A follow-up on college and signaling

The other day I wrote a Bloomberg post about the fad of describing all communication and information extraction as "signaling" even when a Spence-style signaling model doesn't apply.

Some people have been telling me that this Garett Jones tweet is a reply to my piece. Garett writes:

Emoteconomist: One who is sure competition would eliminate inefficient diploma discrimination, but not inefficient gender discrimination.

Personally, I would apply the term "emoteconomist" to a much wider array of economists, but that's beside the point. I highly doubt this tweet is aimed at me or my piece. Garett knows that I have often written in support of Gary Becker's idea that economic competition decreases inefficient gender discrimination. He also of course knows the difference between preference-based discrimination (as in a Becker model) and signaling (as in a Spence model). So Garett's tweet is almost certainly not directed at my piece.

However, this Bryan Caplan post most certainly is a reply to my piece. At first I intended to rest my case, but Bryan has decided to delay our Bloggingheads debate two years (to coincide with the planned release of his book on the topic), so I might as well make some short reply.

Bryan does agree with a few of my points. For example, he agrees that college is unlikely to be important as an intelligence signal. But he disagrees strongly with my contention that college is not needed as a signal of working ability and temperament. In my piece I wrote:

So is college a way to signal conscientiousness and willingness to work? Maybe. But an even better way to signal that would be to actually work at a job for four years. One would think that if young people needed to do some hard work to signal their work ethics, some companies would spring up that gave young people real productive work to do, and provided evidence of their performance. Instead of paying through the nose to send a signal of your industriousness, you could get paid. But we don't see this happening.

Bryan replies:

Like most economists, Noah needs to be more sociological.  In a cultural vacuum, working four years might be a great signal of work ethic.  But no human being lives in a cultural vacuum.  We live in societies thick with norms and expectations. And in our society, people with strong work ethics go to college and people with bad work ethics don't.   

Disagree?  Just picture how your parents would react if you told them, "I'm not going to college.  I'm just going to get a job."  In our society, your parents definitely wouldn't respond, "That makes sense, because you're such a hard worker."  Why not?  Because in our society, most hard-workers choose college.  If a hard-working kid refuses to copy their behavior, people - including employers - understandably treat him as if he's lazy.  Because lazy is how he looks.

Actually, when I think about the college-as-signaling hypothesis, I do often think sociologically. But, as so often, the society I think of is not the United States - it's Japan. In Japan, it is taken as a given that college students don't work hard at their studies. College is even nicknamed "moratorium". Japanese college kids are expected to enjoy themselves and not work hard - in fact, when I ask Japanese young people why they don't consider going to America for college, they usually tell me that American students work too hard. And yet, top Japanese employers all require a college education (usually a Japanese college education) as a precondition for hiring.

But to be honest, Bryan is right that I don't think very sociologically. I don't really know much about sociology. Does he? Perhaps we should call in a sociologist. I will do so on Twitter.

Anyway, Bryan then writes:

Noah overlooks another key trait that education signals: sheer conformity to social norms.  In our society, you're supposed to go to college, and you're supposed to finish.  If you don't, the labor market sensibly questions your willingness to be a submissive worker bee. 

I agree that college, in America and also in Japan, is a hallowed cultural institution, and that there is a lot of social pressure on people to do it. But this seems like part of college's consumption value, not its value as a costly, Spence-style signal.

Next, Bryan quotes this part of my post:

There are many other reasons to doubt the signaling theory of college. A more likely explanation for college's enduring importance is that it provides a large number of benefits that are very hard to measure -- building social networks, broadening people's perspective, giving young people practice learning difficult new mental tasks and so forth. 

He replies:

I'm glad to hear this.  Noah inadvertently grants one of my key points: Most of education's labor market payoff is unrelated to the material your professors explicitly teach you.  Once you accept this heresy, you're stuck with some combination of my multidimensional signaling story, and Noah's amorphous, evasive "large number of benefits that are very hard to measure" story.  If that's the choice, my story will end up with the lions' share of the mix.  Noah is welcome to the leftovers.

Ah, but wait! College most certainly does provide some direct and obvious skill-based human capital benefits: reading, writing, working in groups, communicating, arguing, doing math, programming computers, etc. My point about non-obvious forms of human capital - human networks, cognitive broadening, emotional growth, exposure to new career ideas, sexual maturity and marriage - was in addition to the obvious benefits of coursework and instruction. And a third big chunk of college's value is consumption, which Bryan basically ignores.

After those three big bites, it is Bryan's "conformity signaling" that is left to hunt for the table scraps!

Finally, Bryan mentions the "sheepskin effect":

Final challenge for Noah: If education's rewards stem from this "large number of benefits that are very hard to measure," why on earth would the payoff for graduation vastly exceed the payoff for a typical year of education?  My explanation, of course, is that given the vast social pressure to cross educational milestones, failure to graduate sends a very negative signal to the labor market, leading to discontinuous rewards.  What's Noah's alternative?  Do schools really delay "building social networks, broadening people's perspective, giving young people practice learning difficult new mental tasks and so forth" to senior year?

I have no ready explanation of sheepskin effects - perhaps they are used by employers to extract a signal of how well one actually learned things in one's college courses. But signal extraction does not imply Spence-style signaling. Spence-style signaling must be costly, and for students who have done enough to graduate, collecting that sheepskin is simply not costly.

So I don't need to explain the sheepskin effect in order to rule out Bryan's explanation. Bryan views the sheepskin effect as evidence of signaling, but since it implies that much of the college payoff comes without cost, I view it as clear evidence against the signaling model of college.

Anyway, I think that about takes care of Bryan's points. As a final note, Bryan wants me to be more sociological, but I think he should be more psychological! If college really is wasteful, costly signaling, as Bryan posits, then people who complete it should view it as a wasteful, unnecessary chore. It should be something they wish they didn't have to do. But I bet a substantial majority of college graduates, if you ask them, will speak quite highly of their time in college, and will not wish that they had been able to go directly into the workforce instead.


P.S. - If you don't understand that signal extraction does not imply signaling, just contemplate the following sentence: "Fire doesn't emit smoke in order to prove to observers that it's really a fire."