- To obtain the education itself, with all of the concomitant joys and sorrows.
- To be able to get a better job, or more generally, to get whatever external benefits the degree provides (which may or may not be correlated with number 1).
- To socialize, or more generally, to get any of the things from the college experience that are desirable to students but are not part of number 1 or number 2.
Probably most undergraduates would cite the ability to get a good job as one of the reasons they are in college. For most business students, in my experience, that is the primary or even the sole consideration. Whereas liberal arts students are likely to have some genuine interest in the field they are studying, business students are likely to view the degree as a means to an end. They may be amenable to the education itself to varying degrees, or they may embrace the education itself as the thing that is going to help them get a job or be successful in that job; but I have never encountered a student that was studying business because he or she enjoyed studying business for its own sake or perceived any value of this study that was not entirely career-related. (There may be such students out there, but I feel confident in claiming that they are not the norm.) It is common for business undergraduates to want to get through the degree with the minimum amount of fuss.
Within the rationale of getting the degree for the sake of the job, a popular view is that the education makes the student a better employee and thus a better job candidate. However, if we believe the evidence indicating that many undergraduates do not make significant gains in the thinking abilities that the undergraduate degree is meant to instill (and I do believe it), it raises the question of why college graduates are better able to get jobs than non-graduates (for which there is also credible evidence). It is possible that a student's successful completion of the degree says something about who the student was to begin with. This is what economists call a signal.
Here is an illustrative example for anyone unfamiliar with signaling in the economic sense. Say a firm offers a warranty on a product—not an extended warranty with a separate price, but something that is automatically included with the purchase of the product. This is not simply a kind of insurance against defects in the product. The provision of the warranty provides information about the quality of the product, i.e. it indicates that defects are unlikely. In order for the warranty to provide this information credibly, it must be that it would be more costly to offer the warranty for a low-quality product. Consumers can infer that the product with the warranty is high-quality because it would be too costly for the producer of a low-quality product to offer the same warranty. The warranty then functions as a signal of the product's quality.
Education could function as a signal in the following respect. Say that there are some people that are sufficiently intelligent and responsible that they would make good employees. Both the potential employer and employee have an interest in this information being communicated, but it is difficult to do so. Any prospective employee would like to say, “I am intelligent and responsible and therefore you should hire me” (just as any firm would like to claim that its products are high-quality), but the problem is how to make this statement credible. An undergraduate education signals this information credibly if there is enough of a difference in the difficulty of obtaining the degree between those that are intelligent and responsible and those that are not. If only the intelligent and responsible people are able to get through the degree, then by completing the degree successfully, one demonstrates that one is a reasonably intelligent and responsible person and thus would make a good employee. This is information about who the person is, not what the education has done for the person; education can function as a signal even if the education does not in any way make one a better employee. This is not to say that education does not also add value to the employee. Thinking of education as a signal does not preclude that possibility.
The idea of education as signaling has been part of economic thinking for decades. I never hear non-economists talking about it, but I’m not sure if that is because others are unaware of the idea or if they don’t accept it. It may seem a cynical view, especially if the traits being signaled include willingness to conform to the kinds of norms that employers value—following directions, meeting deadlines, etc. But if so many students (and their parents) are making huge sacrifices in order to attend college but are getting little or no real education, there has to be some other reason why they continue to do it.
- Students (or their parents) are misinformed about the benefit they will receive from the education (or from the degree).
- Students have too much incentive to obtain a degree: the cost exceeds the benefit, but students go to college because it is subsidized, and thus the expected benefit exceeds their private cost. There could be a stochastic component here or in the point above: the perceived benefit is uncertain, but students are willing to roll the dice if the cost is low enough.
- Some students (or their parents) are willing to pay for the social aspects of the college experience even if the other benefits are too small to provide sufficient incentive.
There isn't anything fundamentally wrong with that whole process. The transmission of information is valuable, as it is in the case of the product warranty. It is a problem, however, insofar as the signal has become very expensive. Furthermore, it is harder to supply the education to those that want it when some students are in it for the signal.
I would not claim that college education is solely a signaling process. If college serves several purposes, and the relative importance of those purposes varies with the student, it is difficult to quantify or even conceptualize how much the signaling part matters relative to everything else. I would put it this way: there are many people that would not go to college if not for the signaling function. If there were a less costly way for students to communicate their intelligence and responsibility, some students would opt for that and forego the college education. If we could move the signaling function out of the university, those students would be better off, and universities would be better able to focus on the educational component.