Today's episode of Rationally Speaking is sponsored by Give Well, they're dedicated to finding outstanding charities and publishing their full analysis to help donors decide where to give. They do rigorous research to quantify how much good a given charity does. For example, how many lives does it save or how much does it reduce? Poverty per dollar donated. You can read all about their research or just check out their short list of top recommended evidence based charities to maximize the amount of good that your donations can do.

It's free and available to everyone online. Check them out at Give Weblog.

Welcome to, rationally speaking, the podcast, where we explore the borderlands between reason and nonsense. I'm your host, Julia Gillard, and I'm here with today's guest, Bryan Caplan.

Bryan is a professor of economics at George Mason University and the author of several books, including, most recently, The Case Against Education Why the Education System is a Waste of Time and Money. That's the case we're going to be talking about today on the show. Brian, welcome back to, rationally speaking, so much fun to return.

So your kids education lays out a model of what education is doing, what the value of the education system is to people and to society that is different from the norm. Could you lay out that case in brief assurer?

So the big thing that I'm doing differently from almost everybody else is I'm taking the idea of signalling very seriously just to back up. So there's a standard story that almost everyone tells about why education pays in the labor market and just says you go to school, they pour some skills into you, you're better at your job, and so you get paid more. What's the problem? And I'm happy to say, well, sure, that's part of the story.

But I say there's also a much bigger part of the story that rarely gets discussed, and that is that when you do well in school, you impress others. You get certification, you get stamped with a sign of approval saying, great, a worker. And my story is that the majority, in fact, a large majority of the pay off from education actually comes from this. Selfishly speaking, that doesn't matter so much. But from a social point of view, it matters tremendously because if the reason why people get paid more for school is because they learn more skills than basically it's a way the taxpayers invest in our productive capacities.

And then we produce the very we produce the very wealth that we are being paid for. But on the other hand, the signalling story, the main thing that's going on is that you're getting paid because you have impressed employers. And if everyone has a bunch of stickers on their head, this doesn't mean everyone gets good jobs or gets paid a lot. It just means they need a lot of stickers in order to get a job. So the biggest sign of this, I would say, is what's called credential inflation, which is they just now need more education to get a job that your dad or grandfather could have gotten with one or two fewer degrees.

And what kind of signal are you mostly pointing out? Is it the signal that someone was good enough to be accepted into a college or the signal that someone was good enough to graduate with the grades that they did?

Yes. So the graduation seems like it's a lot more important, because if it were the first story to just you get a great signal by being accepted, then people would take their admission letters and shop them around employers and saying, I got into Harvard and Stanford. So what are you going to offer me, Goldman Sachs? And in practice, that doesn't seem to work very well. Right, right. Right. So and again, if you're wondering why, I would say that there's something very odd about a person who tries to do that, they seem like they're trying to skip out on this sacred institution of our society.

So, yeah, employers are understandably nervous about someone so weird that they would try that they would get into Harvard and then try to weasel out of it. So in terms of like what is the people are signaling? I think it's really a big package of different traits. So intelligence, obviously, but it's not just that that's too easy to measure by itself. So I said also work ethic and then finally to sheer conformity again is very important on the job.

Someone can be really smart and really hard working, but if they're defiant, if they don't play as part of the team, then they're almost useless to you. And I say really to understand a lot of what's going on with education, we have to focus on this conformity signaling. And again, what's really interesting about conformity signalling is if someone comes along with a brand new, incredibly creative, unheard of way of signaling conformity, who are the first?

People are going to want to try that signal, say it's going to be the nonconformist. So there's a catch. Twenty two of conformity signaling, which is that once something becomes a standard way to signal conformity, there's a lot of in and it's hard to break out of it. And I think that's a big part of the problem with our education system as we are pretty locked into this bad equilibrium. So I have a bit of experience trying to communicate relatively complex ideas, and one thing that I now do instinctively is I ask myself, what are the top three, five ways that people are going to misunderstand what I'm saying?

And I have a feeling that the signalling model of education is often misunderstood.

Am I right? Oh, yes, very much so.

What are the main ways people misunderstand it? One of the things you're not saying that people might think you're saying.

The big thing I'm not saying is that all education is signaling. All right. I can't tell you how many even smart people you go and say, say, 80 percent of education signaling you may even say that exact sentence. And then people hear you're saying it's all signaling. I didn't say all. I said 80 percent. Yes. So we assume that that is an enormous problem. And just the way the people will say, what about literacy? What about numeracy?

Oh, I never thought about that before. Thank you for pointing out what a stupid view I have because you like I just wasn't aware that I was going on in school. So I think that's probably the biggest one. Probably the second biggest is this idea that it's just impossible that this could be true, because despite all appearances, because if it were true, people would figure out some better way of figuring out if people would discover a better way of selecting the good workers.

