Because most philosophies that frown on reproduction don't survive.

Monday, April 14, 2014

Caplan on the Value of College

I've written a bit in the past on the question of whether college is "worth it" in the economic sense -- given the rapidly increasing cost of college balanced against the earnings gap between those with and without college degrees. Bearing also had an interesting series of posts on this topic a while back, which the above post was a response to.

Those interested in the topic may find this recent EconTalk episode interesting (the transcript is pretty good if you'd rather read than listen) in which Russ Roberts interviews fellow economist Bryan Caplan about the value of a college education. Caplan is a proponent of the signaling model of the value of a college degree. According to this model, the economic value assigned to a college degree (the extent to which employers require it or pay more to people who have one) is not primarily a matter of what you learn in college (the skills acquisition model) but rather a matter of signaling that you are the sort of person who can get into college and then stick with it and earn a degree. One of the things that Caplan points out in support of this view is that virtually no value is assigned to having completed most of college (say if you stop one course short of getting your degree) -- which in a skills acquisition model is not necessarily what you'd expect.

Here's a bit of the transcript where Caplan lays out how the signaling theory and the wage gap interact according to his thinking:
Bryan: So, in 2011, college graduates made 83% more than high school graduates. And high school graduates, mainly people who have gone to college not at all.

Russ: How has that amount changed over time?

Bryan: It's gone up quite a bit. So, maybe around 1970 it would have been only about 35 or 40%, so it's something like doubled over the last 40 years, during my lifetime.

Russ: And what are some of the standard explanations for why that's happened? So, why is college more productive for people who attend and have graduated?

Bryan: The usual story is that there has been a lot of psychological change in the economy, globalization as well, and that this has somehow made it more important to be a college graduate. And among most economists, they do tend to focus on the skills that you supposedly receive in school. And so they think of it as: it's more important to have general thinking ability and reasoning skills, as well as different technical skills you might learn in school; and that when the economy is more technologically complex, and also when you are competing in a global market where one person could mess up a big firm, it's more important to have these skills. I'd say that's probably the usual view.

Russ: And what do you think of that view?

Bryan: I think that there is some truth in it, but it's greatly exaggerated and there's a lot of other things that are going on that most people who study education would rather not talk about.

Russ: What are a few of those?

Bryan: Well, one of the main ones, strangely, for economists to ignore is--even though they do--is that people who go to college are not the same even when they start. So, the kind of person who goes to college is different at the beginning. And there are a lot of reasons to think that people who are different in the beginning would have made more money even if they hadn't gone to college. The most obvious one is that people who go to college are generally smarter. It's not popular to say it, but all of the evidence confirms it. And they were smarter before they started. Now, there's also a lot of evidence that--

Russ: We'll get into that later. But why would that have changed over time? This is the reason--this is an incredible change, right? I don't think there is any parallel development in the area of education over any other time period, 30, 40-year time period, a doubling of the returns to education. You are suggesting that--you started by saying that the standard answer, which is, well, the world is more complex, there's all this technology, and so college students are more valuable--you are not convinced of that. I'm not either, by the way. I used to be more sympathetic to that until I started reading you. So, I'm interested: Why would think that would change over time?

Bryan: Right. Well, again, there's an important distinction to make. You need to distinguish between college graduates being more valuable and college itself being more valuable. Those are two different things. So the main problem that I have with the usual view is that I take a look at what people actually study in school, and I see very little evidence that most students are acquiring any technical skills. And also, surprisingly, when I read educational psychology, there is a lot of question about whether college students are actually learning much in the way of thinking skills, either. So, a more reasonable story is not so much that the skills that college teaches are more valuable than they used to be, but rather the kind of people who go to college are more valuable than they used to be. Which is quite different.

EconTalk is a consistently very high quality interview show, and this one in particular is worth listening to if it's a topic that interests you.

6 comments:

Chad Toney said...

Yeah, this podcast is great. I think you turned me on to it.

Got any others you like? I listen to a bunch of comedy shows and:

This American Life
CSpan Lectures in History
CSpan Q&A
Slate's Lexicon Valley
Slate's Culture Gabfest
Slate's Political Gabfest
The Tobolowsky Files
The /Filmcast
BackStory
99% Invisible
Freakonomics Radio
Radiolab

Darwin said...

I don't actually have time to listen to a whole lot. I listen to virtually every EconTalk and also try to keep up with Julie and Scott's A Good Story is Hard to Find which does book and movie reviews.

Abigail said...

This is interesting to me. I'm a stay-at-home Mom who went to college (and graduate school). I think I learned a lot of things in college that greatly help my daily life as a wife and a mother--even though my current economic return is zero. For example, I graduated from the same all women's college at Julia Child. Today, I have a lot of confidence in learning how to cook well because I think "Oh yeah, Julia and I are the same!" Sylvia Path graduated from the same school too. Whether it's a comic "Don't give up on the bad days when everyone kid is sick" or the more serious "I love writing I can do this too!" The people who graduated from my same college inspire me. I'm not sure if I was just a smart kid from rural West Virginia, I'd have the same confidence to tackle the intimidating, yet rewarding things in my life.

Jerry said...

I wonder if a post-grad degree will eventually become the equivalent of the current college degree in that if too many people are college graduates it will devalue the currency, if you will. Already grade inflation has made college grades sort of a joke. Education as arms race, with educators reaping the benefits of selection bias.

Darwin said...

Abigail,

I definitely agree that a college education has a lot of value aside from any economic benefit it may gain the holder of a degree.

Indeed, I always kind of go back and forth on how to write about these topics. On the one hand, given my career experience, I disagree with those who hold you should just save the money and skip college because from a job point of view you can do just as well without it. I both find my college education personally valuable and also wouldn't have been considered for the job I have had I not a degree.

On the other hand, I think people have far too mercenary an approach to college in general, so I always fear that while defending the value of college in one sense I debase it in another: upholding its monetary value too easily suggests to many that it has only monetary value.

Jenny said...

I am sold on the value of college for those who are intellectually inclined. I am not sold on its value for those who have to be coaxed to "just try it out and see how it goes."

Where my conflict arises is how to choose a major. I have theoretical understanding of how a liberal education should work and want to cling to that ideal. However I get to live in a world where the 'right' degree seems to be the most important thing, actual experience and skills be damned.

At this point I have no idea what I will advise my own children to do. Today I am strongly inclined to tell them to just get a business degree and then minor in what you prefer. At least that way someone will actually look at your resume.

This is a bitter pill to swallow. I believe from an educational point of view, my undergraduate degree is much more valuable and applicable to many areas of life than the standard business degree that was offered at my college. But they get the jobs. What good are all those educational experiences if no one will even interview you?