Higher Education 3 (1974) 43-58

9 Elsevier Scientific Publishing Company, Amsterdam - Printed in the Netherlands

THE CORRELATION BETWEEN EDUCATION AND EARNINGS:

THE EXTERNAL-TEST-NOT-CONTENT HYPOTHESIS (ETNC)

PETER WILES
London School of Economics and Political Science
Houghton Street, London WC2A 2AE, United Kingdom

ABSTRACT

The Human Capital theory, as ordinarily defined, is a " c o n t e n t " theory of the
economic value of a higher education to its recipient or his employer. But
non-vocational higher education offers by definition no such content. So why does it
yield a higher income? Various theories are examined:
1) The degree is an external test, vastly expensive to society but very cheap to
individual employers;
2) The degree course forms character, and that is a kind of human capital;
3) The degree course exercises the mind, and develops it like a muscle;
4) The degree confers social status;
5) Insistence on a degree, including now vocational degrees, is a restrictive
practice by many trade unions.
People also seek non-vocational higher education because it is publicly financed.
There is a "Robbinsian" supply curve of higher education facilities. This is profoundly
irrational, but all parties react rationally to it. No evidence connecting degree
certificates with income could distinguish between Human Capital and most of these
other theories. Possible statistical tests are discussed.

One of the most prominent advocates of recruitment by examination

was Macaulay whose work on the reform of the Indian Civil Service was a
forerunner of the Northcote-Trevelyan proposals for the Home Civil
Service. The lines of Macaulay's answer to the objection that academic
examinations are irrelevant to an administrator's work may be seen from
the following instructive passage:

It is said, I know, that examinations in Latin, in Greek and in mathematics

are no tests of what men will prove to be in life. I am perfectly aware that
they are not infallible tests; but that they are tests I confidently
m a i n t a i n . . . Whether the English system of education be good or bad is
not now the question. Perhaps I may think that too much time is given to
the ancient languages and to the abstract sciences. But what then?

43
 Whatever be the languages - whatever be the sciences, which it is, in any
age or country, the fashion to teach, those who become the greatest
proficients in those languages, and those sciences, will generally be the
flower of youth - the most acute - the most industrious - the most
ambitious of honourable distinctions. If the Ptolemaic system were taught
at Cambridge, instead of the Newtonian, the senior wrangler would never-
theless be in general a superior man to the wooden spoon. If instead of
learning Greek, we learned the Cherokee, the man who understood the
Cherokee best, who made the most correct and melodious Cherokee verses
- who comprehended most accurately the effect of the Cherokee particles
- would generally be a superior man to him who was destitute of these
accomplishments. If astrology were taught at our Universities, the young
man who cast nativities best would generally turn out a superior man. If
alchemy were taught, the young man who showed most activity in the
pursuit of the philosopher's stone, would generally turn out a superior
man (Thomas Babington Macaulay on Indian education: Keith, 1961, Vol I,
pp. 252-3).

1. I n t r o d u c t i o n

O f r e c e n t m o n t h s flattering a t t e n t i o n has been paid to a frivolous

passage o f mine in a c o n t r i b u t i o n to a fly-by-night s y m p o s i u m (Wiles,
1969, p. 195; cf. Blaug, 1971). T h e idea has even been applied to
u n d e r d e v e l o p e d countries, and b e c o m e a part o f the t h e o r y o f develop-
m e n t (Cline, 1972; R a d o , 1971). I t h o u g h t at the time this c o n t r i b u t i o n
w o u l d do m y academic r e p u t a t i o n little g o o d because it was n o t serious. I
n o w find that it is serious, so e n h a n c e s m y r e p u t a t i o n b u t t h r e a t e n s m y
earnings instead. F o r in saying t h a t degrees and leaving certificates are
valued n o t for the c o n t e n t o f the e d u c a t i o n they certify b u t as a c c e p t a b l e
tickets o f e m p l o y a b i l i t y in good jobs, I transfer a g o o d deal o f higher
e d u c a t i o n o u t o f h u m a n capital f o r m a t i o n into c o n s p i c u o u s c o n s u m p t i o n
and socially irrational careerist c o m p e t i t i o n , and l o w e r drastically m y o w n
marginal social p r o d u c t . F o r Russian Social and E c o n o m i c Studies is a
quintessentially g e n t l e m a n l y subject, o f the kind t h a t the External-Test-
not-Content ( E T N C ) and similar h y p o t h e s e s w o u l d devalue.
E c o n o m i c research into higher e d u c a t i o n , incidentally, w o u l d n o t be
similarly devalued. Its existing d o c t r i n e s would be s h o w n to be wrong, and
this w o u l d d e s t r o y particular people's academic reputations. B u t m o r e
c o r r e c t doctrines w o u l d be, ex hypothesi, substituted, and d i f f e r e n t
conclusions for public e x p e n d i t u r e urged u p o n governments. T h e insti-
tutes and courses w o u l d continue. In any case only a quite small part o f
all h u m a n capital w o u l d have b e e n abolished.