And for that, I say two things. I mean, first of all, there's about a trillion dollars of money in favor of the status quo. So it's going to be pretty hard to compete with that. You know, step one and then step two again is there's this law in effect, which is that if one of the main things are signaling is conformity, then someone who does something different looks nonconformist. And so it sends a bad signal.

And then a third thing is that the whole idea of signaling is that if you come up with a really cheap way of signaling, the result isn't that you get your signal across at a low cost, but rather that you just have to do more of it. So you basically the signaling model is if you found a way of cutting the cost of signaling and half the result wouldn't be that we do half as much signalling. The result would be that we signal for twice as long.

Can you say a little bit more about that, like, what is the yeah, sure, what is the thing that people think should be possible that your model says is not possible or what we have possible possible is too strong to likely.

Sure feels like my favorite example. This is suppose that someone comes up with a new way of making synthetic diamonds at 10 percent of the current cost. And my question is, how long would it take before people either stop giving diamond engagement rings or they sort of giving rings that were enormous? Right. And the key point is that since what you're signaling with that ring is that you're willing to go and put in a lot of money into something to indicate your devotion if the cost per carat of diamond were to fall, it's not that we would just keep giving the same diamonds that we're currently giving.

Instead, people would say, well, that doesn't really convince people very much anymore, doesn't say much anymore. I better go and either get an even bigger diamond or I'll give something that can't be synthesized. And I say it's a lot of it is really the same for education, where if you were to go and have, say, free college for all, the result wouldn't be that everybody with a college degree can get the job kind of jobs that people get with.

Now, instead, there'd be an army of extra people going and then you might need a master's degree or another advanced degree to be considered worthy of an interview.

So my impression is that other academics agree that there is some signaling value to higher education. They would just put it at a lower percentage than 80 percent. Right. So two part question. Do you have a sense of what the sort of consensus view is, of what percentage, among other researchers, about what percentage of education value is signaling? And to how could you tell the difference between a model in which signaling is 80 percent of the value versus the model, which is, you know, 30 percent or something like that?

You know, because you can always point to some evidence of signaling and some evidence of actual value being added by education. So how do you how do you distinguish those two models?

OK, so two great questions and I'll start with your first question and then try to remember what your second question was with Larry. Refresh my memory. OK, so the first question is, do I have a sense about what's signaling share? Other economists in particular have I think that know there's a big gap between just your run of the mill economist who I mean, I think a lot of them would say a third, something like that, on the other hand.

And I actually did do a survey of economics bloggers, I think a pretty common answer was like 50 percent. So not that far from what I'm saying. But there's a huge gap between what most economists think and what actual specialists think. So people who specialize in either education, labor, economics, I don't know of any actual survey of them, but I have spent decades around them and reading what they're saying, and I don't think I could get most of them up to more than 10 or 15 percent.

Wow. So, again, it's the kind of thing where if the average is sort of at the median, is that low, then the average is probably going to be a bit higher. But I think 20 percent is sort of an upper bound. There's a lot of economists who just say, look, as far as we can tell, it doesn't exist or it's just not an issue. You know, there's one of the main literature reviews in the league.

The Handbook of the Economics of Education comes away saying, I don't we don't see any sign the signaling is of any importance.

OK, in that case, I want to change my second question and ask what what is your impression of the cruxes, the main crux of disagreement between you and the other specialists and by crux of disagreement? I mean, what is what is the thing that they are seeing or the thing that they assume is true about the world that is causing them to have a very different picture than you?

Right. So my basic story is that there's a lot of evidence in other fields that they just don't pay any attention to it. And most obviously, just taking a look at the curriculum and seeing what it is that students actually learn in school and then compare that to what they might ever do on the job. Right. And again, Somalia, like most specialists in health, education, labor, economics, they're only looking at income writers. So they're looking at the effects of education.

And then there is this is this really circular effort to say, well, since there's a big effect on the income of the person, they must have learned something useful. And you say, yes, but this model predicts the very same thing. So something like that. So that's a big issue. And again, there is sort of an idea of, well, of course, we all know that the people are learning tons of useful stuff. And then when you say, well, actually they're learning a ton of stuff, they'll never going to use it.

And this is then where economists will often retreat to, oh, well, they're learning how to learn. Learning, critical thinking doesn't really matter what the subject is. And then I'll say there's something they really don't know about, which is like in educational psychology. They've been studying this very issue for one hundred years. They want to find evidence of learning how to learn. They want to find evidence that critical thinking is being successfully taught. And yet after one hundred years, they're really pretty shell shocked and say, look, we're just not finding much sign of this broad general inculcation of thinking skills that educators love to believe is actually happening.

So I say that's the stuff that most economists just are totally unaware of. So at the curriculum that looking at these educational psychologists who go and study. The sort of the rebuttals to that and then, you know, then there's some other areas also outside of economics, so there is this work on credential inflation that I've been mentioning is more done by sociologists than by economists. So it's more sociologists who actually go and try to get details on so what is actually required to do a job versus how much education you to get a job and noting that that's been going up and that I think there is a tendency to set up tests where it really is had human capital wins and tails, it breaks even.

