Excellent.”  That’s what Tyler calls Noah Smith’s effort to salvage the human capital model.  Noah’s story: Students learn lots of useful job skills outside of class by socializing together.

[U]seful skills, which you mostly learn on the job, are not the only
valuable form of human capital. There are three extremely important
forms of human capital that you can’t acquire on the job:

1) Motivation,

2) Perspective, and

3) Human networks.

Japan is Noah’s cleanest example:

Japanese college basically provides zero additional signal, because A)
Japanese college kids do very little work, and B) Japanese employers
don’t even look at college grades.


In Japan, college students do mostly party. In fact, that is what you are supposed to do at college, especially at a top school like Tokyo University. It is encouraged. Fun fact: Many Japanese people call college “moratorium”. As in, a moratorium on work.

I say that Japanese college students are signaling conformityIf smart, hard-working, ambitious Japanese normally go to college, a smart, hard-working, ambitious Japanese who doesn’t go to college signals that he’s weird.  In a notoriously conformist society like Japan, signaling conformity is probably even more important than it is in the U.S.

But what’s wrong with Noah’s story?  Lots.

1. As Alex Tabarrok quipped me this morning, Animal House sure doesn’t seem like a story about human capital formation.  The idea that partying (“Toga! Toga!”), drinking, and hooking-up in college substantially improve your job performance for a lifetime is highly implausible.  The burden of proof is on anyone who makes this remarkable claim.

2. If Noah is right, people who flunk out of college should still earn a substantial return as long as they socialized a lot.  Does anyone believe this?

3. If Noah is right, introverts should acquire fewer skills in college, and therefore have lower job performance.  But as far as personality psychologists can tell, this is not true.  While extraversion predicts better performance for managers and salesmen, only conscientiousness predicts job performance in general.

4. If Noah is right, off-campus living should predict lower job performance and lifetime earnings.  Does anyone believe this?

5. Workers “can’t” acquire motivation, perspective, or human networks on the job?!  That’s absurd; it happens all the time.  And the motivation, perspective, and human networks you acquire on the job are the right kind.  You gain motivation to do laborious, boring real-world jobs, the perspective that makes these jobs tolerable, and human contacts in your actual industry.

6. The motivation, perspective, and human networks you build in college, in contrast, are often useless, if not counter-productive.  College students today do very little work.  How does that give them “motivation” or “perspective” for the jobs they’re actually likely to get?  And the friends they make are unlikely to end up working in the same industry.

7. Finally, suppose Noah is completely right.  His story and the signaling model actually share a key implication: The private return to education exceeds the social return.  If college raises the productivity of promising young people by segregating them from other kids their age, it simultaneously reduces the productivity of less-promising young people by depriving them of peers they ought to be emulating.  If socializing with college students gives you good motivation, good perspective, and good human networks, then socializing with drop-outs should give you bad motivation, bad perspective, and bad human networks.  Why on earth is this social stratification something taxpayers ought to be subsidizing?