Human capital or signaling? No, it's about doing the Right Thing and acquiring karma

by VipulNaik7 min read20th Apr 201416 comments

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Education
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There's a huge debate among economists of education on whether the positive relationship between educational attainment and income is due to human capital, signaling, or ability bias. But what do the students themselves believe? Bryan Caplan has argued that students' actions (for instance, their not sitting in for free on classes and their rejoicing at class cancellation) suggest a belief in the signaling model of education. At the same time, he notes that students may not fully believe the signaling model, and that shifting in the direction of that belief might improve individual educational attainment.

Still, something seems wrong about the view that most people believe in the signaling model of education. While their actions are consistent with that view, I don't think they frame it quite that way. I don't think they usually think of it as "education is useless, but I'll go through it anyway because that allows me to signal to potential employers that I have the necessary intelligence and personality traits to succeed on the job." Instead, I believe that people's model of school education is linked to the idea of karma: they do what the System wants them to do, because that's their duty and the Right Thing to do. Many of them also expect that if they do the Right Thing, and fulfill their duties well, then the System shall reward them with financial security and a rewarding life. Others may take a more fateful stance, saying that it's not up to them to judge what the System has in store for them, but they still need to do the Right Thing.

The case of the devout Christian

Consider a reasonably devout Christian who goes to church regularly. For such a person, going to church, and living a life in accordance with (his understanding of) Christian ethics is part of what he's supposed to do. God will take care of him as long as he does his job well. In the long run, God will reward good behavior and doing the Right Thing, but it's not for him to question God's actions.

Such a person might look bemused if you asked him, "Are you a practicing Christian because you believe in the prudential value of Christian teachings (the "human capital" theory) or because you want to give God the impression that you are worthy of being rewarded (the "signaling" theory")?" Why? Partly, because the person attributes omniscience, omnipotence, and omnibenevolence to God, so that the very idea of having a conceptual distinction between what's right and how to impress God seems wrong. Yes, he does expect that God will take care of him and reward him for his goodness (the "signaling" theory). Yes, he also believes that the Christian teachings are prudent (the "human capital" theory). But to him, these are not separate theories but just parts of the general belief in doing right and letting God take care of the rest.

Surely not all Christians are like this. Some might be extreme signalers: they may be deliberately trying to optimize for (what they believe to be) God's favor and maximizing the probability of making the cut to Heaven. Others might believe truly in the prudence of God's teachings and think that any rewards that flow are because the advice makes sense at the worldly level (in terms of the non-divine consequences of actions) rather than because God is impressed by the signals they're sending him through those actions. There are also a number of devout Christians I personally know who, regardless of their views on the matter, would be happy to entertain, examine, and discuss such hypotheses without feeling bemused. Still, I suspect the majority of Christians don't separate the issue, and many might even be offended at second-guessing God.

Note: I selected Christianity and a male sex just for ease of description; similar ideas apply to other religions and the female sex. Also note that in theory, some religious sects emphasize free will and others emphasize determinism more, but it's not clear to me how much effect this has on people's mental models on the ground.

The schoolhouse as church: why human capital and signaling sound ridiculous

Just as many people believe in following God's path and letting Him take care of the rewards, many people believe that by doing the Right Thing educationally (being a Good Student and jumping through the appropriate hoops through correctly applied sincere effort) they're doing their bit for the System. These people might be bemused at the cynicism involved in separating out "human capital" and "signaling" theories of education.

Again, not everybody is like this. Some people are extreme signalers: they openly claim that school builds no useful skills, but grades are necessary to impress future employers, mates, and society at large. Some are human capital extremists: they openly claim that the main purpose is to acquire a strong foundation of knowledge, and they continue to do so even when the incentive from the perspective of grades is low. Some are consumption extremists: they believe in learning because it's fun and intellectually stimulating. And some strategically combine these approaches. Yet, none of these categories describe most people.

I've had students who worked considerably harder on courses than the bare minimum effort needed to get an A. This is despite the fact that they aren't deeply interested in the subject, don't believe it will be useful in later life, and aren't likely to remember it for too long anyway. I think that the karma explanation fits best: people develop an image of themselves as Good Students who do their duty and fulfill their role in the system. They strive hard to fulfill that image, often going somewhat overboard beyond the bare minimum needed for signaling purposes, while still not trying to learn in ways that optimize for human capital acquisition. There are of course many other people who claim to aspire to the label of Good Student because it's the Right Thing, and consider it a failing of virtue that they don't currently qualify as Good Students. Of course, that's what they say, and social desirability bias might play a role in individuals' statements,  but the very fact that people consider such views socially desirable indicates the strong societal belief in being a Good Student and doing one's academic duty.

