Thursday, April 2, 2015

If firms can measure ability, why go to school?

School can serve a variety of economic goals: screening and signaling (but only if dropping out of the labor force, and paying tuition for four years is unprofitable for the bad "types"), in addition to the "added value" that supposedly raises your productivity.  

But what of software coding, where attendance at school has no relation to coding ability.

If you can measure output (coding ability), measuring inputs (grades, courses, college) is redundant.  

HT:  Merle Hazard


  1. Mike Rosenbaum asked the question, why should fancy degrees make him a better candidate for a programming job than others who lack the degrees but might be better coders? Then, he built a data platform to compare the resumes with future job performance. According to Rosenbaum, “there is no correlation between having a college degree and being a good software engineer” (Mims 2015).

    Could student financial aid also be called into question? What is the correlation between financial aid (i.e. the ability to obtain a college degree) and future job performance? According to Walker, “student loans have been shown to minimize moral hazard but are in generally considered inefficient because they exclude some well-qualified low income students from getting a college education… When it comes to supporting people in need, social responsibility management scientists and non-behavioral economists seem to have hardly found a common ground” (Walker 2014).

    Similar to Rosenbaum’s algorithm, Walker suggests that “in order to have a significant impact, providers of educational assistance should be more selective, by screening candidates on the basis of their past behaviors, capabilities and potential… providers of educational assistance can design and implement observable measures for influencing behavior (i.e., the manner in which financial assistance is actually used) and early assessment initiatives that determine if students are on track (i.e., obtained results, such as effort, academic performance and graduation rate)” (Walker 2014).

    - Mims, Christopher. "Here's a Thing: There's No Correlation Between a College Degree and Coding Ability." WSJ. 2 Apr. 2015.
    - Walker, R. L., & Florea, L. (2014). Easy-come-easy-go: Moral hazard in the context of return to education. Journal of Business Ethics, 120(2), 201-217.

  2. Really fantastic post.
    Here is I'm going to launch my new business named as Bilal Rent a Car in Lahore we provide pur customers best rental services.


    Before World War II, only a small proportion of Americans went to college. In 1937, just 15 percent of high school students went on to higher education, and most of them were from upper-income families. Since then everything has change and people who don't get some kind of post-secondary education are quickly falling out of the American middle class.

    In 1970, only 26 percent of middle-class workers had any kind of education beyond high school. Today, nearly 60 percent of all jobs in the U.S. economy require higher education. The wage gap between people who have bachelor's degrees and people with only a high school diploma has nearly doubled since the early 1980s.
    Educated workers are becoming increasingly valuable for two reasons: Many lower-skilled jobs are being shipped overseas, and computers do much of the mundane, repetitive work now. What's left are more complex tasks that require people to solve problems and work together.

    School as an added value and as a result a requirement for jobs should really depend on the job and should not be a blanketed requirement since a higher education may not necessarily prove that you can fulfill the job requirements.

    Hanford, E., The Value of a College Degree. America Public Media (2015)

  4. The problem of adverse selection:
    "Investing in the stock market is just like gambling at a casino"? Investing and gambling both involve risk and choice. Interestingly, both the gambler and the investor must decide how much they want to risk. Some traders typically risk 2-5% of their capital base on any particular trade. Longer-term investors constantly hear the virtues of diversification across different asset classes. This, in essence, is a risk management strategy, and spreading your dollars across different investments will likely help minimize potential losses.
    Gamblers must also carefully weigh the amount of capital they want to put "in play." Pot odds are a way of assessing your risk capital versus your risk reward: the amount of money to call a bet compared to what is already in the pot. If the odds are favorable, the player is more likely to "call" the bet. Most professional gamblers are quite proficient at risk management. In both gambling and investing, a key principle is to minimize risk while maximizing profits.
    Both stock investors and gamblers look for an edge in order to help enhance their performance. Good gamblers and great stock investors study behavior in some form or another. Gamblers playing poker typically look for cues from the other players at the table, and great poker players can remember what their opponents wagered 20 hands back. They also study the mannerisms and betting patterns of their opponents with the hope of gaining useful information. This information may be just enough to help predict future behavior. Similarly, some stock traders study trading patterns by interpreting stock charts. Stock market technicians try to leverage the charts to glean where the stock is going in the future.
    Abraham, S. (2015, April 9). Going All-In: Comparing Investing And Gambling . Retrieved from INVESTOPEDIA:

