Is the education system really a waste of time and money?

Thursday, February 22nd, 2018

Is the education system really a waste of time and money, Bryan Caplan asks, as his new book claims right on the cover? This is a strange topic to debate with Eric Hanushek, he explains:

Why? Because if Hanushek had absolute power to fix the education system, education might actually be worth every penny. Hanushek is famous for focusing on what schools teach rather than what they spend — and documenting the vast disconnect between the two. If you haven’t already read his dissection of “input-based education policies,” you really ought to. Hanushek, more than any other economist, has taught us that measured literacy and numeracy are socially valuable — but just making kids spend long years in well-funded schools is not.

Tragically, however, Hanushek is not our education czar. Instead, all levels of our education system are extremely wasteful and ineffective. After spending more than a decade in class and burning up over $100,000 in taxpayer money, most Americans know shockingly little. About a third of adults are barely literate or numerate. Average adult knowledge of the other standard academic requirements — history, social studies, science, foreign languages — is near-zero. The average adult with a B.A. has the knowledge base you’d intuitively expect of the average high school graduate. The average high school graduate has the knowledge base you’d intuitively expect of the average drop-out. This is the fruit of a trillion taxpayer dollars a year.

For economists, however, there’s a powerful objection to this condemnation. If students really learn so little, why on earth is education so lucrative in the labor market? Why do high school grads outearn dropouts by 30%? Why do college grads outearn high school grads by 73%? Explain that! Employers want profit and they aren’t dumb. They wouldn’t pay exorbitant premia unless education dramatically improved worker productivity, right?

Wrong. There are TWO solid business reasons to pay extra for educated workers. One is that education teaches useful skills, transforming unskilled students into skilled workers. This is the standard “human capital” story. The other reason, though, is that education certifies useful skills, helping employers distinguish skilled workers from imposters. This is the “signaling” story. In the real world, naturally, it’s a continuum. But since Hanushek is not the education czar, signaling explains most of education’s financial reward.

How can we know this? We should start with the massive gap between learning and earning, combined with the fact that even the most irrelevant subjects and majors yield decent financial rewards. If human capital were the whole story, why on earth would employers care if about whether you’ve studied Shakespeare, Latin, or trigonometry? Think about all the classroom materials you haven’t used since the final exam.

If that doesn’t fully convince you, many other facts that every student knows cut in the same direction. Such as:

1. It’s easy to unofficially attend college classes without enrolling or paying tuition, but almost no one bothers. Why not? Because after four years of guerilla education, there’s one thing you won’t have: a diploma. The central signal of our society.

2. Students’ focus on grades over learning, best seen in their tireless search for “easy A’s.” Signaling has a simple explanation: If a professor gives you a high grade for minimal work, you get a nice seal of approval without suffering for it.

3. Students routinely cram for final exams, then calmly forget everything they learn. Signaling provides a clean explanation: Learning, then forgetting, sends a much better signal than failing.

In The Case Against Education, I also review multiple major bodies of academic research to help pin down the true human capital/signaling breakdown. In the end, my best estimate is that signaling explains 80% of the payoff. Key pieces of evidence:

1. Most of the payoff for school comes from graduation, not mere years of study. This is a doozy for human capital theory to explain; do schools withhold useful skills until senior year? But it makes perfect sense if graduation is a focal signal of conformity to social norms.

2. There has been massive credential inflation since 1940. The education you need to do a job hasn’t changed much, but the education you need to get any given job has risen about three years. Hence, the fact that waiter, bartender, security guard, and cashier are all now common jobs for college grads.

3. Though every data set yields different estimates, the effect of national education on national income is much smaller than the effect of personal education on personal income. How is this possible? Signaling! Give everyone more useful skills, and you enrich the whole nation. Give everyone more stickers on their foreheads, and you fritter away valuable time and tax money.

If you’ve been wondering, “What does signaling have to do with wasteful education?,” I hope you’re starting to see the link. Sure, it’s useful to rank workers. But once they’re ranked, prolonging the ranking game is a socially destructive rat race. When education levels skyrocket, the main result isn’t good jobs for every graduate, but credential inflation: The more education the average worker has, the more education the average worker needs to be employable. And while sending fancy signals is a great way for an individual to enrich himself, it’s a terrible way to enrich society.

Given Hanushek’s work, I’m optimistic that he’ll agree with much of what I’ve said. It’s our remedies that starkly diverge. My primary solution for these ills is cutting education spending. In a word, austerity. Austerity: It’s word I love. It’s a word I believe in. If Hanushek’s bleak assessment of input-based education policies is right, austerity will save tons of time and money with little effect on worker skill.


