The Case Against Education

Prof. Bryan CaplanDepartment of Economics

and Mercatus CenterGeorge Mason University

bcaplan@gmu.edu

Education: Immortal Beloved• “Education” is one of the Holy Trinity that

everyone is supposed to want more and better of (other two: health care and the environment).

• It’s also a rare example of an issue where economists and the public agree that we’re not “investing” enough.

• Standard return to education estimates are pretty high. Economists assume this proves that education “builds human capital.”

• Rate of return estimates don’t even count the positive externalities that economists think that education has to have.

The Big Puzzle

• When you actually experience education, though, it’s hard not to notice that most classes teach no job skills.

• What fraction of U.S. jobs ever use knowledge of history, higher mathematics, music, art, Shakespeare, or foreign languages? Latin?!

• “What does this have to do with real life?”• This seems awfully strange: Employers pay a

large premium to people who study subjects unrelated to their work.

The Signaling Explanation

• It’s easy to explain these facts, however, using the signaling model of education.

• Main idea: Much schooling doesn’t raise productivity; it’s just hoop-jumping to show off your IQ, work ethic, and conformity.

• Key assumptions: – (1) differences are hard to observe– (2) differences correlate with the cost of an observable activity. – (3) higher productivity workers have lower costs of performing

observable activity

• In signaling models, the market rewards people who “show their stuff” even if the display itself is wasteful.

Why Signaling Matters

• Beauty of the signaling model: It works even if students, workers, and employers don’t understand it.

• Who cares? Signaling models imply that education actually has negative externalities. These can balance out any positive externalities, or even imply that government is subsidizing waste.

What’s Wrong With Education

• Question: Who cares if education builds human capital or just signals it?

• Answer: Signaling models imply that education actually has negative externalities.

• Concert analogy.• These negative externalities can balance out

any positive externalities, or even imply that government is subsidizing waste.

• Social return versus private return.• Note: Signaling ≠ “education bubble.”

Objections Answered

• Signaling models are widely dismissed on a priori grounds.– “We’d just do IQ tests instead.”– “Employers know true productivity after a few months.”– “There has to be a cheaper way.”– “Learning how to learn.”– “Character formation.”

• Signaling explains some otherwise very puzzling facts, and the a priori objections only apply to the most simple-minded versions of the theory.

• It’s rhetorically easier for libertarians to join the pro-education chorus, then insist that the free market will give us more and better education. But the truth is more complicated.