Efficient prestige hypothesis

Consider the analogous hypotheses about attractive real estate brokers, which are in higher demand. You might claim that broker attractiveness is just an indicator of broker quality. One hypothesis says attractive brokers are in more demand mostly because they sell houses faster, while another hypothesis says the are in more demand mostly because people like to hang out with attractive people. We could compare these theories empirically by seeing if in fact attractive brokers sell houses faster or for more money. If they don't, or if their gains aren't enough to cover their added costs, the second hypothesis would be favored.

I think the trick is that prestige is never composed solely of quality-assessing measures. If nothing else, prestige is path-dependent: it takes a lot of work for a new university to prove itself.

Even if all relevant quality metrics are included in prestige, additional lower-correlation components can make prestige correlate worse than any of the individual quality metrics.

Prestige is a complicated indicator, and might underperform simpler indicators that are already incorporated in prestige evaluations. Cf. Michael Bishop, "In Praise of Epistemic Irresponsibility".

But what would a person who completely didn't care about such affiliations do? Pretty much the same thing.

I actually doubt this is true. Specifically, for the case of private university tuition. Suppose people actually sat down and calculated their lifetime expected income, given their admissions metrics, and their parents/the state said, "Here's tuition at a private university. Go where you want and keep the change." Then, they forget all about prestige. Do you think people would be spending those dollars at more-prestigious private schools, or at comparably effective but lower-cost, lower-amenity public schools? Similarly, do you think they'd be going to famous research institutions, or famous teaching institutions?

Precise Hanson's theory is not, but it does seem to explain why students pay top dollar to listen to professors who don't really want to teach them.

There may admittedly be a significant collective action problem: if everyone ignored prestige, maybe you should pick a top public school over a top private one. But if it's just you, well, signal away.

As I recall, haven't we linked and discussed before studies showing that lifetime earnings of those who turned down Ivies for top-but-cheaper schools were comparable to those who went? By that standard, prestige is inefficient. (And I've seen advice to this effect, too, in college guide materials.)

I have also heard that an increasingly common strategy among undergraduates in California is to go to one of the feeder community colleges and only go to the prestigious schools like UCLA or Berkeley for the last 2 years. (Although I read this in Steve Sailer who was busy mixing it up with his theories about canny Asian parents maximizing the bang for their buck, so reader beware.)

These 3 points suggest to me that it is known that prestige is not identical to quality. There are a few possible explanations that occur to me.

Perhaps the target demographics of the 3 points are people who cannot take advantage of the financial aid offered by prestigious universities but perhaps not by the higher-quality but less prestigious institutions. (Prestige attracts donations, which enables things like Harvard's attend-free-if-you're-poor. Obviously qualified poor kids will much prefer Harvard to, say, Cornell, even if Cornell is more quality; it's basic math. But for a middle-class kid who doesn't qualify?)

Perhaps the lifetime earnings are similar or higher elsewhere but one is compensated for the poorer education/higher-expense with intangibles like being part of a tradition, everyone knowing of where you went, or...

Having more power thanks to the prestigious institution & networking. I think of John Kerry; leaving aside the marrying-into-wealth, he has exercised a great deal of power of the years, so you certainly couldn't call him a failure, but I suspect his lifetime earnings are vastly less than if he had gone to a higher-quality-but-lesser-prestige school which funneled him into private law. (Kerry first really got into politics at Yale, but if you don't think his example works, how about Barack Obama? Without the prestige of Harvard, would he have gone into local politics/community-organizing & thereby forfeiting the lucrative lawyering career one could expect? But notice how much power he got in exchange.)

So that's 3 or 4 ways in which prestige could be very closely aligned to quality and yet remain permanently different.

I hate to be "that guy" but it depends on what you mean by quality! I think what you have in mind is something like, does the school educate you well? But the only way you'd know if it educated you well is if you succeed in life, i.e. achieved status. ("No, standardized tests!" -- but how the questions on the test are deemed important is irrevocably intertwined with status to begin with!) So we see that education is a tool for achieving status. It's much more direct if the school just conferred status -- which is what we find.

So yes! Prestige is a great indicator of quality - as long as you define "quality" as "prestigious"! (Which we mostly do anyway.)