44
 2. The External-Test-Not-Content-Hypothesis

The ETNC hypothesis, expanding m y earlier formulation especially

on the supply side, states that:
(i) Employers of entrants to the labour market treat formal
educational qualifications as accurate proxies for employability, or
measures of marginal productivity, almost regardless of the content of the
schooling. (This is hardly hypothetical: cf. Doeringer and Piore, 1971,
pp. 103-6, 133, 194.)
(ii) They are right to do so, and act rationally in economic terms,
because all formal educational qualifications are indeed certificates of
ability, perseverance and docility: the very characteristics an employer
wants.
(iii) The content of the course is on all hands admitted to be
unimportant to the employer if not vocational; indeed this is a tautology.
(iv) Therefore in all non-vocational cases a good one-day test of
docility, perseverance and ability, costing about s instead of s
would do as well.
(v) Much the same applies to some but not all vocational training.
(vi) Moreover, " m a t u r i t y " could be ensured simply by applying the
test at graduation age to young workers with two " A " levels, who would
by then have the added advantage of practical knowledge.
(vii) Therefore we must exclude the cost o f all non-vocational and
some vocational higher education, and possibly also of schooling after
sixteen, from our reckoning of human capital, and seek elsewhere the
reasons why people take them.
(viii) The first reason, then, is of course that such degrees are valid
and profitable certificates of employability in well-paid jobs.
(ix) The second is that the courses leading up to them, and the
manner of life at universities, are pleasant. The marginal utility of study,
as of all labour, becomes eventually negative as hours lengthen, but the
intra-marginal utility is positive. This is true of few other kinds of labour:
coincidentally, research by university teachers is one of them.
(x) The third reason is the "Robbinsian" supply curve of higher
educational facilities. 1 All people "qualified," by some wholly arbitrary
1 "In principle, the problem of estimating the number of places required can be
approached in two ways: by considering what supply of different kinds of highly
educated persons will be required to meet the needs of the nation, or by considering
what the demand for places in higher education is likely to be. We have decided that
the second approach presents the sounder basis for estimates." (Committee on Higher
Education, 1963, Sect. 133). Where the Committee speak of the demand for
education, I refer to the supply of it on these principles.

45
standard, get degree courses as of right, largely at the taxpayers' expense
and with no limit of numbers. Student loans, at full cost, would drive
large numbers into the more profitable alternative of early work plus a
test as in (v).
(xi) The public supply curve of higher education is Robbinsian
because of three quite extra-economic ideological factors. These are, in
chronological order of their appearance, das Gentlemanideal, interna-
tionally comparable statistics of education, and the human capital
approach in economics (for which I am told I am also responsible - Wiles
1956).
(xii) There is also one economic explanation for this curious supply
curve. Non-Vocational Higher Education (NVHE)has succeeded Empire
as outdoor relief for the upper classes, teachers and taught alike. This is
particularly important for the taught: as juvenile employment shrinks the
poor young go on the dole while the rich young take degrees. But in order
to make this tolerable to the poor as parents, taxpayers and voters, NVHE
must be made freely available to their abler children.
(xiii) There is also an element of social policy: it is thought good to
turn the most ideologically conscious proletarians into gentlemen. In fact,
of course, it is bad, since gentlemen have always been as revolutionary as
any other class, while being much better at it. So revolution loses no
quantity but gains quality. ~ Quantity is, however, reduced by the element
of outdoor relief (above).
(xiv) Thus the Robbinsian supply curve is irrational, but everybody
else reacts quite rationally to it: an absolutely normal situation when the
government intervenes in the market place. Moreover such a supply curve
is not logically indispensable to the hypothesis.
(xv) On the question of subsequent career advancement (Blaug,
1971), ETNC may be stated strongly or weakly. I prefer the weak version,
which says the certificate is a carte d'entrOe subsequently discarded in
favour of colleagues' opinions, superiors' reports, etc. (Berg, 1970), but
that the basic consilience of certificate with subsequent opinions rests on
the rationality of the procedures and persons generating both. However
the strong version is attractive: colleagues and superiors modify their
opinions of one according to one's educational certificate, and this
generates a vicious circle. People acquire certificates now, and are given
good jobs now, because it is known that high opinions will be held of

