signaling theory and credentialing theory in sociology
A loyal reader asks me to comment on a recent exchange between Econlog’s Bryan Caplan and economics professor and blogger Noah Smith. Specifically, Noah Smith attacks Bryan for his strong defense of the signaling model of education. The theory asserts that the main reason that education correlates with income is that is a signal of intelligence and work ethic, not learned skills. I.e., employers like college graduates because they are good workers, not because they have useful skills.
Smith calls signaling theory a “fad,” even though the main papers were written by Arrow and Spence decades ago!! He also offers arguments in favor of human capital theory, which deserve their own response and have been debated in the literature. For example, he offers the argument that education provides networks. On this blog, MIT’s Ezra Zuckerman has argued that the overall explanatory power of social networks is weak. UNC’s Ted Muow is also a bit skeptical about the value of networks in labor markets.
But I want to step back – what do sociologists think about human capital and signalling? Well, it’s safe to say that opposition to human capital is not a fad. A core theory in the sociology of education is Randall Collins’ credentialing theory. And it’s been around for decades. On this blog, we had a discussion of signaling and it was split – about half the readership (which is mainly soc and management PhD students and faculty) thought that the education/income correlation is due to signalling. Furthermore, sociologists such as Richard Arum and Josipa Roska have documented the lack of learning in college, which strongly supports signalling.
So it’s not a fad, Critiques of human capital are an important part of economics and sociology. The debate will continue.