Is college a waste of time and money?

Bryan Caplan: I think the main thing that we can do is, first of all, look at attendance in college. About 40% of the students are not there. Well the students who are there, if you just go and look at their faces, I mean they generally seem painfully bored.

Josh Barro: Hello I'm Josh Barro, senior editor of Business Insider. And I'm here with Bryan Caplan, who is an Economics professor at George Mason University in Virginia. And he's the author of "The Case Against Education, "Why the Education System Is a Waste of Money". Most of analysis I read say that what you get back in increase salary, much more than offsets the cost of that education. Is this book a case to people ought not to go to college?

Bryan Caplan: No. It is true that people who finish college, get a good deal. People who dropout on the other hand, it's much less clear that's it's worth their while. But the main thing that I talk about in the book, is that it's not really a good investment from a social point of view, because the main reason why people get this big wage premium, isn't primarily that they are actually learning a lot of useful skills in school. The main reason I say is that they are showing off. They're jumping through hoops, they're impressing employers. Selfishly speaking, it doesn't really matter why your degree pays, but from the point of view of taxpayers, it matters a lot whether people are actually learning useful skills in school, or whether they're mostly just getting a bunch of stickers on their forehead. 'Cause you can't have a whole economy based on stickers.

Barro: What if we think about education as a consumption good? People enjoy going to college. And then there's also a sense that it's, you know, college isn't purely a job training tool. That it helps develop people as humans. Isn't it plausible that's a reason that people care about going.

Caplan: I think the main thing that we can do is, first of all, look at attendance in college. About 40% of the students are not there. Well, the students who are there, if you just go and look at their faces, I mean, they generally seem painfully bored. If the consumption is just socializing with other kids your own age then, maybe that's what people really value. Although, that could happen in so many other ways than in college.

Barro: Let's break this down, this idea, the distinction between the value to the individual, or the degree and the broader social value. You talk a lot about this concept called signaling. Can you explain what that is?

Caplan: When you go to school, you're showing off. You may also be picking up useful skills, but one of the things you do is you just look better than other people. You say, "Look, look at me, I'm able to get this degree from Harvard. "I'm smart, I'm hardworking, "I'm willing to play by the rules." And when you do this, employers are impressed. So, let's say, at minimum, they're a lot less likely to throw your application in the trash. 'Cause of course, that's where most applications go. If everyone had one more degree, then you would need one more degree to get those doors open. And that's really the problem that I'm talking about.

Barro: If most of what the degree is showing as the signal, and we ought to be able to find a way to send that signal that doesn't take four years and cost you more than a hundred thousand dollars. Why hasn't that arisen? You would think it would be in the interest of both the students and the employers to figure out who the right employees to hire where they would be less expensive than that. And yet, we haven't gone in that direction.

Caplan: Education is not just signaling intelligence, which you could, definitely figure out ways of measuring in a short amount of time. See, signaling is a package. You've got intelligence, you've got work ethic, and you've also just got sheer conformity. I'm willing to comply with social norms.

Barro: Let's talk something about solutions. It seems like there should be strong incentives, if the system is so broken for it get fixed. And it doesn't get fixed. So how do we do education more efficiently, more effectively than we do right now?

Caplan: Big thing that I push is just spending less on education. People get so nervous about this idea because they're picturing the thought experiment where one person is denied funding, it ruins your life. If that's what your picturing, that's reasonable. But, what I say, is you know, just picture if, there was this general reduction in the amount of education that the whole society had, and how this would change the way that employers consider applications.

Barro: Your strategy is to cut government funding, so that if people do want to send these signals they have to pay for it themselves. Then you're cutting off people who grew up in poor families who no longer have access to the signal, even if they could have achieved the nonmonetary things there. Doesn't that just leave talented people no longer able to match to employers and the jobs they could do?

Caplan: In terms of, What about some of these poor who no longer is able to afford education and isn't this terrible? Every system is going to have some mistakes. I mean, I just got to be honest and acknowledge that. But, here's the main thing, Would you rather be a high school dropout today? Or high school dropout in 1940? In terms of the penalty, the labor market it hatches. I think it's pretty clear, that the penalty is much greater today. This is really one of the main changes overtime. Yes, we have gone and plucked out the very best students from poor families. But at the same time, we've also greatly increased the stigma against other people from those families that are not inclined to go and get a college degree. And I think if we really want an equitable society, we've got to have to consider not just the really smart kid from poor family, we've got to consider the average kids from poor families. So now I think actually they have a harder time moving up.

Barro: Are there any other countries that you see taking a better approach on this?

Caplan: Yes. Switzerland and Germany I think do a much better job. So they have a much bigger emphasis on vocational education. The main point of vocational education is to teach concrete job skills that's not just to show off. Basically, the idea there, especially for kids that just don't like academics very much, and that's a lot of kids. Lot of kids just find academic excruciatingly boring and they would rather be doing something instead of just sitting and listening some windbag talk. In Germany and Switzerland, when you are in your 13, or 14 , or 15, they go and find kids like this, and give them the option at least of getting trained in particular job skills. Of course there's a lot of people there who are very interested in special courses that so many people do it. It really is fair to say that Germany and Switzerland, managed to have virtually no underclass because they go and listen to kids like that, or at least that they take the resistance seriously and they try to find something that they're good at doing, or they like doing. It's a much more functional system than our own where vocational education is an afterthought at best.