The Signaling Model and its Role in Education

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This chapter explores the concept of signaling in education and the competing explanations for why education leads to increased earnings. It questions the necessity of spending several years and significant amounts of money in college to prove one's worth as a worker. The chapter also discusses the influence of government subsidies in the education system and the various abilities schools weed out.

Bryan Caplan of George Mason University and blogger at EconLog talks to EconTalk host Russ Roberts about the value of a college education. Caplan argues that the extra amount that college graduates earn relative to high school graduates is misleading as a guide for attending college--it ignores the fact that a sizable number of students don't graduate and never earn that extra money. Caplan argues that the monetary benefits of a college education have a large signaling component rather than representing the value of the knowledge that's learned. Caplan closes by arguing that the subsidies to education should be reduced rather than increased.