Intelligence, Education, and Earning Power

In a couple of recent posts (e.g., "Lessons from Brooklyn's New Economy" and "An Atypical Perspective on Health Care in the NY Times") we touched on the politics and economics of education. An article in the business section of Sunday's New York Times, a somewhat fawning profile of Google executive Marissa Mayer (pictured above) included a brief, tangential bit of candor on the subject ("Putting a Bolder Face on Google"). The main responsibility of Ms. Mayer at Google is controlling the "look and feel" of the company's search engine, but the article notes that she also has personnel responsibilities:

At a recent personnel meeting, she homes in on grade-point averages and SAT scores to narrow a list of candidates, many having graduated from Ivy League schools, whom she wanted to meet as part of a program to foster in-house talent. In essence, math is used to solve a human problem: How do you predict whether an employee has the potential for success?

How indeed. Why would Ms. Mayer, who holds a masters degree in computer science from Stanford, be interested in the SAT scores of college graduates? Presumably, because SAT scores are a more objective measure of intelligence than a college degree or grade point average, since the later two can be distorted by admissions preferences and grade inflation. This suggests some problems with President Obama's "college for all" initiative. Some advocates of education as tool for economic advancement seem to confuse the correlation of education and high earning potential with causation. Many high-paying employers (such as Google) demand highly-intelligent knowledge workers. The law since Griggs v. Duke Power restricts the use of broad aptitude tests, so employers often rely on other indicators of intelligence, such as SAT scores, or diplomas from elite schools (that generally require high SAT scores).

What would change if college degrees became as common as high school diplomas? Presumably, the use of college diplomas as a proxy for intelligence would decline, and employers would look more closely at SAT scores, or demand a higher degree to replace the signaling function of a college degree (e.g., jobs that now require bachelors degrees might require masters degrees). That would be a boon for the education industry, but it's unclear how it would help the average American worker increase his earnings potential.

I suspect that the focus among elites in government and punditry on the potential of higher education as a ladder to economic advancement is partly the result of most elites having gone to exclusive private high schools, where virtually all of their classmates were relatively bright and college bound. Had more elites gone to public high schools, where not every student was on a track to college, there might be more skepticism in public policy discussions about the broader utility of higher education.

The photo above accompanied the NY Times article.

Update: for the benefit of new readers of this post, I am now blogging at Steam Catapult and Shadow Stocks.