Signals and Human Capital

-

    An interesting portion of The Best We Could Do is on page 286 when Thi’s parents are allowed to take classes as part of a government program to earn certificates for future employment. This would help them replace the degrees they had earned in Vietnam that employers wouldn’t recognize. They would take various classes on computers, programming, math, etc. excelling at all of them and earning the credits. Later in their life, these classes were critical for them to gain jobs as part of the American workforce and help them support their family. The question posed by this section is in what way did taking these classes truly benefit them when looking for a job?

    Traditional thinking says this: the answer is obvious, of course taking those classes helped them earn a job by teaching them new skills and improving their knowledge. Education is one of the determinants of the productivity of labor, an economic concept that measures the value of the output of a worker, and increasing education increases productivity. This causes them to become more desirable to employers, raising the wage that employers are willing to rent (hire) them at. Education creates a better worker, which a firm is willing to pay more for. This relationship allowed the education to benefit Thi’s parents by moving them from struggling to find minimum wage jobs to being able to receive more lucrative job offers.

    However, a newer school of thought threatens to upset this previously clear relationship established by classical economics. In 1970, George Akerlof published a paper that proposed an alternate explanation for why education increases wages. He outlined a market of asymmetrical information, where the seller knows whether his product is high or low quality, and the buyer hopes to buy a high-quality product. The certificates don’t increase the innate talent that Thi’s parents have, having already earned degrees as teachers in Vietnam. The certificates are instead “signals” to potential employers that they are highly productive workers and are worth hiring. This allows them to have higher wages and an easier time during the job search.

Comments

  1. Nathan WangDecember 8, 2024 at 8:09 PM

    Johnny, I love you. To add on, having strong credentials often creates a "halo effect" that clouds peoples judgement. For example, if Ms. Valentino grades a classes mock AP tests 1 by 1, with each test consisting of 3 essays, then a student who performed well on the first essay will likely have mistakes overlooked or go unmarked on the second or third essay. I wonder, then, how much of a facade our education is, and how much substance there is when that mask is lifted.

    ReplyDelete

Post a Comment

Popular posts from this blog

Awareness In Water

-
 David Foster Wallace’s speech, “This is Water”, advocates for an awareness of our consciousness and perspective in day-to-day life. He claims that avoiding our “self-centric” nature and focusing on more positive alternatives keeps us grounded and allows us to master our thinking. When reading this speech for the first time I drew immediate parallels to my journey as a swimmer. The time consuming nature of the sport and the consistent repetition of spending 2 hours a day staring at the black line at the bottom of the pool, reinforces the “day in, day out” mentality. My coach would impart various sayings to us as well, unlike Wallace however, my coach takes joy in being the older fish. The most impactful adage that my coach has said, and relates closest to Wallace's awareness, is to stay in your lane.  When he first said it to me as a starting swimmer, it was probably to avoid me constantly messing around with others or being too rowdy in the pool, just “stay in my own lane” an...
Read more

Nature vs. Nurture

-
Image
  A topic explored throughout The Best We Could Do by Thi Bui is the idea that our circumstances often shape who we become later in life. This theme serves as an extension of the nature vs. nurture debates, where people wanted to see whether a person's genetic disposition or environment had a greater effect on their life. Although the consensus is that both factors play a vital role in a person's development in life. I share a view, and I believe Thi Bui would agree, that nurture plays a bigger role in a person's life than nature does. To understand this complex relationship between nature vs. nurture, I believe that this debate is best represented in terms of supply and demand. Although some might object saying how economics, a field dedicated to the study of money and finance, allows for the representation of this nuanced situation. The truth is economics, although often associated with money, is more the study of people and how they make the many decisions that they e...
Read more

A Limited View on Price Controls

-
Image
     Henry David Thoreau opens his essay on civil disobedience with the aphorism, “That government is best which governs least” and asserts the importance of a limited government that allows the people to decide what's best for them. Whether this statement is true politically is often a topic of debate, economically, however, this statement could not be more final. In most cases, the producers and consumers determine the most efficient equilibrium price and quantity of any good without government intervention. This economic truth is soon cast away by politicians, hoping to increase their own political clout, by placing price ceilings on goods and preventing the mechanisms of the economy to self-regulate. Placing a price ceiling on a good and expecting the price of a good to decrease without adverse effects is similar to declaring cancer illegal and expecting that all cancer patients become cured the next day. When polled, economists largely agree that rent control negativ...
Read more