2 T h e c u r r e n t wave of y o u t h f u l r e v o l u t i o n is n o e x c e p t i o n to this. B u t t h e N e w Left

was b o r n l o n g a f t e r t h e R o b b i n s i a n supply curve of N V H E h a d b e c o m e p a r t of t h e
n a t i o n a l consensus. It is n o d o u b t its a d v e n t t h a t has e n c o u r a g e d t h e a u t h o r to t h i n k
again a b o u t this w h o l e c o m p l e x of p r o b l e m s .

46
them in twenty years time on the basis of these certificates. Therefore the
certificates have only this relation to current merit, that clever people
compete for them. This of course is the essence of ETNC.
(xvi) Training on the j o b can be similarly treated weakly or strongly.
Such training is often a prelude to promotion, and therefore to further
training of the same kind prior to further promotion. So it is allocated to
those considered most meritorious, and at the beginning of one's career
that means those with the best educational certificates. Now the weak
version of ETNC is that results in both kinds of training go by merit, and
that is why b o t h are positively correlated with income. The strong version
is that the results of training courses are based on prior educational
certificates, which only guarantee merit because they have been competed
for, as above.
"Human capital," on the other hand, is an almost pure " c o n t e n t
hypothesis": what we learn at school is knowledge useful in production.
We see later (in secs. 5 - 7 ) to what extent this concentration on content
can be modified so as to save human capital. Suffice it for the m o m e n t
that NVHE is by definition useless in production. Therefore, human
capital could not include it unless one or other term were redefined.

3. Education and Employment

ETNC is a difficult thesis to refute, since it explains just as well as

human capital the correlation of income with education. But what is
difficult to refute is often equally difficult to establish. Griliches' work
has been recommended to me. But none of it enables us to distinguish
them - nor is it fair to ask this of him, since he does not consider the
matter directly.
Thus (Griliches and Mason, 1970, p. 13) it is interesting that the
co-efficient of current income on education after military service in the
U.S.A. is 0.0450, allowing for an I.Q. proxy, 3 age, parental status, race,
education before military service and regional origin, while it is n o t much
higher (0.0513) if we exclude all these influences except race, education
before military service and age. This probably does show that education is
importantly correlated with current income. But of course it doesn't show
why this correlation holds.

3 A very bad one, the Armed Forces Qualification Test, administered at eighteen and
so incorporating vast influences other than pure intelligence (Griliches and Mason,
1970, p. 16).

47
 Again in Griliches ( 1 9 7 0 , p. 80) we read: " E v i d e n c e (in some casual
sense) has y e t to be p r e s e n t e d that " e d u c a t i o n " explains p r o d u c t i v i t y
differentials and that, m o r e o v e r , the particular f o r m o f this variable
suggested above does it best. T h e r e is, o f course, a great deal o f evidence
t h a t differences in schooling are a m a j o r d e t e r m i n a n t o f differences in
wages and income, even holding m a n y o t h e r things constant. Also, ration-
al b e h a v i o u r on the part o f e m p l o y e r s w o u l d lead to the allocation o f the
l a b o u r force in such a w a y t h a t the value o f the marginal p r o d u c t o f the
d i f f e r e n t t y p e s o f l a b o u r will be r o u g h l y p r o p o r t i o n a l to their relative
wages." But m y thesis also postulates rational b e h a v i o u r On the part o f em-
ployers, since e d u c a t i o n a l tests are on the whole good ones and cor-
r e c t l y p r e d i c t p r o d u c t i v i t y . Micro-rationality does n o t establish macro-
rationality, and I only dispute the latter.
L a y a r d ( 1 9 7 1 ) argues that Griliches ( 1 9 6 4 ) s o m e h o w gets a r o u n d
this difficulty, because the e d u c a t i o n a l co-efficient is in that case derived
f r o m a regional cross-section, n o t a t e m p o r a r y series. F o r o f course m y
h y p o t h e s i s could in one variation have a t e m p o r a l e l e m e n t : the test result
replaces the utility o f the actual c o n t e n t b y a vicious circle acting over
time. But the mere fact that certain data showing a positive c o r r e l a t i o n o f
e d u c a t i o n with i n c o m e are simultaneous can in n o way r e f u t e a h y p o t h e s i s
that says that e d u c a t i o n tests c o r r e c t l y predict p r o d u c t i v i t y .

