Me and the Return to Education Literature
The view that education is mostly about signaling is inconsistent with
the established consensus on the returns to schooling and yet the
writers at EconLog do not respond to this literature or, as far as I
can tell, even acknowledge it.
1. Arnold and I have very different views. If I understand Arnold’s position correctly, he has doubts about the private return to education. The evidence that Tyler cites is at least relevant to Arnold’s position. On this issue, I actually stand between Arnold and Tyler. I’m willing to accept non-experimental evidence. There’s no need for scare quotes. But Arnold does score some telling points against the existing literature – and I’ve got some complaints of my own. (Here and here are my two favorites).
2. My main complaint about education – that it’s largely signaling – is totally distinct from Arnold’s. Here, the evidence Tyler cites is simply irrelevant. The signaling model doesn’t say that the private return to education is lower than it appears. The signaling model says that the social return to education is lower than it appears. I “acknowledged” this distinction very clearly in this early post, and repeatedly mentioned it since then. Or see my labor economics lecture notes on human capital and signaling.
3. Tyler’s post is especially weak because he forgets relevant empirical evidence that he previously used against me. For decades, the return to education literature almost entirely failed to acknowledge the signaling model. But in the last few years, this finally ceased to be true. Tyler would have been correct to claim that I haven’t responded to this literature. So why haven’t I? The obvious reasons: (a) I’ve been busy with other projects, and (b) The new evidence I’ve had time to review isn’t nearly strong enough to prompt me to recant.