  1. Toddy Cat says:

    Caplan makes some good points here, but I’d be far more inclined to accept his viewpoint if he wasn’t such a raving loon on immigration and national defense. It’s kind of like saying, “well, yes, Professor X does believe that schizophrenia is caused by evil fairies, but his opinions on quantum energy flux are sound.” It may be true, but the fact that someone can believe such utter bilge in one area doesn’t exactly build confidence.

  2. Kirk says:

    Toddy Cat,

    You’re going to have to really go looking for someone who is an all-encompassing genius, and you’re likely going to suffer failure doing so. Nobody is an all-around expert at everything, and when you find someone who is competent in one area, the thing to do is accept their expertise in that arena, and no other.

    I honestly haven’t met too many real Renaissance men, in real life. The guy who’s the genius lawyer can’t fix a broken doorknob; the guy who’s an expert mechanic is a lousy businessman. This carries over into things like your Professor X, and is a syndrome that is remarkably common. Trick is, figuring out which areas people are expert in, and in which they’re delusional.

    That said, the striking thing about the subject of this post is the apparent ignorance of the precise manner in which we got to be “here”, in terms of using a college degree as a proxy for employee suitability/aptitude.

    You go back and look, and what you’ll find is that the majority of employers were looking at the results of testing they conducted at the time of job application. Then, starting in the 1950s, that became illegal due to the activists from academia, who decided that such testing was biased and immorally racist. Which, “coincidentally”, raised the value of a college education as employers sought other means of pre-employment screening. Were you to go back to the “old days”, and tell people that they needed college educations for specific jobs that we require them for…? The average employer would have laughed you out of his office.

    As well, we also simultaneously dumbed-down the high schools, devaluing the high school diploma. Time was, you left high school with a skill set that would put today’s associate degree holder from a community college to shame–I’ve got my grandmother’s high school diploma from the WWI era, and she had three foreign languages (Spanish, French, German, along with Greek and Latin), fairly advanced calculus, and a host of other subjects we don’t bother to teach anymore, as they are “too challenging”. And, we wonder why education is so bad, of late… The simple fact is, we’ve let standards slip, and we’re trying to educate the ineducable, those who would have likely gone into apprenticeships or labor before qualifying for and attending high school.

  3. Graham says:

    But, but, but… the Flynn Effect!

    Everybody is so much smarter now…

  4. Kirk says:

    The “Flynn effect” is what’s devalued the IQ testing regime the most, to my mind.

    It’s like with the game “Trivial Pursuit”. When it first came out, the game was interesting, in that there was a lot of trivia it brought out into common use, and everyone playing it eventually got familiarized with it. And, you could observe a bit of a learning curve, but… The actual people playing the game didn’t get any smarter, in real terms: They just learned the game, the background info it was based on, and that made it seem as though they were getting smarter…

    Meanwhile, they’re still doing the same stupid stuff in day-to-day life.

    I don’t think we’ve really defined intelligence very well, at all. The tests are telling us something, but I don’t think they are actually measuring baseline intelligence at all well.

    I know a guy, who happens to be dyslexic as f**k. Booksmart? Nope; unless he’s heard it in conversation, or seen it in a movie, he doesn’t know it. But… I’ve never met anyone smarter for figuring out how things work, both in terms of mechanics or situational. Watching him pick up a broken mechanism and puzzle out its intricacies…? Revelatory. The man is a tactile genius, and his ability to work out three-dimensional puzzles and other things that require extreme spatial cognition? Beside him, I’m a low-grade moron. Yet, give us an IQ test, and I’m going to score pretty well on it, and he’s barely going to register as sapient. Which of us is smarter? In the real world, I’m a dunce; he’s a genius. On paper, we’re reversed.

    Actual intelligence isn’t something we’re very good at defining, although “…we know it when we see it…”.

    I think the so-called “Flynn Effect” is more teaching to the test than anything really real, because the march of human folly continues on, unabated. We’ve even added new stupidities to our repertoire, like eating washing machine detergent…

  5. Alrenous says:

    The Flynn effect is mostly a scam.

    If you use only the reading, writing, and arithemetic sections of IQ tests, the scores have not moved beyond the level of noise. +/- 3%, and yes some of them are -.

    The gains are all in weird sections I don’t know the names of because they’re dumb things nobody cares about. Basically what’s going on is a low-grade scientific-philosophical mindset is continuing to spread, so test-takers are better at guessing how the test-makers want their questions answered.

    I do remember a good example.

