Signaling vs. certification at Harvard

By Tyler Cowen

Harvard will be teaching solely on-line this fall (with some students in residence), yet charging full tuition rates.  Many commentators are thus suggesting this supplies evidence for the signaling theory of education.

But not exactly.  The signaling theory, taken quite literally, is that education is a very difficult set of hurdles to surmount, and if you can get through Harvard you must be really really smart and hard-working.  Caltech maybe, but Harvard like Stanford and many other top schools makes it pretty easy to get through with OK enough grades.

The hard part about Harvard is getting in.  By selecting you, Harvard certifies you (as long as you are not part of “the 43% percent,” legacy, athletes, etc…but wait that counts too!).

What isn’t there a service that just certifies you directly?  Surely you could run a clone of the Harvard admissions department pretty cheaply.

Perhaps the logical conclusion is that both the “social connections/dating” services of Harvard and the certification services of Harvard are strong complements.  If you are certified by Harvard, but live on a desert island, or carry a contagious disease, that certification is worth much less.  So it is hard to unbundle the services and sell the certification on its own, without the associated social networks.  Nor is it so worthwhile to sell the social connections on their own.  Harvard grads are socially connected to their dry cleaning workers as it stands, but that does not do those workers much good.

It takes a good deal more work to get signaling to enter this story.

Keep also in mind that the restricted Harvard services are probably only for one year (or less), so most students will still get three years or more of “the real Harvard,” if that is what they value.  And they can use intertemporal substitution to do more networking in the remaining three years.  It’s like being told you don’t get to watch the first quarter of a really great NBA game.  That is a value diminution to be sure, but there will still be enough people willing to buy the fancy seats.  Most viewers in the arena don’t watch more than three quarters of the game to begin with.