Some economists look at the effect of individuals‘ education on income — the microeconomics of education. Some look at the effect of countries‘ education on income — the macroeconomics of education. Bryan Caplan looks at what students actually study, learn and retain — the picoeconomics of education:
The microeconomic approach tells us how much the market rewards education. But in the end, it doesn’t tell us why. To discover why education matters, we must descend to the picoeconomic level.
Key example: the main reason I’m think signaling is big deal has nothing to do with either Micro-Mincerian or Macro-Mincerian estimates of the return to education. The main reason I think signaling is a big deal is that (a) students study a ton of material that almost no job uses; (b) the Transfer of Learning literature shows that learning is highly specific – you don’t build general purpose mental muscles by learning Latin; (c) students quickly — and happily — forget most of what they learn, anyway. And yet employers amply reward education! The signaling model instantly looks like the best way to explain all the key facts.
You’d never extract any of these lessons from wage regressions. To reach them, you’ve got to actually peer inside the individual mind — or introspect on your own experience. Yet economists who study education habitually neglect not just these particular insights, but the very existence of a picoeconomic level. And that is why they fail to see education for what it is.