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Comment by analog31 | Hacker News Reader

Okay, just make life harder for everybody. Nice.

How does subsidizing education, thus creating more college graduates, increase the value of a degree?

There must be some sort of monstrous arbitrage going on, where young people have figured out a scheme for boosting their market value, and employers are utterly clueless about it.

My own suggestions would be to provide better protections for blue collar workers, such as better enforcement of workplace safety laws, stronger unions, health care, pensions, and a generally stronger safety net.

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> Okay, just make life harder for everybody. Nice.

If you spend less on one thing, you can spend more on other things (or tax less), so I don't see how that follows.

> How does subsidizing education, thus creating more college graduates, increase the value of a degree?

I would think about it like this instead: subsidizing education lowers the cost, making it more attractive than it otherwise would be compared to the alternatives (e.g., trade school).

For example, if the government decided to subsidize Ford car purchases, more people would buy Ford, right? Doesn't mean Ford cars became any better.

What I mean by the value, is what employers are willing to pay. Even Kaplan admits that college graduates get paid more. The subsidy should drive more people into college, but depress the wages of college graduates.

In fact, Kaplan admits that college increases pay more than it increases productivity -- that it benefits graduates more than it benefits countries as a whole, suggesting that something about college education enables people to keep more of their own production.

> What I mean by the value, is what employers are willing to pay. Even Kaplan admits that college graduates get paid more. The subsidy should drive more people into college, but depress the wages of college graduates.

The fact that college graduates get paid more seems adequately explained by the signalling model he presents. How else do you explain the big pay differences for college graduates vs people who dropped out early? They are bigger than you'd expect from just skill/knowledge gain.

> it benefits graduates more than it benefits countries as a whole, suggesting that something about college education enables people to keep more of their own production.

Kaplan would agree would you there, he thinks it makes sense for individuals now to go to college, but as a society it doesn't make sense to subsidize, because it is mostly just signalling, and there are cheaper ways to achieve that.

An analogy he uses is that say you are at a movie theater, and you could see better if you stood. It could be true, but it doesn't follow that everyone could see better if everyone stood.

>The fact that college graduates get paid more seems adequately explained by the signalling model he presents. How else do you explain the big pay differences for college graduates vs people who dropped out early? They are bigger than you'd expect from just skill/knowledge gain.

Well, one thing to consider is that you can structure things so that you avoid all the hard classes until the end, and then leave without taking them. I found myself in this situation and had to 'boss rush' all the hard STEM classes at once, which wasn't fun and probably usually results in someone just dropping out.

Confirming this isn't what's happening might be one explanation for the sheepskin effect. (Of course, just because it might be doesn't mean it is, I think Occam's Razor favors Caplan here).

It sees like "signaling" is just an arbitrary label attached to any exception to a simplistic market model of higher education. We know the effect is occurring, by definition.

Kaplan can't figure out why anybody in their right mind would pay me to work for them. (I can't figure it out either). So it must be "signaling."

A better description would just be to admit that we don't understand the market value of higher education, and there are effects that contradict a simplistic market model, either because the model is false or we aren't feeding good information into it.

|subsidizing education lowers the cost, making it more attractive than it otherwise would be compared to the alternatives

The saddest thing, is that it clearly hasn't. Tuition costs have sky-rocketed, as has interest rates on education loans. It's become absurdly expensive.

> If you spend less on one thing, you can spend more on other things (or tax less), so I don't see how that follows.

As an additional note, universities right now are getting a huge subsidy: not only through tuition and student loans, but also from exemptions on income, property, and most importantly, endowment taxes.

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