And when you say heads human capital wins, you're referring to this this Ultranet non model where the value of education is people gain skills and knowledge that that make them more productive workers.

Yeah, precisely. So when signalling models first came around the 70s, people immediately said, well, why don't we see whether there's a special return for graduation as opposed to mere years of education? And they have some idea in the background of, well, when you graduate, then you get this diploma and that's a convincing signal. Whereas if you just have a few years, that does really show very much and you probably some kind of conformity signaling lurking in the back of their minds.

So anyway, so there's about 10, 15 years of research where they got crummy data and they and people are at least not convinced one way or the other. Then finally, better data sets come along, which show overwhelmingly that that not only is there a big payoff for graduation as opposed to mere years of education, but in fact, that is most of the payoff. Now, at this point, you might think that there would be a general admission while signaling us crush this one.

This is amazing. Instead, it takes about five minutes before people start coming up with alternate theories about how there could be a big diploma. Fact, even though jiggling is not important and, you know, it's logically possible to do it right. So, again, that article is mentioning in the Handbook of the Economics of Education by Fabian Longa and Robert Topple, they produce a model saying, look, it's conceivable, right? But it's like, well, look, if it come out the other way, you would have said that signalling was wrong.

But when it comes out the wrong way, namely in favor signaling, then you say doesn't prove anything. Right. And similarly, there's also a moderately or, you know, pretty big, pretty big literature that contrasts the effect of education on national income or of national education on national income versus personal education or personal income. And again, this is research where what people want to find is that the effect of a year of national education on national income is as big or bigger than the effect of your personal education on personal income.

Nobody finds that right. So there's a paper that I cite where they go over all eight no data sets at the time. Every single one of them finds a much smaller effect of national education on national income than on the personal education of personal income, which again, totally fits with signaling, says, well, because I like the idea like like if one individual gets more scale, they they become better. They produce more. So if everyone in the country gets more scale, the whole country can produce more.

But on the other hand, in the same model, one person gets more stickers on his forehead. They get paid more money because they've impressed people. But if you just hand out a bunch of degrees to everybody and a bunch of stickers to everybody, that doesn't that doesn't it doesn't didn't raise productivity. It's not going to it's not going to enrich the nation. Sorry, so the return to national income is lower than the return to personal income. Yeah, exactly.

So what I said in the book, I'd say that we're using a pretty common estimate is that if an individual raises education by a year, he'll make 10 percent more money, whereas you standard like an average of all these data sets is if a country increases its average education of its workforce by a full year, then the country is going to get richer by maybe two percent. So like five times the benefit for an individual is for a country which coincidentally fits that 80 percent signaling share that I was saying.

Interesting.

Is that the main reason that you estimated at 80 percent. I know. I mean, yeah. Yeah. A different way to ask that. My earlier question about cruxes of disagreement would be how can you tell that it's 80 percent and not 30 percent, Yashar?

So really, what I try to do is assemble a bunch of different bodies of evidence and then just be honest about which ones are more or less convincing. Again, that macroeconomic evidence I was mentioning it strongly in my favor, but reading it, I got to say, well, the data is not that great. So, you know, it's it's a point in my favor. I wouldn't want to go and rest my case on it because, you know, I think it honestly, if it had come out the other way, I sort of said, well, it's not that convincing, you know.

So, you know, like I will say, that result for the effect of national education on national income. That's one thing that I use. I also go and just look at those sheepskin effects or diploma effects. How much of the payoff from education comes from crossing finish lines? And I use that actually just to set a lower bound on the signaling share. And I say that means that it's got to be over 50 percent again, just on the idea.

It doesn't make sense that the payoff that you're teaching lots of extra skills in senior year, if anything, senior years goof off year. But on the other hand, is it just in as a saying that's give us an idea signaling? I think that makes sense. Again, probably to be what is most convincing is just looking at the curriculum and seeing what percentage of people's time do they spend on subjects that they're actually likely to use on the job ever and again.

I mean, I will say they're like, you're getting at something like like 20, 80 percent. Signaling seems very reasonable. Again, for that, you do have to supplement it with this other stuff. On how contrary to a lot of wishful thinking, people don't seem to be learning a lot of general skills or, you know, like general thinking scales is not teaching critical reasoning to do any significant degree. So this was a piece of your argument that I wanted to poke at, you referred to the claims that educators often make that, you know, your classes are not.

The point is not to teach you specific facts and knowledge that you're necessarily going to use in your job. The point is to make you a better thinker. That's what we're that's what school is really about. And you're skeptical of this new site, various studies in which students are tested on the general thinking skills. And it turns out that additional years of schooling don't really help all that much with general thinking skills. And so the hesitation that I'm having is, you know, I'm not doubting those specific studies.

