07 February 2012

The Cost of Signaling

Like this isn’t an attempt to split a non-existent hair:

The segregation model predicts that as the society gets wealthier, the dollar cost of college will get higher. The signaling model would not necessarily predict that. In fact, it would predict that the market would try to find less expensive signals.

It’s like Kling has never heard of anyone signaling their status through conspicuous spending.  As anyone who has ever observed human beings can readily attest to, there are plenty of people who spend money just to show that they have money to spend.  Why shouldn’t this form of signaling extend to higher education?

Let us suppose that college serves as a way for young people to be sorted into their societal roles.  Those who go to more prestigious (read: expensive and/or exclusive) colleges will likely come from families that are relatively wealthy.*  They will also spend a lot on their education, relatively speaking.

Signaling theory would suggest the exact same thing, for there is a) a general correlation between the cost of college and its prestige and also b) a general correlation between family wealth and college choice.  That is to say, the children of wealthier parents are more likely to buy social prestige at college, and will be charged a lot to do so.  Now, given the limited number of prestigious colleges and universities, it should be the case that more prestigious universities command a higher price, and that students from higher-class families are able to pay them.  Thus, signaling theory predicts an outcome extremely similar to segregation theory.

What Kling neglects, then, in attempting to differentiate segregation from signaling is that some signals do not become “cheaper” over time because some signals only work because they are expensive.  What Kling must prove, then, is that the signaling theory of post-secondary education is flawed because college is not a cost-driven signal.  Until then, his assertion regarding the predictive ability of signaling theory is incorrect, and his attempt to differentiate between signaling and segregation is pointless.

* There are some general exceptions to this, obviously, as even impoverished minorities can occasionally make it to Harvard.  But, for the most part, the people who go to pricier colleges can generally pay for them.


  1. Kling is merely repeating what is a common belief among people writing on education matters. Most of them think that some sort of alternative credentialing service will evolve. Like some sort of GED will replace a Harvard degree. They need to read halfsigma.

    Among some deluded scientists, there is even a move to get rid of refereed journals. These people, some of whom are untenured assistant professors or lowly associate professors, do not understand the role of refereed journals in the promotion and tenure process--that refereed papers are mandatory.

    Not one of these clowns has any understanding whatsoever of economics, and obviously not one of them ever heard of Veblen.

  2. @sykes.1- another thing that they've neglected is that there was another credentialing service that existed--skills tests--which was outlawed because it was racist (or, more accurately, because it revealed that blacks and whites had different levels of competency at a variety of tasks and abilities).