Credentialing Over Knowledge: The Sheepskin Effect

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The sheepskin effect illustrates that earning a diploma has significant market value, overshadowing the actual knowledge gained during education. Research indicates that individuals with partial college education do not significantly outperform those without any college experience, implying that the completion of a degree rather than the education itself is what drives labor market rewards. This emphasizes the importance of credentials as signals in the job market, suggesting that the ability to finish education may be more valuable than the knowledge acquired.

Bryan Caplan of George Mason University and the author of The Case Against Education talks about the book with EconTalk host Russ Roberts. Caplan argues that very little learning takes place in formal education and that very little of the return to college comes from skills or knowledge that is acquired in the classroom. Schooling, he concludes, as it is currently conducted is mostly a waste of time and money. Caplan bring a great deal of evidence to support his dramatic claim and much of the conversation focuses on the challenge of measuring and observing what students actually learn.