I haven't really looked into them. I'll assume they're correct. But the hesitation is that the way that we measure general thinking skills in those studies does not it feels like just sort of an easy thing to measure in the lab. It doesn't really feel like the thing that I would optimistically expect school to be doing for people. What I would expect, like just looking at four years of college, all of the hundreds of papers that you have to read and problems that you have to turn in, what would I expect that to be doing for people?

Well, it's it's some some amorphous thing that's like ability to solve hard problems. And that includes things like grit, like ability to really just stick it out even though things are hard and not give up, even though you can't immediately see how to solve the thing. But it also includes more concrete problem solving strategies like break the big thing down to smaller pieces or, you know, try one thing, even if you don't think it'll work and then just trust that you'll like come up with more ideas as you go, that kind of thing.

And those will vary from person to person. And I know those things are very hard to measure, especially in a, you know, a one afternoon study where you're you're testing volunteers. And I also am very sympathetic to the argument that, you know, look, if you're going to claim your your intervention, i.e., education does all these valuable things for people, but the valuable things just happened to be too vague to really measure, to capture in a study.

Well, that's kind of suspicious. I'm I'm sympathetic to that, too. But I still just like I'm still just not all that convinced by the things that we have tested as as as evidence of whether school has these general benefits.

I mean, I guess I guess for that, I would just say, since almost everyone is terrible tackling our challenges, there can be much effective education. And I know that's terrible. You know, I mean, I would just say, like like most people, if you just give them any large thing and say tackle it on your own, they only like ninety five percent of people will go nowhere to sit there. Where do I start? Tell me what to do.

It's like that's part of what I'm testing because I can't do that at all. So, you know, that may seem extreme, but like I think that's that's that is my honest reaction to that. I do cite, like, studies of the effect of education on easier tasks, which I wish people can do to some degree. You know, I think of these are these are open ended. So it's kind of like the fly in the spirit, what you're talking about.

But they're just easy enough that people might be able to do them. So, you know, you cite the study of informal reasoning done by Perkins and some other people at Harvard a while back. And what they did there is they looked at people, they talked to people either at the beginning or the end of high school or college. I think even graduate school, if I remember correctly. And they gave them problems that. We're like, you are not likely to have been taught to analyze in school, but which are still subject to critical thinking.

So, you know, the classic one is what was the effect of a five of a five cent deposit in mandatory deposit on amount of literacy? And then they actually recorded their audio answers and then they had judges go and just give them credit for like number of arguments, clarity of arguments. You know, they're deliberately open ended. So there wasn't one definite answer they were looking for. And and what they found was that while people with more education were better at doing problems like this, there wasn't a gain within the academic program.

So it really looked like it was just selection. And again, this is something where you say, well, yeah. So I guess the deposit gives an incentive for recycling, but it's only a nickel. So would people really do it for a nickel and then. Well, but if they had a lot of the bottles, then maybe it would be worth your time.

So you're saying it's sort of closer to general reason they're capturing something more like general reasoning skill than just like a logic puzzle? Yeah, yeah. I guess I buy that.

Yeah. Yeah. So but again, these, these are small puzzles, I guess small issues and they really get listen to people's reasoning and in real time to you to use the buzz word and and just categorizing the number of arguments for people to come up with any. There's something where you're not really taught to do it in school, but it does seem very much like something that someone who is good at thinking would be good at doing. Right. And again, it's not quite what you're looking for because these are small questions.

Well, it would be the kind of thing that apriori I would have predicted school would help with. So it is relevant. It's not getting at the sort of gret aspect of what I was predicting schools would teach, but it is getting at the sort of general thinking skill thing that I would predict they would teach. And I just wanted to highlight you like touched on, but then like breezed past a thing that I think is important and interesting, which is that people got better at this these reasoning tasks with increasing years of education.

But the gains were were when you jump from one sort of level of education, like high school or college or grad school, not within, you know, over your four years of college or over your four years of high school. Right. That is really interesting.

And and again, again and again, they're not it's not that they're following the same people through it for for that many years. Instead, they're you know, they start with a one sample of high school kids and see whether they improved over time and they barely improved. Then get a different sample of college kids and see if they improved over time and again, like almost nothing. So, yeah. So it's again, it's not saying that when you finish, then suddenly you get better, rather saying that the kind of people who get go further in school were probably better all along is almost the only way you could read that study.

Right.

Well, since I'm since then jumping on parts of your argument that I find somewhat less convincing, although by the by the way, just let me say that there's no study I know of that sees whether listening to your podcast improves general thinking skills out. It's hard to tell, you know, thirty thousand a year in tuition.

So I don't. Well, well, well, even better now.

I mean, I think that maybe people listen to a bunch would actually get better, better at it. Although again, of course a lot of it would just be that the better reasoners are listening in the first place. But, you know, like you're so focused on it that I think it might it might maybe you were actually doing it. It's not that anyone is possible, just that it's barely happening in the real world. OK, so I want to I want to jump on one other piece of your argument that that I have more hesitation around, which is I feel like a fair amount of her model rests on the idea that firms or companies hiring workers care a lot about conformity, because if they didn't, then students could they could take or job applicants could take IQ tests.

