Postsecondary education questions: Megan McArdle on "Is College a Lousy Investment?"

_{(This post is part of the series on postsecondary education.)}

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Ah, this is timely.

While you wait for my next post (which will be about parents' options for meaningful support past age 18), and possibly another guest post by Mark, take a look at this week's Newsweek article by Megan McArdle entitled, "Is College a Lousy Investment?"  

A lot of ink has been spilled over the terrifying plight of students with $100,000 in loans and a job that will not cover their $900-a-month payment. Usually these stories treat this massive debt as an unfortunate side effect of spiraling college costs. But in another view, the spiraling college costs are themselves an unfortunate side effect of all that debt....

Unsurprisingly those 18-year-olds often don’t look quite so hard at the education they’re getting. In Academically Adrift, their recent study of undergraduate learning, Richard Arum and Josipa Roksa find that at least a third of students gain no measurable skills during their four years in college. For the remainder who do, the gains are usually minimal. For many students, college is less about providing an education than a credential—a certificate testifying that they are smart enough to get into college, conformist enough to go, and compliant enough to stay there for four years.

When I was a senior, one of my professors asked wonderingly, “Why is it that you guys spend so much time trying to get as little as possible for your money?” The answer, [economist Bryan] Caplan says, is that they’re mostly there for a credential, not learning. “Why does cheating work?” he points out. If you were really just in college to learn skills, it would be totally counterproductive. “If you don’t learn the material, then you will have less human capital and the market will punish you—there’s no reason for us to do it.” But since they think the credential matters more than the education, they look for ways to get the credential as painlessly as possible.

She has a companion blog post up here:  Are We Paying Too Much for Higher Education?

A sample from the blog post:

It’s not necessarily a problem that we’re spending so much on education--and putting more people through school--if we’re actually adding value to the workforce.  In fact, if education is adding value to workers, then maybe it’s great: we’re upskilling our workforce, preparing them and our country for the 21st century.  That’s basically the thinking behind the president’s goal--now, I believe, part of the Democratic Party platform--of having the highest percentage of college graduates in the world in 2020.

But there’s a fly in the ointment, which is that higher education doesn’t only provide education: it also provides a credential.  This is known in economics as the “signalling model”: it’s hard to prove to employers that you’re intelligent, conscientious and persistent, and so you use a diploma to demonstrate it.

If you think signalling is a small component of degrees, then the extra investment in education is probably a good thing (although we might look askance at athletics and other non-curricular amenities, which have clearly been getting nicer and nicer over the years).  If you think that signalling is a large component of the value of a diploma, then the extra spending is worrying: we’re mostly just bidding up the cost of the credential, not investing in greater economic productivity.

There’s no slam-dunk data on how much of higher education is signal value...

(McArdle is one of my favorite econ-bloggers.  She used to be an excellent writer for the intelligent Atlantic Monthly and now, oddly enough, is part of Newsweek.)

Any comments, or is this just more of the same?

 

Comments

[Kate]

Not much to say to this - I think it is self-evidently true. I also think that the Open Source Curriculum movement highlights this well - OSC is an effort to promote acquisition of knowledge and skills. The courses are free, and often provided by very prestigious institutions, but they provide no credentials, no degree, no certificate. You can get almost a complete MIT Sloan undergraduate business education online for free without affecting traditional applications for MIT at all...because MIT knows that their real product is the degree, not the education.

[Jennifer Fitz]

My hunch is that proportion of "signaling" is going to vary by major, and by student within majors. It'll be a tough one to test experimentally.

I bet you'd get some disheartening but revealing data by testing how much employers value the signal, though.

[Darwin]

Perhaps predictably, Megan's piece seems fairly persuasive to me.

I think she makes a key point about college performing two purposes in our society: education and signalling. Both of these are important to the person considering college, but in many was the one is destructive to the other. If college is seen as primarily signalling, this will tend to undercut its purpose as education, and we certainly see that with students picking colleges for reasons other than educational value. Similarly, the ability to make decisions about college purely on the basis of the education involved is undercut by the tendency of employers to treat it is signalling rather than education.

I'm not sure if I necessarily agree with her that signalling itself has no social value, and thus that it would make no sense for society to spend money on something which is primarily a signalling mechanism. There is, after all, a value to information.

The big problem in relation to social value is if college is being treated by employers as if it's almost purely signalling while being treated by students and parents and society as if its almost primarily education with a bit of entitlement thrown in.

[bearing]

Darwin, I think you are putting your finger on one of the problems: There is a tremendous bait-and-switch going on here.

When it's convenient to do so, college promoters talk about the college degree as a signal ("if you don't get one, no one will even take a look at your resume").

Then when it's time to discuss how much you should spend and what you should major in, all of a sudden education is priceless "for its own sake" and "you should do what you love because that's what really matters" (and maybe it's also what leads students to change majors frequently, setting themselves further and further behind, graduating later and later, and paying for more and more semesters of college?)

There's this finely tuned swing between "For heaven's sake, you HAVE to go to college, major in ANYTHING, it doesn't MATTER, just GRADUATE" and "Education is so valuable you can't put a price on it, so buy the most expensive one you can get a loan for."

[Dissertation Company Reviews]

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