College and Summer Camp
By Arnold Kling
I’ve been defending the signaling model to other economists for 15 years, and always met fierce resistance. Frankly, I think that this resistance mostly stems from a failure of introspection. If you really compare what you learned in school to what you actually use in your job, the disconnect is too large to ignore.
The challenge is to reconcile two observations.
1. College graduates earn more than people who do not graduate from college.
2. Introspection suggests that what we learn in college is not very important on the job.
Then perhaps the relationship between earnings and a college education is one of correlation without causation. Perhaps people would prefer to spend age 18-21 on campus, at least if they have sufficient aptitude so that without too much effort they can avoid the unpleasantness of bad grades.
So college, like summer camp, is a consumption good. And you might observe just as high a correlation between earnings and summer camp attendance as between earnings and college attendance. But in neither case is there much causation.If your parents are wealthy, and they can afford to send you to summer camp, then you are likely to have high earnings. Or, if you know, based on how well you do in high school, that you will have high earnings, you can afford to go to summer camp. So the people who go to summer camp (college) will tend to have high earnings, without there being a causal relationship.
My problem with the signalling model of education is that it suggests that there is a huge unexploited profit opportunity for employers and employees who can come up with alternative signals. And yet nobody tries to set up a system for identifying and hiring smart high school graduates. I suspect that is because very few talented high school students are willing to miss out on the equivalent of a summer camp experience.
I think that the “summer camp” model explains why colleges have done more in recent years to improve their amenities than to improve education. It may explain grade inflation, since you want to keep the campers happy. It may explain why rural small colleges have fallen out of favor, while universities with top-ranked basketball teams have become more popular.