    A scientist interviews an African herdsman. And basically it goes like this:
    Scientist: “There are white bears.”
    Herdsman: “No there aren’t.”

    The scientist is expecting the herdsman to take him at his word, which is retarded. We scientifically-minded folk know the herdsman is ‘wrong.’ But in fact he is perfectly epistemically justified in rejecting the existence of polar bears until he sees one himself.

    Scientist: “Imagine white bears exist, if you’re far enough north. Iqaluit is far north. Does it have white bears?”
    Herdsman: “No. White bears don’t exist.”

    This is an extreme example of a ‘wrong’ answer on an IQ test. This is the kind of answer that’s affected by the Flynn effect. The herdsman thinks hypotheticals are dumb and doesn’t respect them. He is not willing to jump through the scientist’s hoops; he sees no good reason to do so. If he eventually becomes so willing, his IQ does not therefore go up.

  6. Kirk says:

    @ Alrenous,

    That is a much better summation of what’s going on than I gave.

    The whole thing is, I suspect, actually somewhat indefinable. What is “smart”?

    In some contexts, the idiot is king, simply because he cuts through the bullshit that the genius ideates as he tries to “solve” something that isn’t in need of deep thought. It’s the old story of the Gordian Knot–The geniuses all look at solving the problem of unraveling the knot, while the idiot looks at it, reaches for his knife, and cuts the rope.

    And, then there are some geniuses who see the rope-cutting path, and have the strength of will to recast the paradigm.

    Of course, like Alexander, it helps to have the Macedonian Army at your back, or you might be termed a vandal…

    I suspect that the various AI programs are going to suffer some severe disappointments on their way to the eschaton. We really can’t even define “intelligence”, past the “I know it when I see it…” sort of thing, but we’re somehow going to design and create it, artificially? I’d be willing to bet money that when we do achieve that dubious achievement, we’re going to do it by accident, and entirely unintentionally. Like as not, the formal attempts are all going to crash and burn, and some grad student somewhere is going to be playing with something and go “Oh, that’s strange…”, creating a true AI. From there? Better hope the whole idea that they’d be God-like in power and ambition is mistaken, because I bet money that nobody is going to have done the requisite work to establish a moral and legal framework surrounding AI rights and obligations.

  7. Graham says:

    For the record, I’m a big fan of understanding that many things in life can be and are complex and repay a bit of effort to analyze them before acting.

    On the other hand, I’ve also passed a couple of decades hearing people drop the word “Complexity” as though it were an incantation in ancient Sumerian with the power to stop all discussion and/or hinder any kind of action.

    Oddly, in foreign policy as in real life the people who demand action or chant “Complexity” in the tone of “om mane padme hum” are always switching places depending on the specifics. Go figure.

    Somewhere in the last few years I read someone citing the story of the Gordian Knot in order to illustrate the point of blundering and using a brute-force, unsubtle approach and thereby failing to understand or master an underlying complexity. Thus being critical of Alexander.

    I remember being struck by it, as although I had heard many encomiums sung to the majesty of “Complexity” in my time, I had never heard the story of the Gordian Knot deployed as an example of failure.

    I’m open to a wide array of criticisms of Alexander, not just his love of Diversity and Unity either. But this one left me cold.

    There’s a time to understand the complexity of a situation, the subtleties of a culture and people, the nuances of a political or social problem, the deep background, or indeed the details of a scientific problem. There are many areas of human endeavour when it’s just time to cut through the crap.

    Of course, the problems will always remain of whether one is making that choice at the right time and place, and whose oxen are getting gored by that act.

    Alexander had the means to conquer Asia and stumbled on a legend that could bolster his case if he elected to cut through the crap. The traditional interpretation of his action as a virtue is still the best one. Nobody there was going to tell him he had broken the rules. He was in a position to make rules. One of his undeniable skills was to have a rough idea when and how he could do that, and when it would serve him to go along with the customs.

    Putting Alexander and the Gordian Knot into a modern context, one might say that he looked at the Complexity, decided it was unsolvable with any reasonable deployment of resources, and not to his advantage to take it on its own terms anyway. And he knew he had the means to creatively disrupt the situation by applying a massive, innovative paradigm shift. [Thus throwing one 21st century shibboleth into the scales to overpower another. If only he'd known.]

    I am also reminded of the old Simpsons episode in which the family went to Africa and became briefly trapped in a carnivorous flower. All screamed loudly until Homer just knocked down one of the petals from inside, creating an escape route. When the others praised him, Homer snorted and said “It’s a flower”. I can just imagine Alexander responding to the oohs and aahs of the masses with the Macedonian equivalent of “It’s just a rope.”

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