View source for College Isn't a Waste of Time

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[[Category:Noah Smith]]
[[Category:Bryan Caplan]]
[[Category:Education]]
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{{DES | des = [[Noah Smith]] shreds [[Bryan Caplan]]'s claims that college is mostly a waste of time and primarily used for signaling.  "But his arguments against college are deeply flawed, and the country would be well-advised to take them with a shot of skepticism." | show=}}
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In a recent Atlantic article, George Mason University economist Bryan Caplan declares that college is, mostly, a waste of time. Caplan’s claim is sure to appeal to those who feel that their own higher education was wasted, or who dislike colleges because of liberal campus politics. But his arguments against college are deeply flawed, and the country would be well-advised to take them with a shot of skepticism.

Caplan asserts that much of the value of a college education comes not from skills and knowledge, but from something economists call signaling. Suppose employers want to hire smart, hard-working, conscientious employees, but they can’t tell which employees fit the bill. They might demand that any employee complete some arduous series of tasks simply to prove that they have the requisite traits. People who aren’t smart, hard-working and conscientious enough won’t bother to go through with the trial, allowing employers to separate the good workers from the bad. Caplan believes that college is mostly this kind of task -- an ordeal that young people go through just to demonstrate their worth.

But Caplan misapplies the theory of signaling. First of all, he says that it represents “wasted resources.” In signaling models, the resources that people spend proving themselves aren’t wasted -- they’re an economically efficient way of overcoming the natural problem of asymmetric information. Basic economic reasoning suggests that if there were an easier, cheaper way to tell which employees would be good, at least some companies would have discovered it by now. Yet degree requirements remain ubiquitous. So if Caplan is right, the signaling benefit of college is still a positive and necessary economic force.

But Caplan probably isn’t right. As evidence that college has a large signaling component, he notes that people who drop out of college just before graduation receive a much lower wage bump than people who cross the finish line -- a phenomenon known as the sheepskin effect. “Signaling is practically the only explanation” for this effect, Caplan declares. But he’s wrong. To be a useful signal, a task should be difficult to accomplish or very costly -- that’s why it separates good workers from bad ones. But finishing that last semester of school is neither difficult nor very costly, especially for someone who just completed seven other semesters.

So the sheepskin effect can’t be effective signaling -- it must be something else. Probably, someone who finishes seven semesters and then drops out without completing the eighth has some sort of emotional, motivational or other personal issues that make them unattractive to employers. But this isn’t signaling, any more than it’s signaling when employers fire people who come to work with needle tracks on their arms. Signaling, in the economic sense, would require wasted effort -- simply looking for obvious indicators of personal problems doesn’t fit the model Caplan is invoking.

Also, if college were largely signaling, we would expect to see the return to college decline over time, as companies learn which employees are smart, hardworking and conscientious from observing them on the job. Research by Yale University economist Fabian Lange has shown that employers learn a lot about their workers after just three years. So if two employees start out with very similar abilities, personalities and other characteristics, we’d expect to see the benefit of signaling be substantially reduced after a few years.

It isn’t. A recent paper by economists Ben Ost, Weixiang Pan and Douglas Webber compares students at Ohio four-year public universities who just barely make the grade point average cutoff to stay in college with students who just barely miss it and are forced to drop out. Since these groups of students are, statistically speaking, almost exactly the same -- the difference between them is almost entirely a matter of luck -- the difference between them doesn’t depend on who is willing and able to send a good signal. Looking at the earnings of the two groups seven to 12 years after their initial college enrollment, Ost et al. find that the lucky kids who managed to stay in school have considerably higher earnings than those who were kicked out. If college’s value were mostly signaling, we’d expect to see this wage difference disappear over time, as employers learned that these two groups of students were effectively the same. But the gap persists, suggesting that the workers who managed to stay in college derived something useful from the experience.

Caplan cites psychological research to claim that students don’t remember what they learn in their college classes, as well as some studies claiming that college graduates tend to lack basic competence in logical reasoning and domain knowledge. But more systematic reviews of the evidence show otherwise. Since 1991, researchers Ernest Pascarella and Patrick Terenzini have been keeping track of studies on the question of how college affects students, publishing summaries of the literature in a series of three volumes. Overall, they find that going to college has large and positive effects on students’ cognitive, quantitative and verbal skills, as well as their personal development.

The last of these is, in my opinion, overlooked. Most discussions of college focus on classroom material; very few discuss the positive impacts of peers and of college life on students’ goals, motivation and perspective. But these are potentially of crucial importance to students’ lives. The time that students spend socializing or partying is partly a form of consumption, but it’s also cementing those young people’s identity and social relationships in ways that I suspect will make them much more productive over their lifetime.


In any case, Caplan’s argument that college is a waste falls short. Though signaling may play some role in the value of a degree, it’s probably a minor one compared to other factors. That doesn’t mean everyone should go to college, and it doesn’t mean that today’s colleges are doing the best job they could be doing. It doesn’t even imply that college is worth the price -- indeed, falling enrollment suggests that tuition may have be too high. But there are very good reasons to try to provide more Americans with quality, affordable higher education.
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