in real life, real life
employers wouldn’t pay college graduates a handsome premium. 

Strangely, though, there’s
a Nobel prize-winning economic model that explains why even the most irrelevant
coursework and silliest majors can be financially rewarding.  It’s called signaling.  Basic idea:
Academic success is a great way to convince
employers that you’ve got the Right Stuff – to show off your brains, work
ethic, and sheep-like conformity.  Since
people with these traits are productive workers, employers happily reward
people who display them – even if the display itself has nothing to do with the

Think about it like this:
There are two distinct ways to raise the value of a diamond.  The first is give it to a gemsmith to cut the
diamond to perfection.  The second is to
give it to an appraiser to attest to its flawlessness.  The first story is like human capital.  The second is like signaling. 

What difference does the
mechanism make?  For the individual
student, not much.  For society, however,
it makes all the difference in the world. 
Insofar as the human capital model is right, government support for
college enriches society as a whole by upgrading the skills of the workforce.  Insofar as the signaling model is right, however,
government support for college impoverishes society by sparking a credentialist
arms race.

So which model is right –
human capital or signaling?  The truth is
obviously a mix of both.  In The Case Against Education, however, I
argue that signaling’s share of the mix exceeds half – and probably a lot

Why should you agree with
me?  For starters, look at the
curriculum.  Most of what we teach in
college is so otherworldly that
you’re only likely to use it on the job if you become a college professor
yourself.  No sane person with a
non-academic job panics because they’ve forgotten everything their professors
taught them about history, literature, or philosophy.

Curriculum aside, you
probably already tacitly agree with me. 
Did you bother to enroll in college or pay tuition?  If all you wanted was the learning, this was
a total waste, because you can unofficially take classes at virtually any
college in America for free.  There’s
just one little problem.  At the end of
four years of guerrilla education, you won’t have the crucial signal: the
diploma.  Hence, unofficial education
barely exists.

Suppose you could have a
Princeton education without the diploma or a Princeton diploma without the
education.  Which would you choose?  If you have to ponder, you already believe in
the power of signaling.  By contrast, if
you were stranded on a island and had to choose between knowledge of
boat-building and a boat-building degree, you wouldn’t ponder.  When you face the labor market, it’s
important to be impressive.   When you
face the ocean, all that matters is skill.

Signaling dominates if you
look at the way college students approach their studies.  They routinely seek out “easy A’s”
– professors who dole out strong signals in exchange for little work.  Of course you don’t learn much from such
professors, but who cares?  After the
final exam, you’ll never need to know it again. 
Signaling likewise explains why academic cheating isn’t just
“cheating yourself.”  When you
impersonate a good student, you hurt employers who hire you – and the honest
students whose merits you indirectly call into question.

Academic research
reinforces common-sense.  While
economists typically measure education’s annual
return, scholars who look find enormous diploma or “sheepskin effects.”  Senior year pays far more than the earlier
three years combined!  This is very hard
for human capital theory to explain.  It
makes perfect sense if college students are trying to signal their conformity
by completing their degree. 

Macroeconomists, similarly,
have found that while individual education has a big effect on individual
income, national education has only a small effect on national income.  To be fair, they rarely embrace the signaling
explanation; instead they cry for better data so “we can get the right
answer.”  But signaling cleanly
explains their results: If one laborer gets more irrelevant education, he
outshines the competition; but if a whole labor force gets more irrelevant
education, society’s time and money go down the drain.  Given the small effect of education on GDP,
it’s hardly surprising that few researchers find that education leads to higher
GDP growth.  If you’re still trying to
figure out if your machine moves at all, you can safely conclude it’s not a perpetual motion machine.

The most striking academic
evidence for signaling, though, comes from the literature on “credential
inflation.”  The average worker is
years more educated than he used to be. 
How much of this is because jobs are more cognitively demanding?  How much of this is because workers need more
education to get – though not to do – a given job?  In The
Case Against Education
, I examine all the main studies.  Punchline: The evolving labor market explains
only about 20% of the rise in education. 
The remaining 80% is credential inflation: You need college to convince
today’s employers to give you the same jobs your parents or grandparents got
right out of high school.  This is
puzzling for human capital theory.  Why
should employers pay for B.A.s when you need only a high school education to do
the job?  Signaling explains it
elegantly: The more degrees proliferate, the more you need to stand out.