  5. Having the college degree builds the employer’s confidence level that some sort of formal training has already been accomplished by the candidate. This in and of itself, at least gets the candidate to the interview. Unless corporations are expecting their coding experts to just function as robots then there is some merit to the topic at hand. In the bigger scheme of things, it can be assumed that the long-term goals of most corporations are to grow and expand internally and externally. To this end, it is greater value added to invest in coding experts who not only can work effectively in silos but also who possess the formal knowledge to function efficiently in cross-functional departments and who has the formal business acumen skills to become future leaders of say, a coding/programming department.
    So it would seem that the real question is what are the main advantages of experience vs college degree? Do coders naturally have the knowledge and tools to deal with the dynamics within the competing values framework in today’s workplace? Furthermore, recent changes in the global job market have revealed that only a few people experience the stability of working in only one specific role. Thus, workers jump ship more frequently looking for new career opportunities so only few companies can afford to invest heavily in employee development. Therefore, more employers rely on job seekers to develop their own skills, college based, before joining a company. As a result, the demand for workers with college degrees has climbed sharply over the past few decades worldwidelearn . So having the experience coupled with a college degree is a win- win situation for both the employer and employee.

    Leo Palmer ESC. Mangerial Econ

    Worldwide learn.Education vs. Work Experience. Retrieved 4/13/15

  6. For many years I have listened the same question, why go to school if you can demonstrate skills, in fact, amongst the richest people that are influential to the world that we know today, there are notable examples of people who went ahead and beyond in the world of informatics and computer after having dropped out of school to devote themselves to business projects.
    These people are examples who do not time discuss their successes. Just as these there are many other entrepreneurs in the markets, within different industries, who like the previously mentioned, have been be successful though not as mega stars of business before referred to, but there do exist many examples
    I ask myself, what has happened with this trail of people who left the path of education, with the dream of creating a great company, a medium-sized company, a small company, a modus viventi, and they did not develop professional abilities within the formal education system, and the years have passed, and the generation of relief in the market already struggling with a space. Companies are reducing the space for these types of dreamers. The competitive advantages of today, of the present, which allows people to compete on the market, will not be the same tomorrow.
    Everything changes, life in the new capitals and by demand for capital, adjusts to new realities, those who may not exceed the expectations of the demands of the market, or at least match these, the market takes care of getting rid of these individuals.
    Study, work, and be to be human comes first. This is the salvation for common individuals, perhaps like me, and maybe the majority

    References: Froeb, McCann, Ward, Shor: (2014) Managerial Econonics. A Problem Solving Approach, Ohio: South Western Cengage Learning

  7. Hello, Luke Froeb
    Yeah! School can serve a variety of economic goals just we have to do hardwork to achieve it.
    Thnks for sharing
    Get Custom Assignment Writing Service

  8. why go to school? just simple is that for getting education we have to go to school :)
    Amazing Post
    Scholarship Essay Help

  9. Having a medium to high-paid job without having your bachelor’s degree finalized? A few years ago, and because I belong to this generation that believes that ONLY good degrees will land you a good job, I would have said without hesitation that it is not possible. Last year I went to the movies to watch “The Internship” and again, although I thought that some real life may have been peppered in the story, I laughed through-and- through: comedians! This year, reality burst this school-to-job stereotype, when my younger son was promoted to Team Manager, at only 26 years of age, at a software / computer science/ customer service national corporation, after only 2 years on the job and before finalizing his computer science degree: exactly like the Google Team Manager, in the movie, who was helping the 5 misfits to make it through the hiring tests.

    “By 2017, an estimated 2.5 million new, middle-skill jobs are expected to be added to the workforce, accounting for nearly 40% of all job growth, according to a USA TODAY analysis” (). These new jobs “require some training” but much less school than a bachelor's degree (Webster, 2015). Technology changed the labor market needs, “worlds away from their assembly-line predecessors” (Webster, 2015).Technology changed the mentality that the “only path to a good career is a four-year degree” (Webster, 2015).

