Right now, Cato Unbound is having a pretty fascinating conversation about college, and whether it is overprescribed for American youth.  Bryan Caplan asks:

My key problems with Murray's essay are his arguments, not his conclusion.  I don't see that Murray has a coherent story about how the BA persists despite its inefficiency.  The signaling model does tell such a story, so Murray ought to at least take it seriously, and tell us how it relates to his thesis.

If he does embrace the signaling model, though, Murray's distributional analysis will probably turn out to be wrong.  The main losers are taxpayers who subsidize the wasteful signaling competition, and consumers who pay more for the labor that colleges divert away from the productive part of the economy.  Murray is right, of course, that talented workers without BAs suffer, too; but we should not forget that below-average people without BAs actually benefit from employers' imperfect information about their productivity.

I'm not sure this is right.  This presumes a few things, like that people who get useless BAs end up doing whatever they would have absent the BA.  But getting a BA has an opportunity cost.  For one thing, it may use up funds that could have gone for useful vocational spending.  For another, those who pursue college degrees they aren't really suited for give up several years of earnings, and more importantly, experience.  Early experience seems to matter; the minimum wage literature indicates that failure to get a job as a teenager can have a permanent negative impact on later earnings.

The use of a BA as a signal is helpful to those who are below-average academically only if we presume that there is no other, useful training they could undertake, or that there is no more efficient means of sorting workers.  If we instead imagine that three years of desultory course-flunking could instead be spent acquiring a marketable skill, or seeking out work that suits them, it seems more costly.

We should also consider that not everyone loves school.  To people who are academically inclined, three years of school that doesn't result in a degree doesn't seem so bad--a pity about the degree, of course, but at least you got a lovely long vacation.  For people who hate classwork, however, it's torture.  Encouraging people to spend years doing something they detest in order to acquire a not-very-useful signalling device seems like a fairly great social loss.

I'd hate to think of us adopting something like the German system, where kids are relentlessly tracked into their future lives by the time they're fourteen.  On the other hand, the Germans get one thing very right:  they provide an excellent career path for those whose talents lie outside of college.