There is an old joke that an economist would not lift a $100 bill lying on the sidewalk, since in equilibrium it should not be there. But economist Bryan Caplan from George Mason University believes the world is leaving trillion dollars or so on the sidewalk. The culprit in his mind is education, which developed countries tend to invest about 5-6% of their GDP on:
Correspondingly, the number of years people spend in school has been growing:
Most people would think this is a good thing. First of all, an educated population is a good in itself. Second, this seems correlated with growth in general:
However, Caplan believes education in high school and above is mostly a waste of time and money. (He is also suspicious about K-8 education, which he calls a “daycare center for kids”.) So in his mind, the GDP growth of advanced countries has been in spite of their investment in education. Who knows how far the U.S. could have come if the average years in school would have stayed at 8 or 10.
Caplan’s theory is that people’s productivity is just a function of innate skill, that is not changed at all by education. They only go to high school, college, and beyond due to an “arms race” of credentials aided by ease of access to education. If you own a business and believe Caplan’s theory, you’d probably want to set up shop as far away from universities as possible, where you could get quality workers on the cheap that did not waste time on education. Perhaps Amazon should hire Caplan as a consultant, they seem to be doing the exact opposite.
Caplan also wrote a book. Scott Aaronson is not impressed.
Windows On Theory 
This V-shape in Russia’s (adjusted) GDP tells quite a lot, doesn’t it.. And explains quite a lot..
his thesis is not so simple, but will be dismissed/ nearly mocked as such, theres a essay in the atlantic, found it to be literate/ articulate. educational system going thru major shifting and shearing and hes looking at the big picture as few others do/ can.
https://www.theatlantic.com/magazine/archive/2018/01/whats-college-good-for/546590/
“Caplan’s theory is that people’s productivity is just a function of innate skill, that is not changed at all by education. […] If you own a business and believe Caplan’s theory, you’d probably want to set up shop as far away from universities as possible, where you could get quality workers on the cheap that did not waste time on education.”
This amply shows you don’t understand Caplan’s argument. He is of course personally aware that if someone really is interested in something and wants to learn, they’ll learn it — it’s not just innate ability.
In general, watching academics (the most highly educated people in the world) react to this book has only convinced me further of its claims. Outside their field of expertise, and when it concerns a topic close to their personal identities, their vast analytical abilities are nowhere to be found.
I believe my understanding is accurate. He’s of course not claiming that it’s impossible for people to improve but is claiming that for most people if you tried the counterfactual of starting them on their job instead of going to college (and even high school!) then they would perform just as well.
BTW I don’t view his argument as an attack on me personally. I think he’s mostly concerned with universal education and would like the world to return to 70 or 100 years ago where only select few people went to college (or even high school). Of course Harvard was still around even then…
Great solution, thank you for an excellent article.
“If you own a business and believe Caplan’s theory, you’d probably want to set up shop as far away from universities as possible, where you could get quality workers on the cheap that did not waste time on education.”
This is an incorrect inference.
Caplan argues that education in the US works primarily as a form of signaling. If you are smart and conscientious, the rational thing for you to do is obtain an expensive college degree to demonstrate these qualities to potential employers. How else are the employers going to believe you have these qualities from glancing at your resume?
Thus: if people make the decision to go/not go to college rationally, workers without college degrees will lack either intelligence or conscientiousness. In other words, Caplan’s theory does not employ it’s rational for worker to hire among those without degrees.
The US (not to mention the world) is a large place. Presumably if education is an “arms race” as Caplan argued then in places there is less access to education, people would settle for less credentials but would be no less productive. Clearly such employees would be cheaper
Hence an employer might prefer to set up shop in a place like Liberty, Texas , than Cambridge, Massachusetts