    Reference: Webster, M.J. 2015. Where the jobs are: The new blue collar. Retrieved from

  10. Why go to school?
    Going to school does not only educate a person it also ensures that person can prove their credentials when applying for jobs. Most good paying jobs require more than experience in the field, the employers want to see that the employee not only has the experience but the education to back it up. Furthermore when applying for these jobs usually there is more than one candidate for the position so the person with the best experience and education most likely gets chosen. Even if the job does not require a college education it is a great combination to have both experience and education. Job searchers need to be able to market themselves and the best way to do that is to have experience and the college education.


    Froeb, L. M., McCann, B. T., Shor, M., & Ward, M. R. (2014). Managerial Economics; A problem solving approach (3rd edition). Mason, OH: South-Western Cengage Learning.

  11. A college education offers many benefits. To prospective employers it signals that the job candidate is goal oriented, disciplined and generally has a wider knowledge base than individuals who have not obtained a college degree.
    Firms that are seeking positions for task oriented jobs may choose to base their decision on only one criteria; in this case the ability to write code. However, anyone who has worked in an office knows there is more to a job than ability to perform a task. A coder may function well under certain conditions, such as a quiet setting and limited personal interactions. The coder may not function well with deadlines, change in priorities or constructive criticism. Perhaps this coder would not follow office policies and procedures. My point is that individuals are not computers; we will not always respond to a specific query with the same answer.
    Ability to perform a job is important. So are the myriad other factors of social interactions, communication, ethics, productivity, innovation, etc. What motivates an individual in a job to outperform their peers?
    A college education does not guarantee that the individual is a better candidate for a position. But it is a signal to consider.

  12. This is interesting subject matter. I don’t think the question of the value of an education is new. However, the developed algorithm may be new to many. I have often wondered whether continuing by education would truly be beneficial in the short and long run. After all, it’s a significant time and financial commitment. A friend of mine went to a well-known graphics/technology school, but did not graduate because he could not get past the math classes due to a learning disability. However, he is extremely talented. Since leaving school, he has worked as an independent contractor for some well-known companies. But it doesn’t change the fact that he lost several opportunities due to the required degree. Hiring by coding ability vs. credentialing seems credible but it also works against long held notions. And as we all know people naturally resist change – just as ask the oil industry. There is also the economics of education. I wonder however coding ability was coupled with education. In other words if the ability is coded, the education would only enhance the ability. We try to convince potential students to pursue a college education based on increased earning potential. However, is this true because the ability is there or because employers believe the ability is present.

  13. I read the post and I want to say I love to go school to get education :)
    Take My Class Online

  14. Attendance at school has no relation to coding ability, but as we learned in the signaling area of the blog, it does have a relation to other factors of a potential employee’s personality. The idea given in the video about signaling was that education is a signal to a potential employer that the employee is conscientious, smart, and willing to work. The best non-schooled coder in the world may have a terrible work ethic and not be a team player, making his or her coworkers unhappy and lowering THEIR productivity. Where does an organization draw the line and how do they compare the values of the two differences? What’s better, a team of five antisocial HR headaches that don’t do their best but are great coders, or ten good coders that have the organization’s best interests in mind? Certainly some professions don’t require schooling, and it’s likely that a mechanic without any formal education and ten years of experience is better than a graduate of automotive technology who has never torqued a wrench.

  15. There are many different benefits to a college education. I believe that this speaks not only to the intelligence of an individual but their drive to succeed. In order to land a job, one must meet the minimum qualifications in regards to education and experience. However, it is their personality, mannerisms and energy that will help them land that job and work their way up.
    A college education is by no means necessary in finding a full time job. As a college graduate with a specialty bachelor's degree and nearing the end of my MBA program, I find myself surrounded by many co-workers - equals at my organization - that have no college education at all. It is because they have the skills necessary to do the job. I decided to get my MBA because I knew that I would not be happy in this position long term. In order to move up that corporate ladder, education is necessary for me.

  16. It is true that a school can serve number of economic activity. Your post really depict that and I pretty much enjoyed this post. thesis writing services