Signaling Dominates Causation

The discussion emphasizes the significance of signaling in understanding causal effects in the context of human capital and ability. It highlights that while all three factors—signaling, human capital, and ability—are relevant, signaling accounts for the overwhelming majority of the causal effect at 80%. The analysis clarifies that this estimation is made after adjusting for ability bias, which reduces the apparent effect by 45%. Therefore, the remaining effect is divided into 20% attributed to human capital and the adjusted signaling effect, reinforcing the idea that signaling is a predominant force in the analysis of human capital effects.