When I present these
arguments, economists rarely deny that signaling seems like a persuasive
story.  Instead, they usually retreat to
apriori objections: Appearances notwithstanding, signaling can’t be right.  The most popular objection: College “passes
the market test.”  If it were mostly
signaling, someone would have figured out a cheaper signal long ago. 

But this this crazy.  Higher education receives hundreds of
billions of dollars of taxpayer support every year – a classic sign that it fails the market test.  There are probably plenty of socially cheaper
forms of labor market signaling.  But as
long as the massive subsidies continue, the substitutes will remain on the fringes.  The easiest way to discover good alternatives
is to end government support for higher ed – and see what comes next.

At this point, you could
respond, “Sure, education is mostly signaling.  But the economic rewards are so great that
it’s still worth
subsidizing.”  But signaling aside,
there’s far less to education’s economic rewards than meets the eye.

Why?  First, college graduates aren’t randomly
selected.  Most were already high
performers back in high school; if they hadn’t gone to college, they probably
would have been fairly successful anyway. 
When researchers statistically compare high school graduates to college
graduates with equal pre-college ability, they almost always find the true
effect of college on personal success is smaller than it seems.

Second, standard
comparisons focus on people who finish
college.  But this is cheating, because
the college graduation rate for full-time students is about 50%.  When you weigh college as an investment, this
slashes the expected return.

A debate is admittedly not
a great place to do arithmetic.  But in The Case Against Education, I snap all
these pieces – and many others – together. 
Along the way, I seriously study potentially neglected benefits of college: health, crime, you
name it.  Because confirmation bias is
bad.  Final result: From a social point
of view, investments in college aren’t just overrated; they’re ruinous.  Subsidizing this rat race is as economically
foolish as handing out big cash prizes to the world’s dirtiest polluters.

When the economic case for
tax-subsidized college crumbles, even many economists suddenly discover the
“finer things in life.”   What
about the humanistic argument that college inspires love of ideas and culture –
that it refines and elevates us?  My
quick response: Refinement and elevation would be great… if it really
happened.  But the actual data say that
it’s mostly wishful thinking.  Only a
miniscule fraction of college grads take a meaningful interest in ideas or
culture after graduation.  People who
attend events like the Soho Forum for fun are really weird.  That’s why I love you guys! 

You could agree with every
word I’ve said so far, but respond, “Instead of abolishing government
support for higher education, government should use the power of the purse to fix higher education.”  We can certainly imagine a world where
colleges fill every student’s mind with human capital and every student’s heart
with Shakespeare.  Why not do that?

Simple: Defunding
dysfunctional systems is almost fool-proof. 
Fixing dysfunctional systems, in contrast, is horribly hard.  As a professor, I assure you that the entire
system bitterly resists even mild reforms. 
Most professors detest the very idea of objectively measuring the value
of anything they do.  They’re artists!  You can’t deal with these people – and it’s
foolish to try.  If someone says,
“Sorry for wasting trillions of tax dollars.  But we did a few good things, and we’ll spend
your money wisely from now on,” the prudent reaction is to draw a line in
the sand and say, “You’re fired.” 

But why should we be so
extreme?  Why not just cut half and see
if that does the trick?  Pragmatically
speaking, abolition is far more transparent. 
The scope of partial reforms is always confusing and debatable.  When you separate college and state, it’s

Since this is the Soho
Forum, let me end with my principled argument for full abolition: the presumption of liberty.  I know there’s a wide range of libertarian
views.  In fact, there’s one libertarian
view per libertarian.  But we should all
be able to agree that the burden of proof rests on the advocates of government
intervention.  If politicians are going
to take our money without our consent, they should at least have solid proof
that the money is very well-spent. 
Government support for colleges does not meet that bar.  Not even close.

Update: Gene Epstein sent me the vote tally.