TABLEI

Situation I Situation II
(principally subsidized univer-
sity, some private decentralized,
testing)

university other (one nationwide

entrance candidates private test)

i) Cost of education, s 3000 0 20a

ii) Cost of interviewing, s 15c 30 c 15c
iii) Number of people on short list 4 20 b 4
iv) Total private cost of test, s 60 600 560 e

a This is the cost of the nationwide test. It is less than s because there are econo-
mies of scale, and no costs of travel or subsistence.
b The short list is longer because there are far fewer chances of finding suitable people.
c The interviewing of pre-tested people is much shorter.
d Including s 10 travel and subsistence.
e Including the cost of administering the nation-wide test to 20 candidates, where 20
is the number on the short list in the second column.

48
 Again Layard argues (in private correspondence) that: "One would
expect the supply price of the 21-year-old with 'A' levels who has
foregone no income from age 18-21 to be much lower than that of the
21-year-old graduate. So why aren't employers willing to spend s to
find the good 'A' level people, thus abolishing any financial incentive for
individuals to graduate?" But 21-year-olds without degrees are bound to
be inferior as a group to those with degrees, and employers do of course
test them, for what that is worth. Only they must test far more of them
in order to obtain one good one, as Table I shows.
The result is that non-university candidates are either not hired at all,
or put into lower-paid positions. It is simply too expensive to let them
compete fairly. Moreover employers would even find it more expensive to
run a single private scheme than to concentrate on graduates; so there is
no private incentive to start up such a test. But it would be very cheap for
the state to subsidize a nationwide test: and the transference of only a
very few people out of universities into work until age 21 would make it
actually profitable.
Next, why don't employers test 18-year-olds in a rigorous manner,
promising them graduate-type careers? But able youngsters taken on at 18
and launched into such careers would not fetch lower salaries at 21 than
graduates of equal ability, since prices depend on demand (constant ex
h y p o t h e s i ) and the quantity supplied, not its "sunk" costs. Besides much
of these costs is consumption-type utilities already enjoyed and without
any claim at all to further consideration. Thirdly, some employers
accustomed to recruiting managerial personnel at 18 (the armed forces,
the banks) do continue to stand out against the trend - but only by
promising day release and the opportunity to get a degree! The "financial
incentive for individuals to graduate" remains, in that these recruits wish
to be occupationally mobile, in a world conforming to ETNC. Fourthly,
the test at 18 is as expensive as it is at 21, as illustrated above.

4. Subject-Matter of Degrees

How, then, can ETNC be checked against "human capital"? I think,

by breaking degrees and certificates down according to subject. It is
obvious that a first class degree in Sanskrit implies more intelligence and
less useful knowledge than a third class degree in Economics. But it is,
alas, also obvious that firsts in Sanskrit are less motivated to make money
than thirds in Economics. So our first stage is to analyse the incomes of
those now employed in business only (or Sanskrit studies only) according
to the subject-matter of their degree. This procedure controls to some

49
extent the motivation factor. The higher the correlation of income with
degree-class (or quality of school/university plus class), and the lower its
correlation with relevance of subject-matter, the more true is ETNC and
the less true is human capital.
It seems that detailed information of the type required is available in
the 1970 British Census, and from University Appointments Boards. But
such bodies must respect privacy, and would probably refuse access to
data on individuals. So a research project on these lines would probably
mean a separate survey, and would be very expensive. I make no apology,
then, for publishing an article the principal point of which is to
recommend research, not present it.
Secondly, we could contrast degrees with ability in more or less per-
fect labour markets, standardizing income by age. Thus accountants
and solicitors enter their careers with graduate and with non-graduate
training. ETNC would lead us to suppose that graduates would start
out at higher salaries, but the high turnover among firms would even-
tually sort people out by ability instead. So the incomes of the middle-
aged would be arranged more by IQ than by formal qualification -
whereas in more structured careers, we have seen reason to suppose,
training on the job accrues mostly to those with the better degrees and
certificates, so that the initial income handicap is seldom overcome.
See also, for a third type of data, this time actually available, the
appendix.

