Mixed Signals: Why Becker, Cowen, and Kling Should Reconsider the Signaling Model of Education
Gary Becker, Tyler Cowen, and Arnold Kling have all recently criticized the signaling theory of education. If you haven’t heard, the signaling theory says that to a significant extent, education does not increase workers’ productivity. Instead, the fact that you obtain an education shows that you were more productive all along, which makes employers want to hire you.
Here’s a simple thought experiment to illustrate the distinction. Which would do more for your career: A Princeton education, but no diploma, or a Princeton diploma, but no education?
All my personal experience (30 years in school!) tells me that there is a lot of truth in the signaling model. I don’t use most of my schooling in my job, and I’m a professor, for God’s sake! But would I have my current position if I had failed high school Spanish? No way.
I must admit, however, that Becker, Cowen, and Kling have even more personal experience with education than I do. What are they missing?First, Becker:
I believe it [the signaling model] declined because economists began to realize that companies rather quickly discover the productivity of employees who went to college, whether a Harvard or a University of Phoenix. Before long, their pay adjusts to their productivity rather than to their education credentials.
There is a big equivocation here. Sure, employers eventually figure out how productive a worker is IF they hire him. But interviewing is expensive, and so is getting rid of disappointing workers. So it still makes sense to use credentials to make interviewing and hiring decisions: You save valuable time, and reduce the chance of hiring unproductive workers.
If education is pure signaling, just give everyone a standardized test in seventh grade and then close up the schools.
This is a straw man. Even firm believers in the signaling model like myself grant that schools teach some useful skills. But more importantly, this objection only works against specific kinds of signaling. Yes, if all that school signals is IQ, then a test is a cheap substitute. But what if school signals conscientiousness and/or conformism? Think about it this way: Would you want to hire a high school drop-out with a 150 IQ? Probably not, because you’d immediately think “This guy had the brains to do anything. Why didn’t he finish high school? What’s wrong with him?!”
Tyler’s defends an alternative, “self-image formation” model of education:
Men are born beasts. But education gives you a peer group, a self-image, and some skills as well. Getting an education is like becoming a Marine. Men need to be made into Marines. By choosing many years of education, you are telling yourself that you stand on one side of the social divide.
This is interesting as far as it goes. But jobs create self-image too – and probably self-images that are more conducive to being a productive worker. Schools instill the self-image of the speculative day-dreamer; jobs instill the self-image of the practical go-getter. Tyler anticipates this:
Of course apprenticeships can turn beasts into men, but apprenticeships also turn them into working-class men. You spend your childhood hanging out with other laborers. As society becomes wealthier, more parents are willing to spend on education rather than apprenticeships.
But this is mostly semantic. Working-class jobs have “apprenticeships” which promote a working-class self-image; middle-class jobs have “internships” which promote a middle-class self-image. Ending government subsidies for education wouldn’t create a new working-class generation; it would lead businesses to massively expand the employment of interns to take advantage of the large pool of talented, young people who can’t afford tuition.
As long as we’re just speculating, let me suggest another hypothesis. Education is supposed to increase our ability to learn. It is not that we accumulate useful knowledge in school, but we build up the mental equivalent of muscles. But many people stop learning at some point in life, resulting in mental atrophy.
Teachers of useless information often seek refuge in the “learning how to learn” story. But the facts are not on their side. The psychological literature on “fade out” essentially finds that mental atrophy is the rule. You can temporarily raise IQ, but it “fades out” in a few years. Furthermore, the psychological literature on “transference” of learning from one area to another finds surprisingly weak evidence of it. Since education has a long-run effect on earnings, but only a short-run effect on learning ability, we’ve got to look elsewhere for answers.
Becker claims that the signaling model used to be popular: “The signaling interpretation of the benefits of going to college originated in the 1970’s and had a run of a couple of decades, but is seldom mentioned any longer.” Cowen claims that it’s still popular: “Nerds will hate education and tend to embrace the signaling model… This is one reason why the signaling model is so popular in economics.”
I wish! 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.