# Finance:The Case Against Education

Short description: 2018 book by Bryan Caplan
Author Bryan Caplan Allan Robertson United States English Educationeconomics Princeton University Press January 30, 2018 PrintDigitalAudiobook 417 Hardcover ISBN:978-0691174655

The Case Against Education: Why the Education System Is a Waste of Time and Money[1] is a book written by libertarian economist Bryan Caplan and published in 2018 by Princeton University Press. Drawing on the economic concept of job market signaling and research in educational psychology, the book argues that much of higher education is very inefficient and has only a small effect in improving human capital, contrary to the conventional consensus in labor economics.

Caplan argues that the primary function of education is not to enhance students' skills but to certify their intelligence, conscientiousness, and conformity—attributes that are valued by employers. He ultimately estimates that approximately 80% of individuals' return to education is the result of signaling, with the remainder due to human capital accumulation.

## Summary

### Human capital model

The foundation of the drive to increase educational attainment across the board is the human capital model of education, which began with the research of Gary Becker.[2] The model suggests that increasing educational attainment causes increased prosperity by endowing students with increased skills. As a consequence, subsidies to education are seen as a positive investment that increases economic growth and creates spillover effects by improving civic engagement, happiness, health, etc.

#### Present value of learning, adjusted for forgetting

The simple human capital model tends to assume that knowledge is retained indefinitely, while a ubiquitous theme in educational interventions is that "fadeout" (i.e., forgetting) reliably occurs.[3] To take a simple example, we may compute the present value of a marginal fact $\displaystyle{ F }$ that increases a person's productivity by $\displaystyle{ V }$ as:$\displaystyle{ PV(F) = \int_{0}^{\infty}e^{-rt}Vdt = {V\over{r}} }$where $\displaystyle{ r }$ is the discount rate used to compute the present value. If $\displaystyle{ V }$is $100 and $\displaystyle{ r }$ is 5%, then the present value of learning $\displaystyle{ F }$ is$2,000. But this is at odds with the concept of fadeout. To correct for this, assume that the probability density function for retaining $\displaystyle{ F }$ follows an exponential distribution—with the corresponding survival function $\displaystyle{ S(t) = e^{-\lambda t} }$. Then the present value of learning $\displaystyle{ F }$, accounting for fadeout, is given by:$\displaystyle{ PV(F) = \int_{0}^{\infty}e^{-rt}S(t)Vdt = \int_{0}^{\infty}e^{-(r+\lambda)t}Vdt = {V\over{r + \lambda}} }$Since the expected value of an exponential distribution is $\displaystyle{ \lambda^{-1} }$, we may tune this parameter based on assumptions about how long $\displaystyle{ F }$ is retained. Below is a table showing what the present value is based on and the expected retention time of the fact:

Present Value of Learning $\displaystyle{ F }$, with Fadeout
3 Months 6 Months 1 Year 2 Years 3 Years 5 Years 10 Years

## Reviews

### Mixed

• Stephen L. Carter in Bloomberg News Opinion[20]
• "I’m not sure he’s right, especially about education being almost entirely for the purpose of signaling, but goodness does he make a strong case. Agree with him or not, you’ll never look at the schools and colleges in quite the same way."
• Tyler Cowen in Marginal Revolution[21]
• Ilya Somin at Reason[22]

### Negative

• Big Five personality traits
• Credential inflation
• Education economics
• Intelligence
• Labor economics

## References

1. Caplan, Bryan (2018). The Case Against Education: Why the Education System Is a Waste of Time and Money. Princeton, NJ: Princeton University Press. ISBN 978-0691174655.
2. Becker, Gary S. (1962). "Investment in Human Capital: A Theoretical Analysis". Journal of Political Economy 70 (5): 9–49. doi:10.1086/258724. ISSN 0022-3808.
3. Cascio, Elizabeth U; Staiger, Douglas O (2012). "Knowledge, Tests, and Fadeout in Educational Interventions". NBER Working Paper No. 18038.
4. Spence, Michael (1973). "Job Market Signaling". The Quarterly Journal of Economics 87 (3): 355–374. doi:10.2307/1882010. ISSN 0033-5533.
5. Ree, Malcolm James; Earles, James A. (1992). "Intelligence Is the Best Predictor of Job Performance". Current Directions in Psychological Science 1 (3): 86–89. doi:10.1111/1467-8721.ep10768746. ISSN 0963-7214.
6. Gottfredson, Linda S. (1997-01-01). "Why g matters: The complexity of everyday life". Intelligence. Special Issue Intelligence and Social Policy 24 (1): 79–132. doi:10.1016/S0160-2896(97)90014-3. ISSN 0160-2896.
7. Deary, Ian J.; Strand, Steve; Smith, Pauline; Fernandes, Cres (2007-01-01). "Intelligence and educational achievement". Intelligence 35 (1): 13–21. doi:10.1016/j.intell.2006.02.001. ISSN 0160-2896.
8. Barrick, Murray R.; Mount, Michael K. (1991). "The Big Five Personality Dimensions and Job Performance: A Meta-Analysis" (in en). Personnel Psychology 44 (1): 1–26. doi:10.1111/j.1744-6570.1991.tb00688.x. ISSN 1744-6570.
9. Specht, Jule; Egloff, Boris; Schmukle, Stefan C. (2011). "Stability and change of personality across the life course: the impact of age and major life events on mean-level and rank-order stability of the Big Five". Journal of Personality and Social Psychology 101 (4): 862–882. doi:10.1037/a0024950. ISSN 1939-1315. PMID 21859226.
10. Plomin, Robert (2012). "Genetics: How intelligence changes with age" (in en). Nature 482 (7384): 165–166. doi:10.1038/482165a. ISSN 1476-4687. PMID 22318596. Bibcode2012Natur.482..165P.
11. Fuente, Angel de la; Doménech, Rafael (2006). "Human Capital in Growth Regressions: How Much Difference Does Data Quality Make?" (in en). Journal of the European Economic Association 4 (1): 1–36. doi:10.1162/jeea.2006.4.1.1. ISSN 1542-4774.
12. Caplan, Bryan (2008). The Myth of the Rational Voter: Why Democracies Choose Bad Policies. Princeton, NJ: Princeton University Press. ISBN 9780691138732.
13. Snyder, Thomas D.; de Brey, Cristobal; Dillow, Sally A. (2017). Digest of Education Statistics, 2017. National Center for Education Statistics. pp. 13.
14.
15. Pethokoukis, James (2018-03-16). "The case against education: A long-read Q&A with Bryan Caplan" (in en-US).
16. Riley, Naomi Schaefer (2018-01-15). "Review: Deciding Against the Paper Chase" (in en-US).
17. Epstein, Gene (2018-10-19). "Compulsory Futility".
18. Carter, Stephen L. (2018-12-20). "My 15 Favorite Nonfiction Books of 2018".
19. Cowen, Tyler (2018-05-09). "My Conversation with Bryan Caplan" (in en-US).
20. Somin, Ilya (2018-03-24). "Bryan Caplan's Case Against Education" (in en-US).