5. The Character-Formation-Not-Content Hypothesis:

Even so it can be argued that we are taking an over-simple view, in

that length of education, no matter in what subject and little matter with
what results, is itself of positive marginal productivity, because of the
Character-Formation-Not-Content Hypothesis (CFNC). Thus to be 21 and
have 15 years of education is to be more (a)mature, (b)docile,
(c) persistent, and (d) self-confident than to be 21 and have 10 years of
education plus 5 of work. From casual observation I would say that
(a) was the opposite of the truth and (c) extremely doubtful. Point
(b) however is important. What employers need is intelligent conformism,
or great independence and originality within a narrow range. It may just
be that prolonged education is on the whole more productive of this
admirable quality than juvenile labour - and it also may not. But it is an
important quality, and its development might appropriately be called
human capital accumulation. Point (d) however is strongly allied to status
questions and is dealt with in section 7 below.

50
 6. The Exercise-Not-Content-Hypothesis

If we rule out character-formation from human capital we come

close to ruling out sheer length o f education as a factor, and pro tan to our
theories approximate to ETNC. But not quite: sheer schooling undoubt-
edly develops general intelligence, just as sheer repetitive unskilled juvenile
labour dulls it. Perhaps, then this is the rational reason for NVHE: it is
mental gymnastics, and the brain is like a muscle.
Certainly this is a view of very long standing. It may be called the
Exercise-not-Content Hypothesis (EXNC). It is certainly more flattering
to the teacher engaged in NVHE. It also, like CFNC, saves human capital.
It may, thirdly, be true. That the actual content of NVHE should be of
value in e m p l o y m e n t (the "Content Hypothesis") remains excluded, as we
saw, by definition.

7. The Status-Not-Content Hypothesis

Another possibility is that the Status-Not-Content-Hypothesis

(SNC) degree has always been a status symbol, though in some walks of
life it used to rank second to a public school tie: the City, the Forces -
precisely those sectors where even today (section 3) a serious attempt is
still made to recruit school-leavers for managerial positions (though no
longer only from the public schools). It is not, I think, the fact that
England has an aristocracy that makes her more status-conscious than
other nations (including her own Celtic Fringe). Indeed as aristocracies go
the English one is notorious for its comparative openness; and its male
young have traditionally accorded high value, though not social status, to
degrees - of a sort. What used to count was the altogether irrational
preference of the English middle class for particular "public" and
grammar schools. But they are now coming to see these as merely one
kind of stepping-stone to the new status symbol, a degree. The English
middle class are adopting the same fetish at the rest of humanity.
At parties, you cut more ice with a degree than a salary. Also merely
financial deficiencies are easier to conceal; it is polite to ask about y o u r
degree, rude to ask about y o u r salary. Everyone knows the market is even
more of a lottery than the examination hall: the degree, now that it is
supplied on Robbinsian principles, is the truer test of worth. Besides, you
might easily have political or conscientious objections to doing the kind of
work that brings in a large salary, but you have to be far out indeed to
nurture ideological doubts about educational success. More or less assured
of an income, the middle classes have shifted the focus of their social
competition. When we say that NVHE, indeed all HE, is a consumption

51
good, we mean not only that it is pleasant, as things go in this vale of
tears, to acquire (section 2/ix); we mean that young men like to impress
pretty girls. An economist needs to be anti-sociological indeed to deny
that.
This much economic logic, however, inheres in SNC: status gives a
man self-confidence, and enables him to lead others. Therefore junior
managers should have degrees and professors should have doctorates. 4 But
this is logical in terms of private, not social, profit. Obviously if fewer
people had degrees of all sorts, junior managers and professors would have
just as much status as they do now, since status and self-confidence are
purely relative. However, since the professional classes are so migratory
nowadays there would have to be international agreement.

