Maggie's Farm

Russ Roberts: But I want to move on. I want to move on to the Sheepskin Effect, and I want to introduce it with a quote from your book, which is a great quote. It says,

Imagine this stark dilemma: you can have either a Princeton education without a diploma, or a Princeton diploma without an education. Which gets you further on the job market? For a human capital purist, the answer is obvious: four years of training are vastly preferable to a page of paper. But try saying that with a straight face. Sensible versions of the signaling model don't imply the diploma is clearly preferable; after all, Princeton teaches some useful skills. But you need signaling to explain why choosing between an education and a diploma is a head-scratcher rather than a no-brainer.

And I think that's a fantastic example that forces you to think about it. You, of course, have a Princeton diploma, a Ph.D. from Princeton, in economics. I want you to make that case. Lay that out a little bit more clearly than I just read it quickly. What's the issue there? Why is that a head-scratcher rather than a no-brainer?


Bryan Caplan: Well, because when you pose a hypothetical, people at least think about it. They are saying, 'Well, which one would be better?' And say, 'Well, on the one hand, I could have that Princeton education, but then people wouldn't know that I had it. And, how would I get people to actually give me a chance or opportunities based upon that?' Say, on the other hand, 'If I had that Princeton diploma, then that would open a lot of doors; but maybe they would find that I was a fraud. Hmmm. Which is better? Which is better?' So, that's the sense in which it's a head-scratcher: Just that you do have to think about it, and there's arguments on both sides. And it's confusing. And it's interesting that it's confusing. It's interesting that it's not something we're going to say, 'Well, doh, of course it's better to have the education, because then you know stuff and you know how to do things.' Whereas, you know, if you are on a desert island, you say, 'Would you be better to have a diploma in Survival Studies right now,'--that you would without the survival skills--or the survival skills without the diploma? On the desert island, you go of course, 'I want the survival skills.' Duh. 'I'm talking about food.' But, in society, it is a [?] question, because education is so much about convincing other people that you are worthy of opportunity. Convincing them that you are worthy of receiving training. And the actual job.