The human-capital argument for college education is that students purchase college education because college:

life provides direct utility to the student.
degrees provide a way of demonstrating certain traits, such as intelligence, to prospective employers.
education increases the productivity of those who get one.
makes students better human beings, and thus improves society.

Several years ago (on 9-13-87), the Gary Post-Tribune ran a story about a woman who wanted to enlist in the U.S. Army. Even though she had a General Education Development (GED) certificate and had scored high on the Army's entrance exams, she was refused because she did not have a high-school diploma. An Army spokesman explained that past experience showed that women without a high school diploma had a much higher attrition rate than women with the diploma. To an economist, this incident is an example of the:

importance of education in building human capital.
importance of the educational system in screening.
problem of moral hazard.
need to view education as a public good.

Back to Reading Overview