If you presented the signaling hypothesis to self-identified Good Students they'd probably be insulted. It's like telling a devout Christian that he's in it only to curry favor with God. At the same time, the human capital hypothesis might also seem ridiculous to them in light of their actual actions and experiences: they know they don't remember or understand the material too well. Thinking of it as doing their bit for the System because it's the Right Thing to do seems both noble and realistic.

The impressive success of this approach

At the individual level, this works! Regardless of the relative roles of human capital, signaling, and ability bias, people who go through higher levels of education and get better grades tend to earn better and get more high-status jobs than others. People who transform themselves from being bad students to good students often see rewards both academically and in later life in the form of better jobs. This could again be human capital, signaling, or ability bias. The ability bias explanation is plausible because it requires a lot of ability to turn from a bad student into a good student, about the same as it does to be a good student from the get-go or perhaps even more because transforming oneself is a difficult task.

Can one do better?

Doing what the System commands can be reasonably satisfying, and even rewarding. But for many people, and particularly for the people who do the most impressive things, it's not necessarily the optimal path. This is because the System isn't designed to maximize every individual's success or life satisfaction, or even to optimize things for society as a whole. It's based on a series of adjustments driven by squabbling between competing interests. It could be a lot worse, but a motivated person could do better.

Also note that being a Good Student is fundamentally different from being a Good Worker. A worker, whether directly serving customers or reporting to a boss, is producing stuff that other people value. So, at least in principle, being a better worker translates to more gains for the customers. This means that a Good Worker is contributing to the System in a literal sense, and by doing a better job, directly adds more value. But this sort of reasoning doesn't apply to Good Students, because the actions of students qua students aren't producing direct value. Their value is largely their consumption value to the students themselves and their instrumental value to the students' current and later life choices.

Many of the qualities that define a Good Student are qualities that are desirable in other contexts as well. In particular, good study habits are valuable not just in school but in any form of research that relies on intellectual comprehension and synthesis (this may be an example of the human capital gains from education, except that I don't think most students acquire good study habits). So, one thing to learn from the Good Student model is good study habits. General traits of conscientiousness, hardwork, and willingness to work beyond the bare minimum needed for signaling purposes are also valuable to learn and practice.

But the Good Student model breaks down when it comes to acquiring perspective about how to prioritize between different subjects, and how to actually learn and do things of direct value. A common example is perfectionism. The Good Student may spend hours practicing calculus to get a perfect score in the test, far beyond what's necessary to get an A in the class or an AP BC 5, and yet not acquire a conceptual understanding of calculus or learn calculus in a way that would stick. Such a student has acquired a lot of karma, but has failed from both the human capital perspective (in not acquiring durable human capital) and the signaling perspective (in spending more effort than is needed for the signal). In an ideal world, material would be taught in a way that one can score highly on tests if and only if it serves useful human capital or signaling functions, but this is often not the case.

Thus, I believe it makes sense to critically examine the activities one is pursuing as a student, and ask: "does this serve a useful purpose for me?" The purpose could be human capital. signaling, pure consumption, or something else (such as networking). Consider the following four extreme answers a student may give to why a particular high school or college course matters:

  • Pure signaling: A follow-up might be: "how much effort would I need to put in to get a good return on investment as far as the signaling benefits go?" And then one has to stop at that level, rather than overshoot or undershoot.
  • Pure human capital: A follow-up might be: "how do I learn to maximize the long-term human capital acquired and retained?" In this world, test performance matters only as feedback rather than as the ultimate goal of one's actions. Rather than trying to practice for hours on end to get a perfect score on a test, more effort will go into learning in ways that increase the probability of long-term retention in ways that are likely to prove useful later on. (As mentioned above, in an ideal world, these goals would converge).
  • Pure consumption: A follow-up might be: "how much effort should I put in in order to get the maximum enjoyment and stimulation (or other forms of consumptive experience), without feeling stressed or burdened by the material?"
  • Pure networking: A follow-up might be: "how do I optimize my course experience to maximize the extent to which I'm able to network with fellow students and instructors?"

One might also believe that some combination of these explanations applies. For instance, a mixed human capital-cum-signaling explanation might recommend that one study all topics well enough to get an A, and then concentrate on acquiring a durable understanding of the few subtopics that one believes are needed for long-term knowledge and skills. For instance, a mastery of fractions matters a lot more than a mastery of quadratic equations, so a student preparing for a middle school or high school algebra course might choose to learn both at a basic level but get a really deep understanding of fractions. Similarly, in calculus, having a clear idea of what a function and derivative means matters a lot more than knowing how to differentiate trigonometric functions, so a student may superficially understand all aspects (to get the signaling benefits of a good grade) but dig deep into the concept of functions and the conceptual definition of derivatives (to acquire useful human capital). By thinking clearly about this, one may realize that perfecting one's ability to differentiate complicated trigonometric function expressions or integrate complicated rational functions may not be valuable from either a human capital perspective or a signaling perspective.

