Contra Cowen, competency-based & on-line school seem to me to offer worse signals of future job performance, and so would not beat existing school plans in an open fair competition. https://www.overcomingbias.com/2018/02/signal-inertia.html …https://twitter.com/MargRev/status/966727303693615104 …
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If you wish to argue that signaling is significantly inefficient, you've got to win on these across the board.
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There's three separate questions here! 1. Is school about glorious human capital formation or mere signaling? 2. Is the social benefit of signaling worth the costs expended, or is this a negative-sum phenomenon? 3. Is there a Pareto-superior new Nash equilibrium we can get to?
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@bryan_caplan's first and foremost contribution is that the oft-repeated notion that school is about glorious human capital formation is mostly false. This already calls into question the original stated reason for the massive subsidies. -
There's then a further point that even though competitively discriminating future job performance can be a kind of social good, it's an especially dumb kind of social good to try to subsidize. This further point is also not refuted by saying school is efficient as signaling.
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That is: Even if signaling future job performance is a social good (which it would be at zero cost), it's not the same social good as human capital formation (which is supposed to be a very large social good allowing your country to create a higher grade of stuff and services).
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It's also possible for signaling to burn most of the gains from trade in a negative-sum way. If the trade surplus from employment is $100,000 and the use to the employer of a strong signal is $10,000, then the future employee is still motivated to burn $90k to send this signal.
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You similarly can't refute this thesis about negative-sum-ness by saying "There's no individually better way to signal competence" or even "It'd be hard to build a social system that more effectively signaled competence." Nash equilibria can have negative-sum components too.
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