8. The Restrictive-Practice-Not-Content Hypothesis

Then there is the Restrictive-Practice-Not-Content hypothesis

(RPNC). The competitive market is cynical and unsympathetic. There is
always some curmudgeon who makes more money by not being trendy,
and forces the rest of us to follow him, kicking and screaming, back into
the nineteenth century. But public monopsonists and trade union
monopolists of labour can defy cynicism and the market, provided that
they collaborate. And in these matters, why should they not collaborate?
The trade unionist (let us say the British Medical Association or National
Union of Teachers negotiator) can dress up his wage-claim as a superior
qualification for the protection of the public, justifying at once higher pay
and lower numbers. To be sure, the older members of his union may
suffer (Richardson, 1971, Chapter 2) if the better qualified new entrants,
despite their smaller numbers, compete business or jobs away from them.
But this is not a likely proposition, since everyone is subconsciously aware
that the new qualification is bogus. Moreover, existing members of the
union are older, and will never allow it to put forward a claim that
actually upsets the age/promotion structure.
The public monopsonist is not paying out of his own pocket. He
needs a settlement that looks good to his superiors and the taxpayer-cum-
voter, because that is what will get him promotion. He has, therefore,
every possible reason to grasp at straws, and RPNC is a most substantial
straw. If he yields, he can use human-capital-type arguments to convince
his superiors overtly, while covertly suggesting to them, on the lines of

4 T h e w r i t e r has n o d o c t o r a t e , b u t is a professor. He leaves it t o t h e reader to i n t e r p r e t

this c i r c u m s t a n c e .

52
SNC, how wise they have become to be employing such clever young
people.
The validity of RPNC may be taken as flatly proven by the higher
educational qualifications demanded by public employers wherever they
compete with private ones. It applies also, as the British Medical
Association has amply demonstrated, to vocational education. Indeed this
is its principal field.

9. Conclusions

Summing up, I incline personally to a mixture of SNC, EXNC,

RPNC, ETNC and CFNC, in that order of importance. Orthodox human
capital comes nowhere at all in NVHE, but should, all cynicism to the
contrary, rank first in vocational training. It follows that the element of
mere socially irrational over-qualification is too high, and the volume of
higher education, especially NVHE, should be reduced. But of course
NVHE has a multiplier effect, like other conspicuous consumption, and it
does keep the upper class young off the streets (2.xii), where they would
be dreadfully troublesome (2.xiii). So with u n e m p l o y m e n t at 4% the time
is not ripe to put these doctrines into even partial effect.
The downgrading of the human capital theory does nothing to
support Christopher Jencks' (1972) view that the redistribution of
educational resources from rich to poor children will not redistribute
income between them later in life. For none of our hypotheses says that
more education will not bring more income. Besides, Jencks' hypothesis,
if true at all, refers to primary and secondary education. When he comes
to higher education he fails to standardize his statistics by age, and so -
dealing as he does with a growing economy - overweights the compara-
tively underpaid young graduates, thus understating the graduate life-
cycle.
What this paper really does is to rescue the economics of education
from Chicago: from the presumptions of rationality and perfect competi-
tion, nay even of social justice in a market. There is nothing wrong with
applying economic analysis to education; but there is much wrong with a
particular sort of nai'vet&

Acknowledgement
I owe a great debt to the criticisms of Richard Layard.

