Devin Helton

The Race Between Education and Technology epitomizes everything that is wrong with social science. The modus operandi is to pull together a series of charts showing correlations, assume that the correlation is due to causation, and ignore any discussion of alternative explanations of the trends.

Goldin-Katz spend the bulk of the book hammering away on two points that everyone already knows: years of schooling on a national level correlates with industrialization, and years of schooling on a personal level correlates with income. Goldin-Katz spend precious few pages actually dealing with the causation issue, and never address any of the best arguments against their thesis. Nor is there any attempt to actually talk to people working in technology in order to understand more deeply why the correlation exists.

Let’s examine in detail some of the flaws.

a) Goldin-Katz’s base hypothesis is that years of schooling should continuously rise over time, as technology increases. But the very definition of technology is that you get more output for a given amount of input. Thus we should not expect a proportional increase in education to take advantage of new technology. Indeed, this is what we see on the ground. As a web programmer in 2009, I no longer need to learn a huge amount of information that my father needed to know. For my job, I do not need to assembly language, register hacks, memory allocation, pointer arithmetic, etc.

b) Goldin-Katz’s hypothesis is at odds with the experience of all the recent college graduates I know. No one believes that education teaches job skills. A quick check of the top 10 most popular college majors shows that these majors have little to do with technology. Clearly if there is an income bonus from college education, it cannot be from teaching technology, because colleges do not actually teach technology.

c) Goldin-Katz’s hypothesis is at odds with the life experience of most engineers I know. If you ask the typical, engineer, “How many years would it take, starting from the beginning of high school, and working efficiently, to reach an amount of knowledge where you could be a productively employed?” the answer is usually something like 1 to 3 years. If you look at the actual skills to do high tech jobs, you simply notice that very few require 8 years of full time schooling. You’ll also notice that engineers universally deride schooling, and that they learn most of their skills by avoiding school work (this is especially true in high school). For more details Google the essay “Why nerds are unpopular” by Paul Graham.

d) The standard government economic growth statistics have so many methodological problems that’s it’s impossible to draw any conclusions from them (for more details, Google “Economics needs a divorce” ). It’s unclear both a) that growth has actually been declining and b) that the decline has to do with lack of technological innovation ( it might have a lot more to do with the increasing portion of the GDP taken up by bureaucratic sectors that are impervious to technological change - like the education sector itself!). Chinese, Japanese, and Korean mercantilism have also played a great role in the decline of America’s technological-industrial base. Never do Goldin-Katz address either of these points.

e) I do agree that 19th Century America derived great benefits from its strong primary schools and high literacy rates. But I believe this is primarily a threshold effect. After students have the tools to find books and self-educate, further formal schooling has diminishing returns. So I might agree that 19th century America derived an advantage from averaging something like 5 years of schooling rather than the 0-2 years of schooling that was common in other countries. But it does not follow that modern America would derive an advantage from raising the average years of schooling from 13 to 15. In fact, 13 is almost certainly above the point where opportunity costs exceed returns to schooling.

Goldin-Katz never address any of the competing explanations for the correlation between industrialization and education or income and schooling:

a) Richer countries can afford more years of schooling. The experience of my peers and I in college is that college is primarily a luxury good.

b) Academics have greatly increased their influence on politics in the past century, first with the Wilson administration then with FDR’s brain trust. Prior to 1900 academics had neither involvement with politics nor control over policies. Today, virtually all major policy advisers are academics. Not coincidentally, there has been a concurrent increase in government money spent on schooling and on total years of schooling. Thus part of the rise in education over the last century was likely simply two unrelated but concurrent events - the continuing industrial revolution, and the increasing political power of the academic class.

c) On an individual level, selection effects play a major role in creating the link between college and income. Completing college requires a threshold level of intelligence and diligence. Colleges select for people with high earning potential, because such people are more likely to make money, and donate it back to the school. I was talking to my friend who does hiring for Bain Consulting: “Bain likes to recruit econ majors from top schools, but because they learn anything valuable in the major, but because it means the person is smart and care about business.” I hire programmers at a startup, and I care little about the degree, and a lot more about how smart the person is and what they have done. This does correlate with college and major, but the actual knowledge gained in the college major is a tiny portion of what is needed to be a successful engineer.

The selection/signaling effect is even more important considering the that the 1971 Griggs Supreme Court case made it illegal for employers to use IQ tests for hiring purposes. As a result, companies have to rely more on educational attainment as a proxy for IQ.

d) Finally, and perhaps most importantly, Goldin-Katz completely ignore the impact of credentialing laws. There are now legal degree laws for professions such as: lawyers, architects, doctors, teachers, civil servants, military officers, nurses, and education administrators. These professions receive relatively high salaries because they have either direct government subsidies, or they have monopoly rights to perform certain tasks (prescribe medicine, defend the accused in court, etc). Yet there is no evidence that requiring a degree is a credential is a greater indicator of ability than simply using a test or requiring apprenticeship. Most architects of the 19th century learned via apprenticeship, yet the quality of the buildings was much higher back then than today.

Searches of the book for “signaling”, “credentials”, “credentialing”, “Spence” return zero hits. To write a book about the school about the education wage premium and not discuss these issues is completely egregious. In a just world this failure alone would be enough to ruin the reputation of Goldin and Katz as being serious scholars and to impugn the reputations of the academics who offered such fawning reviews.

Goldin-Katz’s book is fundamentally about policy. It is about how to manage a countries economy to maximize technological growth. You would think that the first thing that anyone would do when writing such a book, is to talk to dozens of people in high technology. You would talk to engineers, entrepreneurs, workers at high tech firms, current college students, recent college graduates. Yet Goldin Katz do none of this. They sit in their ivory tower, plot some regressions and engage in chart-ism of the worst sort. Their statistics add nothing to the stock of knowledge that already exists about the correlations between education and income. And they ignore addressing all the possible arguments against their case. This book is only interesting the way that a car wreck is interesting.