Debatable Ideas #1 - Do you prefer an ivy league degree or an ivy league education - Signalling vs Human Capital value of Education
Increase in Education is correlated with increase in Earnings, but why?
There are 2 competing theories:
- Human Capital: education creates human capital that increases productivity and this increases earnings (in competition the labour market will award wages proportional to marginal productivity)
- Signalling: education reflects inherent human capital. This is what increases productivity and hence wages
There are many studies, see the bibliography here for example.
I would borrow from prof Caplan and ask:
"Do you prefer a Harvard education knowing you wont receive a degree or do you prefer a Harvard degree knowing you wont receive its education?"
I strongly believe in the predominance of Signalling, I would choose the degree to the education.
If this is true, it has strong social implications:
- education is a very expensive and time consuming signal: these resources could be use better somewhere else
- it may not be a very good signal: people may not afford it or they may disagree on the correlation with wages
- government spending: time and money spent optimising the education system could be spent designing a better signalling system
- stress: the current social importance of education (for parents and peers) may be very overrated and rather that pushing for "more education is always better", it may be better to push for educating people on the fact that "education may not give you much more than a degree"
What you think?
--- EDIT:
@ecoinstant in the comments added 2 interesting points which I would consider a strengthening of the case against the human capital value of university:
- people go to ivy leagues for the network so higher education is primarily the purchase of a very nice contact list and the admission to a club. If this was true even more than before the costs and time required for this contact list are very high and maybe better devoted somewhere else
- he mentioned he would use more online education if he had to re-do it. This is also against the human capital nature of education: if people were after enriching lessons they could get them online far cheaper and easier.
I think mostly it is about signalling. The true value of ivy league is in your network.
I of course sent a different signal by attending the cheapest public university that I could. My signal was that I am practical and down-to-earth, and probably know the value of a dollar.
Even so, now I wish I had been on the front lines of online education and maybe gone to a community college.
Great discussion starter.
Hi @ecoinstant , thank you for your answer.
I like your signal! I'm from Europe where there is less an "ivy league" concept and (with maybe the exclusion of UK) Universities are relatively cheap and highly subsidised. So I did not have to make that type of choice.
I agree 100% with your addition, I will Edit the post to add the network effect you mention.
Online easily scalable education is the future, it will have the same effect as internet had on cable TV and TV on radio. Btw this line of thought is in line with Signalling as well: if the most important element was the content of the classes than online education would be already 99% of higher education....