How Much is That Degree Really Worth?

An interesting debate about the value of a college education starts here, on the Becker-Posner blog, Richard Posner's response here, and then follow-up from Richard Vedder here. In summary: Nobel Prize-winning economist Gary Becker says that all the evidence points to the fact that a college education is worth more today than ever before. Posner and Vedder are skeptical, wondering if colleges are merely selecting and certifying smart people, and that smartness is actually what's more valuable than ever before.

It's a legitimate question, but Posner and Vedder don't offer any evidence to support their skepticism. I hear this point made fairly often, and in every single case it's made by an older white guy with multiple college degrees. That doesn't automatically make them wrong, but there's an unavoidable elitism to people who benefit from a hugely valuable privilege like higher education questioning whether other, less fortunate people would benefit from the same thing.

Moreover, higher education isn't just for the Top 10 percent anymore. Most college students are somewhere in the middle of the smartness distribution, and all the statistics pointing to a high return on education apply to them too.

The reason this debate even exists, of course, is that there's very little good data out there about how much colleges actually increase student learning between students arrive as freshman and leave at seniors. That data void is what keeps debates like this in the realm of informed speculation, rather than something that can be resolved empirically.

The debate also highlights an under-appreciated fact about contemporary higher education--universities have effectively merged two functions that are conceptually and historically distinct: education and certification. There's no particular reason that the institution that provides you with a curriculum and teachers has to be the same institution that grants you a degree certifying that you've mastered a certain body of knowledge and skills. In other higher education sectors--like IT certification--they're handled separately.

Because there's no hard data about how much students at a given institution actually learn, the job market values the degree in ways that are logical given that lack of information. If you get a degree from a selective college, the degree's primary value is a signal that you were smart enough to get admitted. If you (like most students) went to a non-selective school, the degree says that you had the work ethic and discipline necessary to accumulate 120 or so credits. Those qualities have value, which is why employers care about degrees. But the lack of data about learning creates distortions in the labor market that work to the detriment of the students who learn the most, particuarly at non-selective colleges.