They could they could they could do something to demonstrate that they have conscientiousness, that they're hard workers. For example, they could take online courses.

They could wash the boss's car. Yeah.

Stuff they could do to show that you're smart and your your your explanation of why we don't see people doing that and saving themselves the four years and one hundred thousand dollars in college. And also why we don't see firms looking for people using those alternate metrics, not just using colleges. The signal is, well, anything that sort of deviates from the standard way to signal these good traits would be nonconformist. And firms want conformist workers. And I just it's not obvious to me that conformity is a good thing or would be valuable, desirable to firms as long as you already have conscientiousness.

So I wear conscientiousness for those listeners who aren't familiar with it is basically like being reliable and hard working and following through on plans and things like that you can imagine would be very important to companies hiring workers. And so I think a lot of cases of nonconformity. Just sort of in general would make people worry, like, oh, this person is just not going to they're not going to do the work that we want them to do.

Yeah, well, actually, that's the key thing. So the fact that someone is hard working doesn't mean they're going to work hard at what you want them to do. All right. So like we all know people who kill themselves and their hobbies, but they slack on their job and you and they might say, I'm not lazy. I work all the time, but you don't work on what you're supposed to. We don't work on what employer wants you to do.

And that's a problem for an employer to have someone with that attitude, which doesn't conscientiousness like hardworking is part of conscientious, but isn't another part of it like following through on the things that you said you would do? Well, so, again, you could go and just collapse conformity into conscientiousness, I think I more and more often, at least, I just say you work ethics just to to sort of peel off that one part of it you like.

In terms of personality psychology, I think it probably conformity would generally load on the edges of straight, but I still think that it's worth separating and separating it just because, you know, socially, I know so many people who are really hard working, but they're still nonconformist, you know, especially like among programmers. I know people who will work for one hundred hours in a week, say, like working on a program they want to do. But if they're an employee, they're terrible because they're so defiant and just back talking.

Bad attitude. Yeah, yeah, yeah.

Well, OK, so my intuition just back up. And then it was coming from the fact that it seems like colleges and often jobs are looking for people who who have done something to stand out, like they've you know, they've come up with some innovative idea or they've they've taken on some leadership role of their own initiative, which is not conformist, but it's nonconformist in a very conscientious way in like a a very disciplined and and and hard working way.

I guess I guess I would say to start that most people don't stand out at all but like but is sending out good. That's if it's conscientious, is doing a good if it continues to think about that.

So the kid who gives the valedictorian speech in the skit is standing out, but he's doing something that is approved by all the authorities, by teachers and parents. He's not standing out in some way that where he's being defiant or he's really saying, look, I have put all my effort into doing what other people want me to do. And I think that's that's a lot of conformity is about is being willing to push yourself to your limits in the service of a goal that isn't really your own.

And and that's a lot of what education is. Education is about is weeding out people who will who will work hard for something if they care about it. But otherwise, say this, this is stupid. I don't feel like it. OK, well, I was thinking about other ways to test the signaling model, and I was thinking so it seems to me that that your theory predicts that signaling would be less relevant under a few conditions, one, when in in jobs where conformity is less important.

So you could, like, surveyed employers in different industries about, you know, you don't necessarily ask them directly, like how much do you care about conformity? But you ask about various other things that matter to them that would correlate with conformity. It would matter less. I think in cases where it's easy for employers to detect people's skill and likely productivity just by looking at their work, for example, so they would have to rely less on signals.

And then third, I would predict it would matter. Signaling would matter less in industries or companies where it's easier to just fire people where you can like, you know, take someone on and then if they aren't productive, just easily fire them. So those are the three conditions I came up with, low conformity, jobs, jobs. It's easy to detect skill and it's easy to fire people first. Do you agree that, like, those are predictions that the second model makes, like what would affect the returns to education?

And if so, have you looked at any of those things? Right, right, so those are all reasonable points, the third one that signaling matters less when people are willing to fire is an argument that I specifically make, although I make it in the context of, in fact, there are very few jobs where people actually readily fire people. So I get a lot of economists say, like, how can we matter very much like you hire someone to give them a chance.

If you don't like him, you flash them. And so I tracked down a lot of papers in sociology saying, like, there's almost no businesses that work this way and said the normal thing in businesses is you hire someone, you get to know them. And by the time you know how good they are, you're already emotionally attached to them. And people don't like firing them at this point. And so, you know, there's you know, there's a lot of evidence of what I call firing aversion where people that you might think would have it would have been gotten rid of long ago like malinger when it went out.