53
 Appendix

Types of Evidence that Might Distinguish

Between the Hypotheses

We suggested in section4 a correlation of degree-class, degree

content, income and relation of occupation to degree content. Another
piece of evidence is what happens when a school or a subject is upgraded
from diploma- to degree-level. The Otto Suhr Institute of Political Science
in West Berlin, degraded by the Nazis, was totally refounded in 1949
(Hartung et al., 1970, pp. 3 9 - 4 4 ) . Political science, hitherto unrecognised
in German universities, had special emotional significance in the FRG,
since it was a new democratic substitute for law in the preparation of
public servants: it was to strike at the roots of an authoritarian tradition
much older than the Nazis. Politologie was to be the new science of
democracy, and the Otto Suhr Institute its headquarters. The institute
began as an adult re-education centre but quickly turned into a regular
higher school granting a diploma, and ended giving degrees inside the Free
University of Berlin. Our figure (Hartung et al., 1970, p. 70) purports to
show the effect of this academic promotion on the incomes of its
alumni, s In the late sixties the institute was thoroughly infiltrated by the
New Left, and as this is written it has been closed because of disorder. It is
highly improbable that this affected any alumnus' income in 1968.
The numbers of people in each two-year group range from 40 in the
early fifties to 100 in the late sixties (p. 195'). Non-response was 28%, but
is not thought to over-represent success or failure (pp. 53-6). The authors
themselves interpret their fascinating figure as follows (p. 69). The kink in
1957/8 occurred because with "the formal ultimate recognition of the
subject as an academic discipline the new graduates upgraded their
valuation of themselves." This is because of their theory that supply in the
graduate market determines demand. We have not space here to discuss
such a theory: we note only that it is equally compatible with "human
capital" and any of o u r . . . N C theories. Anyway, on this basis they
extrapolate the dotted lines a and b, to represent the total career gain
accompanying (note the neutral word) academic recognition.
The superficial interpretation (which is also mine) would then be
that from 1959/60 to 1961/2 we get one new career curve, and that in
1963/4 we move on to a third, with the first release of full graduates of
the university. This is indicated by my dotted line c. The authors,
s I am i n d e b t e d to Mr. David Webster of the Higher E d u c a t i o n Research Unit at the
L o n d o n School of E c o n o m i c s for drawing m y a t t e n t i o n to this figure, and for the idea
of interpreting it in this manner.

54
 DM
e0 3500-
s

~) 3 0 0 0 I
.13
E
25oo // /// /
C3
t-
2000
E
O
U
.c_ 1 5 0 0 / /z///

o1000
1[
i r [ [ r J ' I J J ' ~ I t I ~ ~ T
1965 1960 1955 1950
Year of e x a m i n a t i o n

~ Lob tt3

r~ . ~o

xo~ ~ o ;>,
o

~3

o =
O
~ '~ 2:

F i g 1. Careers of the alumni of the Otto SuhrInstitute of Political Science. ( E a c h

point represents a 2-year average and should lie m i d w a y b e t w e e n year marks.)
A p p r o x i m a t e translations: D i p l o m - B.A. or B.Sc.; P r o m o v i e r u n g - Ph.D.; H o c h s c h u l -
reife - 2 or 3 A-levels.

however, in an obscure passage, say that their line b is the ultimate new
career curve, and ascribe the "irregularity around 1962" ( 1961/27) to the
Berlin Wall and the bad market for new graduates which this produced in
Berlin (where half the alumni work). There was a bad slump in the city, so
new graduates o f 1962 got a "bad professional start" which they never
made up. But this would imply that the line 1 9 5 9 / 6 0 - 1 9 6 1 / 2 was
unusually steep, so that the dotted line b should have been drawn sloping
more gently than it. This is not impossible: there is no reason why b

55
should not converge u p o n the original career curve, showing that political
scientists o f ability eventually make the same income, whether they start
with a diploma or a degree. But the change from 1961/2 to 1963/4 is very
sharp, showing that five years later (i.e. in December 1968, at the time of
the survey) the graduates of the two earlier years still had lower incomes,
even though only half o f both groups work in Berlin. That was "a bad
professional start" indeed! The authors' own explanation is thus incred-
ible, and the theory that we have here sections of three career curves is
m u c h to be preferred.
It is in any case not in dispute that an income of DM 1900 is now
reached six years earlier, or four years out of school, instead of ten.
General economic growth, and general shifts in the demand for graduates,
can hardly explain this, since the incomes we are comparing were all
earned at the same moment. There is simply more demand for young
alumni than for older ones, and it is firmly related to academic upgrading.
But is it related to human capital? It would seem rather not, since the real
changes were made in 1952. This is true of both length of course (as
indicated on the figure), and course content. The evolution from an adult
education syllabus to a university syllabus is shown at five different dates
(pp. 4 7 - 8 ) : the real change comes again in 1952. It seems to be rather
the later formal changes that raised the career curve.
The Otto Suhr case is only suggestive. It can be presented as the
normal marketing difficulties of a new product, the political scientist: it
took 15 years to persuade the market of the product's value. Or it is a case
of SNC: buyers were willing to pay more and sellers to demand more for
the produce once it was properly packaged ( 1 9 5 6 - 6 3 ) , regardless of its
content, which was unchanged after 1952. Or, even, is it really a case of
human capital working properly: subtle improvements in the quality of an
essentially vocational course, not caught by the research project and its
questionnaire, accompanied rather than preceded formal upgrading, and
were accurately/udged by employers? This is harder to believe.

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56
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