Econ Duel: Is Education Signaling or Skill Building?

What’s the point of education?

Do you learn about things, because the learning itself matters, or is education all about the signal you -- and your degree -- send out to the world? Is education really about building skills, or does it serve only to transmit intangible traits, like your level of talent or your persistence?

These are the questions we’ll be tackling in this new Econ Duel debate from Marginal Revolution University.

And since we believe that nothing beats a good friend-vs-friend duel, we’ve picked two friends, whom you’re probably familiar with. For this debate on education as signaling vs. skill building, we’ve got Tyler Cowen and Alex Tabarrok, ready to go head-to-head.

You’ll see them argue about nearly everything—from peacocks, to private markets, to street sweepers, to Scandinavian education laws, and even the real value of Harvard University. In the end, you’ll see them duke things out, in a quest to determine education’s effect on our lives and well-being.

The video also asks:

-Why do students tend to rejoice when their professor cancels class?

-When we’re talking education, what really counts? Is it the soft skills, or the hard facts?

-If evolution still can’t sort out good vs. bad, can we really expect the market to do any better?

-Can the things you learn today still matter 20 years down the line?

-Why do peacocks still sport huge, colorful tails, despite the fact that evolution should’ve come up with a better signaling device by now?

Once you reach the end of the video, we have one specific request. It’s hugely important.

Ask yourself: “Is education only about signaling, or is it really about skill building?”

Think it through and then let us know by voting at the end of the video!

Help us caption & translate this video!

[amazingbanter]

Electrical Engineering is 100% signaling! haha get it because we study signals... I'll show myself out (+1 for skill acquisition).

[mikedonovan]

I think it is very clearly a combination of both (personally I’d say maybe 20% learning 80% signaling) but I think the more interesting point is how over time, at least in the US, there has been a vast trend towards education being a signal and less about learning. College now is much more about earning a prestigious degree, passing tests, and just making it through the process. In the past, especially very early on such as in the 1800s, education very clearly seemed to be more about learning and was not as important a signal. It would have likely been seen as somewhat exotic even very early on. It seems as higher education became more widespread, starting after WW2 and really taking off from 1970 to 2010, it became more of a standard process and somewhat of an expectation for all, meant to display who in society could make it through the process.

[zhenxie]

Really appreciate this video, one of the best debate I've seen between actual economists
Personally I think Alex has done a great job with a rather difficuit view ：）

[singertriboscience]

I worked for 35 years as a research scientist at a national lab, where I and all of my co-workers had to have earned PhDs to get this type of job. From my experience, there wasn't an obvious correlation between where you got your degree, e.g., Berkeley or Podunk U, and success as a scientist. This would suggest your both right, and wrong. Both signaling (sticktuitiveness to get the PhD) and Education (learned enough to get the PhD) got us in the door all right, but success required cleverness and adaptation, neither of which was taught in school.

[TigerLawProf]

I loved this video ... what a great way teach and learn

[itsarendezvous]

It's about the degree not the education. We all get trained for our jobs upon hire. That training, that resume builder, grants us new oppurtunities in higher positions. If more employers were willing to hire people without degrees for entry level positions then I'm sure the lifetime earnings gap would decrease

[rosepumpkin]

I learn most things online, I am about to complete my associates in science, finance. But I love economics, but can't afford those private tuitions. So I learn it on my own. Good debate. Youtube is a great resource tool. Most people I know that have a BS or BA, can't get hired because they don't retain the academic experience... Depends on the person's motivation to learn the subject. Wouldn't mind going to Harvard to learn economics, haha but not everyone can get in. Regardless I learn better being self taught, without the pressure.

[phuthumanihlope]

I think you're both right actually. I do however have an issue with what seems to be the view that education is over after college. I think it's important to continually self educate to build skills that you may not learn at your current work place, e.g. coding, that could increase your value. However not every employer may immediately notice or appreciate your value without a qualification endorsing your skillset.

[danielhall]

7:50 "Our K-12 system is junk."
Who trains the teachers? Who designs the curriculum? Who comes up with the principles of teaching?
-The Universities

The fact that the K-12 is so terrible implies that the universities are incapable of conveying good teaching practices. Which further implies that universities don't know how to teach.
Point signalling theory.