Whatever. I go and pull my students and say, like, how many have a job at George Mason? Most students do. How many people want a job? Or there's at least one worker that everyone knows is incompetent and every hand goes up. Right. So, like, why have they been fired? Yes. Well, I mean, like, we're doing OK. Like, say like the next recession comes, then we'll get rid of them.

And then and even worse is that when you do go out, want to get rid of someone. One of the standard practices in the modern world is what employment determination specialists call D hiring instead of firing them. You say, you know, this isn't a good match. We encourage you to seek employment opportunities elsewhere. You got three months, guy. And then and then you essentially collude with this person to help them, to foist them on another unwitting employer.

And then the cycle of deceit and disappointment can again can and can begin again. So, yeah, I mean, not that one makes perfect sense anyway, but I mean, sorry, sorry to interrupt, but you can look at jobs with with unions versus non unions.

Surely firing would be even harder if there's a union, like setting aside the emotional attachment problem.

Right, right. Of course. I mean, I think there's probably other other differences with unions. The unions are well known for having this egalitarian ethos where they just try to prevent people from from doing their hiring. But maybe that would work. And then so then I think you also mentioned your jobs were skills and attacked again. I say like, if it's super easy to attack, then definitely if it's the kind of thing where I get it, where it takes a few months and then, you know how skillful they are.

Then again, it may be that people get especially emotionally attached to people, that it's still a problem. And then the other side of it is that you suppose that once you don't like like like do you think of this like suppose it's Hollywood. Once you once you successfully star in one Hollywood movie, everyone knows how good you are. But there's still the problem with the diamond in the rough, someone who's never had a starring role. And then how do you convince people that you're any good?

So in Hollywood, there's, of course, a huge problem. And there's all these people like you probably probably could do a starring role, but they'd never gotten the chance. And then with education, there's probably there's a lot of people who like like no one will even try me out or just give me a chance to show my scale, because it's too costly just to hire hundreds of people for a position and then sort them through. So there's that.

And then I can't remember what your first one was.

It was like jobs, where conformity is relatively less important because we think that education is a signal of conformity and that's especially hard to find other signals of.

Yeah, I mean, again, that makes perfect sense. I mean, I just be a little bit nervous about two things. One is almost every job conformity is pretty important. So you may not get that much variation of the other one is there's probably more variation in how much people would make they care about conformity than how much they really do. Yes. I mean, like I know in Silicon Valley, it's fabulous. Oh, well, we're totally outside the box here.

At least you tell me. But when you actually go there and filed, this is kind of like a regular job where people are bossed around and you had you you may have to pretend like you're like everyone's being creative, but it's still a chain of command. It's still the same basic deal. But yeah, like in principle, you could do that. That would be great. Like early in the book, I go over to a bunch of other signs of like how important signaling is, you know, just things like how like like students seem so focused on getting easy A's and like if you were in school to acquire skills, this is pretty perverse.

But if you're in school to impress employers, then it's pretty easy to understand what the easier because the employer doesn't know that it was an easy way. If you find the easiest teacher of real analysis in the country, get in a classroom and in order in exchange for doing some arithmetic like that, people look at that and say, wow, he's got an 80 plus real, wow, look at that guy. So I mean, that that makes perfect sense.

You mentioned the case in which a teacher cancels class and the students are all happy about that and say, jeez, if it was really about gaining skills that they expect to increase their productivity and value to future employers, then why would they be happy to you know, they already paid for tuition. Now they're just like getting less for their money, which is I do think that's a suggestive and and striking fact about the world. Yeah, but but I felt like you didn't quite give enough enough space to the alternate explanation of that, which is just, you know, like people buy gym memberships because they want to lose weight or get fit and then they find excuses not to go to the gym or they're like happy when, you know, there's a holiday and like the gym is closed.

They don't have to go to the gym. It just feels like there's this common phenomenon of a tension, a struggle between your your present self interest and your future self interest. And this leads to a lot of behavior that otherwise looks irrational. Yes, I think I did have a couple of sentences on that point. But you're right. You're right. I have talked more about it then I don't like you. But the main thing I say is that this myopia can explain why students don't show up on a regular day.

And yeah, like typical college class in the middle of semester, barely half the students are showing up. And that, I think you might say, well, it's just myopia because they're going and putting this money in and they're going to get worse grades and their life is going to be worse as a result. But but, of course, there's all the students who do show up. And what's and why is it that those students are also happy when you cancel class and that one seems to be that, well, then I get to have this holiday without having to worry about the material that I failed to learn.

And that is going to lead me to get lower grades. So I say, yeah, I mean, I think in terms of just low attendance, you can explain with myopia, but why people see a big difference between skipping class, what everyone else is doing it and skipping class or the old one, and only half of the people are doing it or while you're doing it. That's what I think. I think that's where I think you that you can detect the signaling element is like I don't mind missing it if everyone else miss it, but if I'm the only one missing it, then I'm dead.

So no, I'll go.