Ultimately, the changes wrought by consciously thinking about these issues are not too dramatic. Even though the System is suboptimal, it's locally optimal in small ways and one is constrained in one's actions in any case. But the changes can nevertheless add up to lead one to be more strategic and less stressed, do better on all fronts (human capital, signaling, and consumption), and discover opportunities one might otherwise have missed.

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[-][anonymous]7y 9

Just as many people believe in following God's path and letting Him take care of the rewards, many people believe that by doing the Right Thing educationally (being a Good Student and jumping through the appropriate hoops through correctly applied sincere effort) they're doing their bit for the System. These people might be bemused at the cynicism involved in separating out "human capital" and "signaling" theories of education.

Well there's a few issues here you've failed to disentangle that, in my opinion, make this model the most applicable for the average student:

  • Actual income/job/achievement statistics can vary quite widely depending on otherwise subtle variables, like majoring in pure mathematics versus computer science (for example), or pure physics/chemistry versus engineering. Slightly different choices can lead to very different results, these days.

  • However, employers and society don't actually want hyperspecialized drones as permanent employees. Of course, nowadays employers often don't want to actually hire permanent employees on indefinite contracts with real salaries, but still: doing an education of 100% job-training and 0% education has traditionally been low-status for the good reason that it wasn't held to build up very much human capital.

  • Future shock: the job you do at 30 might not have existed when you were 20, and the job you started out doing at 20 will almost definitely disappear or change radically in its skill-set requirements by the time you're 40. This isn't just a problem for Luddites, because society doesn't really know yet how to retrain and re-employ people that quickly. The result is that you can easily get a market flooded with obsolete human capital, while simultaneously a few cutting-edge firms struggle to hire more people in some field than actually exist (for instance, machine learning experts), while simultaneously even filling that latter demand might not use up the former supply of labor.

  • Despite all this, society is generally held to have an ethical obligation to make some productive use of everyone it can, and reward them with something on the same order of being as the lifestyle everyone considers normal and average. Not everyone has to have a TV Dream Life for working three hours a week, but people do still possess a moral expectation called the social contract, completely detached from today's economic facts, that somehow putting in 40 hours of hard manual labor or reasonably comfortable paperwork in an office ought to ensure them access to an apartment furnished with clean running water, indoor heating, electricity, and a functioning kitchen.

  • The karma/religion model did actually work in the past. Job training was more plentifully available in the publicly-funded education system, more of the education system was publicly-funded (in the form of greater subsidies for public higher education), and while nobody quite agreed on the real point of education, most of the business world agreed that most graduates (from secondary or tertiary education) were, on average, productively employable at something. Sure, everyone knew damn well the degrees had very little to do with the jobs, in most fields, but where the human-capital model didn't work, the signalling one did, helped along by the fact that jobs in the past required a genuinely lower level of theoretical knowledge and intelligence to do. Nothing was optimal, today is better in many ways, and yesteryear's system was a patchwork of badly-designed compromises, but for the short period of time in which people's lives actually reflected the conditions that had spawned their societies' social contracts, those patchworks did get people through life. Since it worked, people developed faith in it -- cargo cult educational economics.

One sidenote I want to make is that I feel like I'm observing an economic-educational mini-Singularity, in the "Accelerando" sense: circumstances have changed faster than the vast majority of human beings can actually keep up with. We high-tech types on LessWrong can sit around tsk-tsking at the rest of the population for failing to keep up, but personally I think anyone wanting to do that ought to show us how he predicted every turn of business and technology for the past decade or two, placed the correct bets on the stock markets, and made loads of money by knowing better than everyone else.

We can listen to moralizing lectures from someone who displays at least as much ability to genuinely optimize the world for his ethics as he does to complain about other people failing to follow his advice. Other than that, people follow a cargo-cult model of educational investment because they are damn well bewildered by the realities flying at them head-on.

The thing about the people who speak in terms of "signalling", what ever they say can not be taken on the face value.

In particular, if the general gist of the signalling theory is to be seen as applicable at least to folks who believe in it, the only sole reason why they would say that they didn't learn anything at school and only got the diploma, is that they believe that this is an opinion that someone extremely smart might have about such a commoner thing as education - an opinion that's useful to imitate for signalling purposes.

