Assessing the Benefits of Higher Education:

At the always excellent Becker-Posner blog, Nobel Prize winning economist Gary Becker and Judge Richard Posner debate the value of higher education. I largely agree with Becker's assessment that the economic benefits of higher education to students are real and growing. Posner, however, claims that the large income gains accruing to college graduates are largely the result of credentialism, because colleges help employers screen job applicants for intelligence and dedication:

[C]olleges 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.)

This is a very common argument, but I think it is seriously flawed. If the benefits of a university education mostly come down to "screening and certifying," one would think that the market could provide a way of achieving this objective without spending four years and tens (sometimes hundreds) of thousands of dollars in tuition. "[D]iscipline and docility" could be easily demonstrated through good performance in an entry-level job of the type that many college students do anyway - such as working part time at McDonald's or serving an internship. For that matter, many college students have already proven their discipline and docility through good performance in high school and in jobs they held as teenagers.

And, as Posner points out, you don't need college to prove your intelligence. A standardized test (or perhaps a battery of such tests) would suffice. Even if college is needed to prove one's discipline, docility, or intelligence, it is hard to see why it should take four years of school to do it. One year of good grades should be enough.

At least to a large extent, Becker must be right and Posner wrong: the benefits of a college education go well beyond screening and credentialing. However, there are a couple of caveats to this happy conclusion. First, college education is heavily subsidized by government, whereas other methods of screening and certification are not. Therefore, some students who could otherwise prove their intelligence and discipline in cheaper ways might choose to go to college instead. Second, many students probably attend school in large part because of the social benefits rather than the economic ones. College provides a great social scene for young people! This fact makes it more attractive to many high school graduates than other certification methods. I'm all in favor of students going to college to socialize, but I don't believe they should get government subsidies to do so. Finally, it's worth noting that neither of these reservations apply with the same force to graduate school and law school. These programs are much less heavily subsidized than undergraduate education, and they usually have a much less happening social scene. So if you really want to make a good economic investment in your human capital, get a graduate degree:).

CONFLICT OF INTEREST WATCH: Obviously, I'm a professor, so I have a vested interest in persuading people that higher education is a good investment. Caveat lector! (Reader Beware!).