I want to run one more alternate model by you. And do you think this is an alternate to signaling also an alternate to human capital? I'm going to call it the ingroup model. And this story is the people at companies who are doing the hiring of new employees are not totally optimizing for the companies online. They also want to hire people who are similar to them culturally, the people that they would feel comfortable working with and like more and they're college grads.

So they want to hire other college grads because there's a big cultural difference between people who graduated college and people who didn't. And so that's you know, you could argue maybe they on some level think that the cultural signifiers of college grads are a predictor of success at a company. But really, I predict it would be more in this model, would be more just about liking. And they're not. That makes the companies less rational because there's just a principal agent problem and the people making the choices aren't know don't 100 percent aren't 100 percent aligned with the interests of the company.

Does that sound plausible? And has has anyone looked at that?

Yeah. So it's very hard to actually actually test that story. But it is an interesting story. I mean, my view is that there might be some small effect in that direction, but just the extra earnings that college graduates scatter so enormous that if you could get equally qualified people for less for a lot less money without those degrees, that it would be like the profit opportunity would be overwhelming. I mean, again, especially when you realize why not go and set up a firm where the human resources people are also not college graduates and then they'll want to hire other people like them just with the instructions.

You have to hire the best people out of that group. And by the way, our firm offers wages that are way below that of all the time, all our competitors, because we're going and hiring people that no one else will look at. So, I mean, there is there is a huge literature on the economics of discrimination in general. When you put in a decent, no obvious control variables, it's hard to find more you like more than more than a very modest residual, which again, might just be something you haven't measured or could be what you're really talking about.

It's hard to say, but I would just say that, you know, like if college graduates were in five percent more than high school graduates controlling for everything else, then your story, I think, would be in the running. But when we see that they're earning a forty five percent more controlling for everything else, then then you really are thinking about people just leaving massive piles of money on the sidewalk and again. And so and it's not that hard to like.

Your strategy seems pretty easy to explain to people. It's not a really complicated thing. It's just fire you human resources snobs, replace them with people that are that dark snobs and then go go and hire the best. People don't have credentials and we don't pay a lot of money here compared to the competition.

So I definitely agree that there's in this story there would be a lot of money being left on the table. I just don't find that all that surprising apriori. And in fact, the story that you were just telling a few minutes ago about companies not firing low performing workers because it's awkward or they're emotionally attached, but also seemed like a case in which there's a lot of money being left on the table due to these kind of innate human biases.

And so I say that's going to be a lot less money because that's all you're there. You're only leaving money on the table for the small cases where you really made a bad hiring decision. So, I mean, most of the time the system works and the people that you hire are about what you expect. So you're not losing that much money. Just for me, if the bottom five percent of performers don't get fired immediately, whereas if you're if you're overpaying your whole workforce, that's a lot of money.

Hmm. Right, and again, also, I feel like there is this big literature on economics of discrimination where they do try to go and measure these effects they are talking about. And like you like, whether it's for race discrimination or gender discrimination, it's usually pretty easy to make a large majority of the superficial earnings gaps go away once you control for some pretty obvious stuff. So, I mean, this is one where I would just say it's just hard to believe that the people could be leaving so much money on the table when it's so obvious.

I mean, and again, I'd say it's like if you said, look, here's a great way people can make money and then you have a plan that's really complicated that hardly anyone's thought of before. That's where I will say I don't know, maybe. But if it's something as dumb as like firing all your male workers and replace them with female workers and no one's doing it, that's what I'll say. Come on. Any any dummy could figure that I could do that.

And if it would work, yeah. So I guess. Well, OK, I just want to zoom out for a moment and note that I've been honing in on the parts of your argument that I find relatively less convincing. But I actually do find your argument overall pretty convincing. And I like I'm certainly closer to your picture of the of the signaling human capital breakdown than I am to the if you're if you're correct about the standard being closer to 10 percent, signaling I'm closer to 80 percent than 10 percent.

But yeah, I guess I don't know.

I've just been thinking during our conversation about the crux of the disagreement between you and me and I. I think probably one of them is I just I just expect that companies are less rational than you expect they are. And so I would like I would just be less surprised if they were leaving large amounts of money on the table or less surprised if, you know, societal inertia or irrational biases were doing a lot of the work here, which just like changes the whole way, you make sense of what's happening.

I mean, what's funny is for an economist, I say I'm very open minded about this stuff and I am willing to give it to you. There are a bunch of cases where I'll say, yeah, looks like firms are, you know, are actually not maximizing profits or they are they're leaving money on the table. But again, I think what the cases that are well documented are ones where it's more marginal and that there is actually a big body literature on how firms that don't maximize profits and have low productivity per worker have much higher attrition rates than other firms.

And on the other hand, the firms that have unusually high productivity are just more likely to not only survive, but also to expand. So, I mean, again, it's another thing to say, well, PE firms are leaving money on the table for five years. But to say that it's gone on for decades, again, this seems to go against most of what we know about selective attrition and growth of firms.

