Economic Models of Education: A Typology for Future Reference
By Bryan Caplan
Economic arguments about education often conflate human capital, ability bias, and signaling. Since I am a big fan of Roderick Long’s exhortation to “Whip conflation now!,” I decided to do something to squelch this conflation. Namely: Produce a clarifying table.
The first three entries are polar cases. They’re worth discussing even if no one believes them because you can use these polar cases to categorize actual positions. Think of them as primary colors.
For the record, I have actually encountered many believers in the Pure Human Capital model, a few believers in the Pure Ability Bias model, and zero believers in the Pure Signaling model.
|Model||Effect of Education on Income||Effect of Education on Productivity||Notes|
|Pure Human Capital||WYSIWYG||WYSIWYG||Education may raise productivity by directly teaching job skills, but character formation, acculturation, etc. also count.|
|Pure Ability Bias||Zero||Zero||
“Ability” includes not just pre-existing intelligence, but pre-existing character, acculturation, etc.
Pure Ability Bias is observationally equivalent to a Pure Consumption model of education.
|Pure Signaling||WYSIWYG||Zero||Pure educational signaling can consist in (a) learning and retaining useless material, (b) learning but not retaining material regardless of usefulness, (c) simply wasting time in ways that less productive workers find relatively painful, leading to a positive correlation between education and productivity.|
|1/3 Pure Human Capital
1/3 Pure Ability Bias
1/3 Pure Signaling
|2/3*WYSIWYG||1/3*WYSIWYG||A good starting position for agnostics.|
|.1 Pure Human Capital
.5 Pure Ability Bias
.4 Pure Signaling
|.5*WYSIWYG||.1*WYSIWYG||My preferred point estimates. I know they’re extreme, but my book will explain my reasons and try to win you over.|
Bonus: From now on, I will link to this table whenever conflation of human capital, ability bias, and signaling becomes an issue.