Bryan Caplan looks briefly at the micro (to the person) and macro (to the society) benefits of higher education, but comes up with a more interesting view of the real value of education:
All this is well and good. But there’s an even deeper level of education to examine: What students actually study, learn and retain. I think of this as the “picoeconomic approach”* because it focuses on details too small for the “microeconomic approach” to see. The microeconomic approach tells us how much the market rewards education. But in the end, it doesn’t tell us why. To discover why education matters, we must descend to the picoeconomic level.
Key example: the main reason I’m think signaling is big deal has nothing to do with either Micro-Mincerian or Macro-Mincerian estimates of the return to education. The main reason I think signaling is a big deal is that (a) students study a ton of material that almost no job uses; (b) the Transfer of Learning literature shows that learning is highly specific — you don’t build general purpose mental muscles by learning Latin; (c) students quickly — and happily — forget most of what they learn, anyway. And yet employers amply reward education! The signaling model instantly looks like the best way to explain all the key facts.
[. . .]
* I know that the term “picoeconomics” is already used to describe the study of self-control problems, motivation, and so on. But why not think of self-control problems as one picoeconomic topic, and mine as another? We can treat picoeconomics as a blanket term that covers everything too small for microeconomists to notice.
