The Case Against Education
Prof. Bryan Caplan
Department of Economics
and Mercatus Center
George 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 simpleminded versions of the theory.
• It’s rhetorically easier for libertarians to join the proeducation chorus, then insist that the free market will
give us more and better education. But the truth is more
complicated.