Sunday, July 10, 2016

[qdkhaonz] College as signaling

The story goes, graduating from business school serves as a signaling mechanism in an imperfect information game, signaling something useful for potential employers.  You don't actually learn anything useful in business school; only the act of getting past its artificial hurdles matters.  And this observation ironically won a business school dean a Nobel Prize in Economics.

Apply the same reasoning to undergraduate college education, where the arguments that you don't learn anything useful are even stronger.  If true, the vast government expenditure to increase access to college education, e.g., financial aid, predicated on the assumption that college teaches something useful, was for naught.  We do nowadays see evidence that a college education is worth far less than it used to.

We need to know, we should have known, exactly what that "something" is that graduating from business school or college signals.

Hypothesize that it is the financial and social support structure around a person, kind of a continuation of "it takes a village to raise a child".  When an employer hires someone, they are also hiring the entire financial and social support structure around a person.  Getting through college, in the absence of government intervention, required a large support structure, which a later employer can count on, or "exploit", to yield a high productivity employee.

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