[binsch]

Couldn't this be tested by studying long term salary differences between grads of two schools of similar quality where one school happens to be more well known (thus providing a better signal)?

[Antitheist]

Tyler Asks: Would you want to drive over a bridge built by an engineer that did or did not go to Caltech? Lets say I would prefer that he did. Now is that because I know anything about Caltech's bridge building curriculum? Do I know anything about any skills at all that he may have learned in college? NO. I just know he got in, got through the classes and the tests. That is the perfect example of a signal of personal traits, and not assessment of skill.

[kschep]

With the level of information available on the internet, It should be clear that college is primarily a signaling effect. One can obtain (though not easy) an undergraduate level of education through use of the internet/books alone. that person will have a much harder time getting jobs as I read a lot of books isn't viewed the same as having a degree.

[soeunjeon]

Amazing debate!! Thank you so much for your insightful analysis!!

[rhythmandacoustics]

I think this is not a deductive answer, such as yes or no, but a probabilistic answer. I think for the very few that very motivated, they actually put to practice what they have learned, such as projects outside of the curriculum. As for the majority of people it is merely a documentation or signaling as they say. Most people are not motivated to innovate or be productive and merely are there because of the pay check. For the very few, a paycheck is not enough, they need more than a salary.I see Elon Musk as a case for neither, he wanted to build skills but never went to class and read books all the time and only showed up for exams. So he neither needed the skills nor the signaling that he was smart. Another good example is Peter Thiel, he went all the way to JD after bachelors but decided it was boring and decided to go entrepreneurial. Also only in the technical disciplines can you show skills. A physics major can show evidence or proof of how x will work but a political science major will have a hard time showing skills, perhaps Bullshi*T skills maybe.

[Mujangga]

People go to college to obtain a government mandated license. If the government did't control education, people would simply purchase knowledge through teachers in the Free Market or be trained by corporations directly.

[abdulfattahzaman]

Investment in education has two parts. First, if you invest in education in a country that is inherently corrupt, it is like dumping cash in a well. Society's influence/education can be stronger than the ciricullum's influence/education.
Secondly, the quality of education matters. Education is about teaching necessary skills and knowledge to thrive both individually and collectively. For a long time, the educational system has been extremely flawed and backwards where we have to personally relearn everything we need to know once we graduate, making the educational system extremely inefficient and ineffective.

[Brazbrah]

Alex sounds just like Ross from friends. It's impossible not to hear it now.

[bcubed]

Question: if you take the total tuition spent, PLUS the forgone wages from studying for four years instead of working...do graduates make enough more in lifetime wages than, say, sticking it in an index fund (at 8% real income growth per annum?) A B.S. costs around $240, 000 in tuition and forgone wages.

[griffonos]

I think there are a few problems with Tyler's arguments for human capital.


1: The persistence of the college wage premium many years after graduation does not disprove signalling. The signal provided by a degree allows students to get initial good initial jobs. These jobs in turn provide great opportunities for human capital accumulation, which allows graduates to maintain and increase their wages.
Thus the long term growth in wages comes from human capital acquired on the job, but getting the initial job is dependent on the signalling provided by the degree. This means that education can ultimately lead to human capital which boosts wages, without education providing any human capital itself.


2: A change in the time and coursework requirements for a degree does not just affect the human capital of the degree, it also effects the signalling. A four year degree sends a stronger signal of intelligence, work ethic, and conformity then a two year degree, and a weaker signal than an eight year degree. So the fact that Scandinavian graduates had higher wages after more years of education does not necessarily prove that signalling was responsible for their college wage premium.


3: It is true that the richest countries invest a lot in education. But it could simply be that as a society becomes richer it can afford to waste more money on signalling. And from an individual perspective, more signalling is justified as potential jobs become more lucrative. So rich countries might just spend more on education, because they are rich.

[kyh]

I am a Korean who goes to a top university and I agree that the Korean education system did help greatly with the economy. Not only because it provided the government and companies with knowledge to make complex industries(cars, phones, ships) but it did act as a signal to weed out the less useful talents to the more useful ones. For example, if you graduated from Seoul Nat. University employers would even look at anything else in your resume. Did this always work? No, but it did provide signaling for the otherwise blind employers and look at where it took us. We are now one of the wealthiest nations in the world.