I think that the knowledge/signalling/networking balance depends on the profession. Hard sciences and engineering jobs require you to apply actual knowledge that you learned in your education. There is also a signalling aspect, mainly in the form of signalling intelligence and general math ability. The networking aspect is probably less important compared to other jobs, at least at entry level.
Soft "sciences", particularly of the "liberal arts" kind, and theology, are probably at the opposite end of the spectrum, with career entry and advancement being based on political affiliation signalling and networking.
Philosophy and economics are somewhere in between.

The general math ability is learned, though. The capacity to learn it varies, yes, and could in principle be signalled, but it's on it's own of no value unless actualized.

I'm not sure what a philosophy degree is supposed to be signalling and to who. What profession it makes you more likely to be hired in, besides philosophy, as compared to a degree relevant for said profession?

I'm not sure what a philosophy degree is supposed to be signalling and to who. What profession it makes you more likely to be hired in, besides philosophy, as compared to a degree relevant for said profession?

I don't know besides philosophy, but certainly signalling makes a significant part of career advancement in philosophy.
Doing real innovation in philosophy, that is, coming up with new interesting philosophical problems or new "solutions" to old philosophical problems, or at least novel insight into them, is really hard, in part because the discipline is very old and therefore the low-hanging fruits have been picked, and in part because there are no clear standards for settling questions. Therefore, signalling of general scholarship and affiliation to particular trends plays a significant role in the profession.

The general scholarship is something one obtains while studying for a philosophy degree, not something someone signals with it...

It seems to me that philosophy forked into two branches. One branch builds foundations carefully and knows a valid argument from an invalid one. Other branch is swayed too much by the desire to have answers right now, gives in to the temptation of deceiving oneself.

So when there's a very complicated problem - nature of consciousness for example - the former branch stays silent like a kid at school who knows how to answer the test problem, working out the inferences towards the answer, while the latter one writes in guesses right now.

Your karma model would fit a child who's been given a good but not superb upbringing-- the parents set up reasonable rules with proportionate rewards and punishments, but don't teach the meta level of thinking about whether what you're doing makes sense.

I think that describes many people :). Also, we shouldn't be too quick to blame the parents -- the other influences around them are also failing to teach them, and ultimately, people should learn to be strategic thinkers themselves :).

[-][anonymous]7y 2

the meta level of thinking about whether what you're doing makes sense.

Wouldn't that imply human life as we currently live it makes sense, with coherent terminal goals, neat ways of getting subgoals from the terminal goals, and a full awareness of both those things for everyone?

I don't see how Nancy's comment implies the existence of known or set goals and strategies. Even without knowing what societies goals will be in the future, there are certainly instrumental values that will probably be highly valued (general honesty, restraint from casual physical violence, etc.). Likewise, without knowing what specifically my children will value, I can teach them some basic skills that will likely be useful for getting what they value (and of course, teaching instrumental skills also increases the likelihood that the child will grow to value things that utilize those skills anyway).

You're theory relies on students having an overall non-contradictory goal that defines all their actions. I don't think this is the case, which I think is a mistake. I think there's just a difference in student's near vs. far view preferences.

You talked about students being happy that single classes are cancelled as evidence. I think that's because when students think of a single lecture, it's an immediate "Yay, I don't have to go to class today!" And there isn't an explicit connection of "this means we will learn less material overall."

But, students would be sad if the entire class were cancelled, because in the long term, they would rather learn the material.

I do think there are enough people who think (sometimes wrongly!) that they are acquiring valuable skills in the classes, but at the same time, I don't think they're a majority. Or at any rate, if you actually asked people to reflect, they would probably realize that they're not learning valuable skills.

Last year, I was teaching a linear algebra class and held an extra optional class on a holiday (I actually offered two holidays where I offered parallel versions of the class) covering some aspects of linear regressions, which is the most important topic of the course. From the human capital perspective, it's the one class people should have been interested in attending (and I had made them well-aware of this fact). In total 6 of 30 students showed up (4 in the first slot and 2 in the second). About 4 more said they wanted to come but couldn't make it. The next time I taught the course, I made that material part of the regular course, and of course everybody showed up to the classes and mastered the material and did well on the test. From what I've gathered, the numbers I encountered aren't unusual: when one holds extra classes on highly relevant material, it's unlikely that more than 20% of the people will show up. That 20% is still a lot, but it's not most people.

Hmm, association: I wonder how this relates to the completionist mindset of some gamers.

Why do you use the word "karma"?

I'm using it in its original religious Hindu sense: https://en.wikipedia.org/wiki/Karma

The term nowadays is often used in gamified points systems such as that on LessWrong. While that's not too different from the original meaning, it does obscure it somewhat.