Tuesday 4 June 2013

Signalling and education

U Vic's student magazine asked me for comment on signalling and degree inflation; Wilbur Townsend and Nick Cross's story is now out.

I agree with Nick that there has been degree inflation in New Zealand; most folks around the traps suggest the big push happened in the 1990s. It's largely leveled off since then. Or, at least at Canterbury, I've not seen much evidence of it since I've been here. It could pick up again once the full effects of the various Universities' new taught masters programmes start coming through.

Here they channel Bryan Caplan:
Why would people get a tertiary education if it doesn’t add value? We believe it is about sending a signal to potential employers. The ‘signalling model of education’ holds that the wage premium from having a tertiary degree comes from the signal of a person’s abilities relative to others. It’s based on the observation that most formal tertiary education is taught by professors with little experience outside the ivory tower, and that most courses are concerned with academic theory and not tailored to specific occupations. Why would these be any use in the real world? Research into the ‘transfer of learning’ suggests that education does little to actually improve intelligence or critical-thinking skills in the long run. Consider the way you approach your own education. Most of us spend weeks cramming for our final exams, but aren’t at all worried if we forget much of the material the second the exam is finished. Most of us rejoice when a class is cancelled because it means we have less to learn. But there is no proportionate reduction in fees for the cancelled class—shouldn’t we be outraged? If education is about building human capital, why isn’t our focus on accumulating as much knowledge as possible? If it’s about signalling to employers, we can understand that the most important thing to come out of our education is the piece of paper at the other end.
It's also been fun seeing a bit of evidence of degree inflation in the data. In the main US work on political knowledge, income matters far less than education in predicting political knowledge. But, here in New Zealand, they both seem to matter. A lot of very successful people here got their start when all you needed was a high school degree, and so household income is the better proxy for intelligence for that cohort. The main bout of degree inflation in America happened decades earlier.

Here's what I sent Nick, which he of course needed to truncate to leave room for others:
“Degree inflation is real, but signalling isn’t everything that’s going on in education. The signalling model says that the value of education mostly comes from the little piece of paper certifying not that the graduate has learned anything but rather that the graduate is the kind of person who is able to put up with a few years of grinding pointless work without quitting, can complete assignments on time, and is smart enough to have made it through. While it would be easy to provide cheaper signals of intelligence, there isn’t a lower-cost way of signalling the ability to put up with years of grind-your-way-through assignments. So it isn’t implausible that much of what goes on at University is providing that signal. But that can hardly be everything: there are wide differences in salary for graduates with different degrees, and at least some of that is due to the specific things taught in those degrees.” 

“At least at Canterbury in Economics over the last decade, I have not seen great evidence of degree inflation. In a degree-inflation model, we would have a higher proportion of students progressing from the Bachelors to the Honours degree, and then more moving on from the Honours degree to a Masters, but little change in where the graduates wound up. But about the same proportion of our majoring students go on to pursue an Honours degree now as was the case a decade ago, we haven’t really changed the standards for entering Honours, and our Honours students place as well at Treasury, the Reserve Bank, the bureaus, and the trading banks as they ever have. I expect that this will have changed in a decade’s time: a lot of places are repackaging Honours degrees as Masters. If employers only pierce the credentialing veil imperfectly, then we could wind up with Masters being the new Honours. While we have substantial degree inflation in the overall population as compared to, say, fifty years ago, I don’t think there’s been much change over the last decade. When I got here, it took an Honours degree to land a decent entry position at Treasury; that’s still the case now.”

“The problem with the signalling equilibrium is that anyone not pursuing a University degree is lumped in with everyone who would not be able to complete one if they tried. And so employers infer something about an applicant’s likely abilities from that he hasn’t gone to University. The only real way of solving the problem would be to reduce the number of funded places at University while providing ample scholarships to students of very high ability but limited means, but it’s not immediately clear that this is better than what we currently have. It’s not crazy to think that New Zealand could be better off if, say, a quarter of the students currently coming to University for business degrees went instead to the polytechs for vocational training. I’ve not seen any conclusive case for or against it, but it’s not immediately implausible.”
The introduction forms a bit of a depressing assessment of New Zealand's intellectual environment.
Canterbury University economist Eric Crampton is the closest thing New Zealand has to a ‘public intellectual’. He blogs at offsettingbehaviour.blogspot.com, and regularly appears in New Zealand media to bring an economic perspective to issues such as alcohol regulation, breakfast in schools and the Christchurch earthquake recovery.
I'm not sure that's entirely accurate. Or, rather, the NZ Herald last year reckoned there were at least a couple dozen of us. 

The provocative conclusion, for a student magazine, I'm sure will draw interesting letters to the editor.

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