OK, well, that's a way bigger crux of disagreement than we can resolve in two minutes, so I'll leave it at that. I just thought it was interesting to point out and I want to make sure that I don't forget to tell you about an ironic thing that I noticed that's very relevant to your case, which is philosophy departments in there on the like, why you should be a philosophy major head on their departmental website. They're always like they always cite statistics about how philosophy majors get.

There's like a high return to a philosophy major in terms of the salary starting salaries you get offered.

And they say, see, this is proof that philosophy majors teach you critical thinking skills, which is especially ironic because they're confusing correlation and causation, which is like an example of poor thinking skills in their in their very argument. So it just struck me as a very brain flavored observation. Yeah.

Plus, it's not even true that the philosophy major is well paid. I mean, was it's not at the bottom of the distribution by any means, but I actually know that think about it. So normally the numbers that I look at actually correct. For test scores. So it might be the philosophers and philosophers do come in with very high test scores. So it might be that if you just look at raw means that what you're so what you're saying is true.

Right. But if you but if you go and look at how people who had the same test scores but who majored in something else do, then I think philosophy does pretty poorly, especially if you're not looking at people who go on to get a law degree or something like that, that those people are probably pulling up the average a lot.

Right. All right. Well, we're about over time, so I'm going to wrap up this section of the podcast. But before I let you go, Brian, I wanted to invite you to give the to nominate the rationally speaking pick of the episode. And for you, my prompt is going to be I'm looking for a pick like a book or paper or blog or something else that you don't agree with, but that you think is either really well reasoned or or sort of interesting enough that it's worth consideration.

Even though you disagree on the substance. Can you nominate any pick like that?

Yeah. So I'm just going to nominate a whole body of work. So next week I'm debating Stanford education economist Eric Benishek. And I do talk about his work a bit in the book because it is some of the most challenging material. So what he shows is that. If you take a look at standardized international test scores, you know, basically like your literacy and numeracy tests that are administered to hopefully representative samples all over the world, he says that not only do those predicts national economic prosperity, but there's a much bigger effect of these test scores on on a nation than for an individual.

It's like the opposite of what he is just telling you for education, four years of education. And he says and furthermore, he claims that these high test scores actually don't just make you richer, they actually increase the rate of growth of the economy permanently. All right, so what I'm looking at the staff, it's again, it's not so much incompatible with what with what I'm saying as just kind of surprising. And, you know, I can see how someone might say this is devastating.

I don't really think that it is striking is your hand you shake is you know, he's well known for also for doing work, saying that input based measures of education are crummy. Like you shouldn't just go and look at the like how much you're spending, how many years people are spending or staying in school or or textbooks or desks or whatever, and say you should look at output like these test scores. And so a lot of what he's saying is that at least at least you might be my my twist on what he's saying or my version, what he's saying.

He'll get the chance to correct me next week is that, you know, Brian may be right about actually existing education, but if we just were to go and reorient schools to focus on building a building basic intellectual skills, then there'd be enormous payoffs. Right. And then you're less optimistic. Yeah. Yeah. Me. So, I mean I mean, I would definitely say that I would I would rather put him in charge of the school system than almost any other researcher because, you know, because his mind's in the right place, he really is focusing on outputs rather than inputs and try to cut through a lot of empty rhetoric.

And that's what that's all great stuff. Ultimately, I do just find it very hard to believe that just boosting national math and science scores, which are the sort of what he really focuses on, could have these incredible benefits, you know, just just because most jobs use little math and almost no science. So I just say just doesn't make sense. So I think what he's really picking up is the effect of other much more of a much more generally important and less malleable cognitive skill, which is just general intelligence.

And this is one that he generally steers clear of. So as I'm curious as to what will actually say when I get a chance to talk to him directly, but I really like you like sort of the whole way that he reaches through it. You know, it really is interesting. And I think it is the kind of thing where you can either read it as being a big challenge to me or you can read it as being very compatible with what I'm saying.

And like what I what I think what I will tell him is the most that he's really showing is that the existing education system is well described by me, but a well-designed education system might be what is described by him.

So I'm going to I'm going to reach out to you after the taping is over to get a link or two links to to posts that are like good representations of his body of work. But what what should our listeners who aren't on the podcast website Google to find an example of these arguments?

So I think I would just do Hanish and New York and ADP's a PC, which is the name of the main international test scores that he works with. And you'll get a ton of stuff. And you could also, if you also do his name with the phrase input based education policies and see what to say about those.

Great. OK, excellent. Well, we'll link to that on the podcast site, as well as to your book, The Case Against Education and to your blog.

All right. Awesome that you now, now, now only 20 bucks on Amazon. So every every one of your listeners clearly is going to buy it, I think.

And Brian, thanks so much. It's been great having you back on the show. Yeah, it's always great talking to you. Great pleasure.

This concludes another episode of Rationally Speaking. Join us next time for more explorations on the borderlands between reason and nonsense.