We Don't Need No Thought Control...

I've been sitting on this post all week. Professors Gary Becker and Richard Posner have created one of the most intelligent and thoughtful (non-chocolate-bunny) blogs out there. The Economics and the Law Prof take a serious look at a single issue, generally finding some of the internecine disagreement of which I am so fond. It's on the blogroll and I recommend keeping up -- they have a new topic every week or so.

Last Sunday, Becker posted on "The Benefits of Education," wondering why even more people do not sign up for the obvious benefits and strong return on investment that higher education provides.

It is well documented that the average earnings premium from a college education in the United States increased from about 40 percent in the late 1970's to about 80 percent at present. Not everyone does well financially from going to college, or badly by not going-Bill Gates is an obvious but extreme example of a college dropout- but the average person who does go has far better prospects for earnings, employment, and occupation than the average person who stops schooling after finishing high school. The economic benefits from completing high school also went up relative to those to high school dropouts, although they did not increase as much as the benefits from college. A similar picture holds for Great Britain and many other countries, although the changes elsewhere have been smaller than in the United States.

Posner's Comment hit a theme pretty close to home, namely that "Correlation is not causation."

Suppose what are increasing are not the returns to education but the returns to intelligence, and suppose that people with high IQs both enjoy education more than other people do and are more likely to be admitted to college or a graduate or professional school because teachers prefer teaching (and learning from!) them and because good students are more likely (because they are more intelligent, not because they are good students) to be affluent, and therefore generous, alumni.

Now if this is correct, one might expect many intelligent people to bypass college, because it is so costly; but few do. However, colleges and graduate (including professional) schools provide a screening and certifying function. Someone who graduates with good grades from a good college demonstrates intelligence more convincingly than if he simply tells a potential employer that he's smart; and he also demonstrates a degree of discipline and docility, valuable to employers, that a good performance on an IQ test would not demonstrate. (This is an important point; if all colleges did was separate the smart from the less smart, college would be an inefficient alternative to simple testing.) An apprentice system would be a substitute (and there is evidence that in Germany it is a highly efficient substitute), but employers naturally prefer to shift a portion of the cost of screening potential employees to colleges and universities. Because those institutions are supported by taxpayers and alumni as well as by students, employers do not bear the full cost of screening.

I have always posited this question as: What if you traded the group of current college graduates with those without a degree (Posner says it much better, having all that education to fall back on). I do not mean to run down the benefits of education nor encourage people to drop out. I am a dropout that has lived the life of a graduate. Most of the jobs I have had since I put the old guitar down would have typically been filled by a college graduate.

I realize that there is a sour grapes element to my question, but I have often thought, like Posner, that the successes were achieved by what I call "college people" more so than college graduates.

Full disclosure: a degree would have helped me both personally and financially, and I expect I will finish up an online Economics degree someday here (You can take a course from Art Laffer at YorktownUniveristy,com)

Education Posted by jk at April 27, 2007 12:40 PM