My favorite book from this past year is Bryan Caplan’s The Case Against Education. Bryan Caplan is my intellectual hero and he’s probably influenced my views on politics and economics more than anyone else. I’ve been reading his work voraciously for more than a decade. And the Case Against Education is his magnum opus (so far). It’s brilliant, challenging, and a joy to read.

I won’t summarize Caplan’s argument in detail here. You can read or listen to good summaries of it here, here, and here. Basically, Caplan’s story is that most education is socially wasteful signaling. When you earn a high school or college degree, you signal your value to employers, but you don’t gain much in the way of human capital. But now everyone else needs to get a college degree to compete with you, thereby forcing other people to waste more of their lives on useless toil (i.e. “getting a liberal arts education”). Caplan thinks that about 80 percent of the value of a college degree is explained by signaling. His arguments are quite powerful.

I’ll just admit up front: as a college professor, I don’t want to believe it. I don’t want to believe that my job is to grease the wheels on a wasteful signaling game. But, if I’m being honest with myself, I have to concede that there’s a reasonable chance that Caplan is right. That said, there are a few questions about the value of education that Caplan has not conclusively answered to my satisfaction. I’m going to compile what are, in my opinion, the most important objections to Caplan’s view and see what other people think.

First, it still strikes me as somewhat implausible that markets are suffering from epic failures. It seems that, if Caplan is right, then there is a trillion dollar bill on the table that someone should be able to pick up by finding more efficient signals for conscientious, intelligent, and conformist workers. But the fact that people aren’t grabbing the money suggests that either signaling is not as big as Caplan thinks or that the system is more efficient than he lets on.

Think about it this way. Suppose that Bob and Sam have the same IQs. Bob goes to Party U for four years and gets a BA. Sam works a full-time job for four years and takes an IQ test and makes his score available to employers. Why would Bob’s actions signal intelligence, conscientiousness, and conformity better than Sam’s? This just isn’t clear to me. If anything, I’d expect Sam to have the better signal.

Second, one of Caplan’s main pieces of evidence is the sheepskin effect from diplomas. People who graduate from college earn much more than people who almost graduate. For example, people who get three years of college education earn substantially less than people who finish. How should we make sense of this? If human capital explained the value of a college education, then this is not what you’d expect. Instead, you’d expect the returns to years in college to be roughly linear. But we observe a discontinuity when people graduate. The only explanation is that graduates convey new information to employers: that they are conscientious and do what’s expected of them. Only defiant slackers would get three years of a college education and then drop out.

But it’s unclear whether we can attribute the entirety of the sheepskin effect to signaling. One economist puts the point as follows:

What schools actually *do* when they allow you to continue in your education is, effectively, measure what you’ve learned and see if it passes some minimum standard. If you don’t, you drop out. We end up with those failing the (lax) minimum populating the dropout years. They’ve learned little, so they earn little. In the final year, you see everyone who passes the minimum, whether they learned just enough or WAY MORE than enough. The final year contains a wide range of big learners, so on average there’s a big jump in earnings that year.

In other words, we can possibly attribute some of the sheepskin effects to human capital acquisition. How much? No idea.

Finally, Caplan confronts the evidence in the book that education increases IQs. One recent meta-analysis finds: “across 142 effect sizes from 42 datasets involving over 600,000 participants, we found consistent evidence for beneficial effects of education on cognitive abilities, of approximately 1 to 5 IQ points for an additional year of education.” Caplan responds by arguing that the gains from education are “hollow.” The IQ boost just reflects practice effects. Schooling teaches you to do better on IQ tests without actually making you smarter. At any rate, the gains fade out over time.

Is Caplan entitled to the conclusion that the gains from education are hollow? I buy that education doesn’t improve your cognitive processing speed. That’s a bit like expecting basketball practice to make me taller. But it seems possible for education to improve your smarts without boosting processing speed. Raw intelligence and rationality are different things. Maybe, just maybe, education makes people better at reasoning, which is partly a learned skilled. Another hypothesis is that education improves your cognitive reserve, your brain’s resistance to damage. On this hypothesis, college doesn’t literally make you smarter, but it pushes back the date at which your cognitive abilities start to decline. Education buys you extra time before your wits begin to slip.

And what about fadeout? According to the meta-analysis I cited above: “estimates [of the impact of education on IQ] remained statistically significant into the eighth and ninth decades of life. One intriguing possibility is that, unlike targeted interventions, increases in educational attainment have lasting influences on a range of downstream social processes that help to maintain the initial cognitive benefits.” So, education boosts IQ decades later. This finding is surprising and it confirms something that I want to believe. But perhaps it’s true anyway.

The debate between human capital versus signaling is kind of like the debate about the right interpretation of quantum mechanics. The competing theories make predictions that are so close to each other that it’s really tough to find evidence for one theory over others. But, like I said, I definitely find the signaling model of education more plausible after reading Caplan’s book.

How does that affect what I do as a teacher? It actually makes me more interested in teaching effectively. Suppose that only 20 percent of the value of a college degree is human capital. Maybe we can do better. There’s plenty of evidence that colleges are doing a sub-optimal job at teaching skills like writing and critical thinking. Perhaps college professors can move the needle a bit more in a positive direction. And Caplan is talking about averages. Education can still impact some people for the better, even if the average student shrugs it off. Hopefully that’s enough to get me through the day.