If that's not clear (it's hard for me to get ideas out of my head sometimes), I guess another way to say it is: Which causes the other? Because I think "prestige" is an input to quality, whereas you're saying "quality" is an input to "prestige."

Students using prestige only as a quality-indicator wouldn't be willing to pay as much for a high-prestige college, as it is an imperfect indicator for them, as opposed to a perfect indicator for prestige hunters.

There seem to exist certain measures of quality that are second level, in the sense that they measure quality in a kind of indirect way, mostly because the indirect way seems to be easier. One example is sex appeal. The "quality" of a potential mate should be measured just by the number of healthy offsprings it can give birth to. However, that's difficult to find out and hence evolution has programmed our genes to refer to the sex appeal instead, that is, the number of people who will find the person in question attractive. However, the only problem with such second level measures is that they can be feigned. An impotent person can still look attractive.

Similarly, imagine a car manufacturing company that produces two different models. However, the only differences between them are in the looks and the cost. Assuming that the looks are not clearly better than the looks of the other, people who use prestige as the measure of quality will always buy the more expensive car.

One example for an alternative metric is provided by the various sets of ratings for law schools. The most famous ratings, the US News ratings, include many different factors, only one of which is "prestige" (as measured by asking lawyers and professors what they think of schools). They also include more objective factors such as library size, money spent on students, and average test scores and GPAs. There are alternative rankings available as well, which look at factors such as debt repayment, minority enrollment, likelihood of getting X job, quality of student life, quality of teaching, and so forth.

When students choose a law school, it's very common to look at these sets of rankings, taking prestige into account as one of many factors.

I agree there is something to this, but given that people have different goals, it usually makes sense to look at factors other than just prestige.

On an only somewhat related note. I highly recommend this paper by Henrich and Gil-White on the Evolution of Prestige (defined as "freely conferred deference.")

I wonder if you could in theory separate out part of the prestige value. Part of the prestige value of a product would be related to its exclusivity - things that are easily got don't confer prestige for obvious reasons.

So suppose you were looking at two schools that were equally prestigous but one was smaller, more expensive, required better social connections and higher academic achievement to access, and was more preferred by people in higher circles than the other. Then you might conclude that this smaller school derived more of its prestige from its exclusivity than the other school did, and hence on other indicators which might matter more, the larger, less exclusive school was actually better.

You need to operationalize "quality". Quality in this context simply means "goodness", which is subjective. If by quality you mean "leads to life success", then prestige seem to be a good proxy for "quality" (though the selection effect makes it less clear).

For example, going to Harvard Business school might lead to life success due to possible employers wanting to affiliate with your high status associations, even if the education leads to lower productivity gains than community college business courses and a few years of employment in the field.

BTW, regardless of the discussion here, the OB-article linked is well worth reading, as are the commments. One of the better OB-articles of recent times.

There's no denying that prestige is better indicator of quality than random chance - the question is - is it the best we can do?

Where does the prestige come from? Likely, it's got a lot to do with public perception of quality in the first place. If we can improve objectivity in the judgment of this quality, then that's great; but the prestige would follow it along. We won't 'do better' than following the prestige, the prestige will 'do better' at following the quality.

“But what would a person who completely didn't care about such affiliations do? Pretty much the same thing.”

I disagree. This is a case of different populations having different utility formulas for the same item. Those who enjoy being affiliated with high status institutions are receiving utility other populations do not.

I think that people often pre-screen their selection options removing those options they think are overpriced aka do not fit their utility formula. They filter out signals belonging to other populations who use a different utility function.

An item may have many utility functions. Populations who’s utility formulas match the market price see correct signals. Populations who’s formulas do not match see the item as either a deal or rip-off. I imagine that populations that view the item as a deal must be small. Those that see the item as a rip-off probably purchase alternatives based off of signaling data they feel is valid.

In some cases the utility function map to the same value but in others they do not.

I recently decided to reverse my old policy and start buying brand name clothes. Previously I would ignore brand information and just buy whatever looked like reasonably high quality clothes at a good price.

The problem is that quality matters, for reasons that are difficult to articulate, and I am unable to identify high quality clothes. So I have a closet full of junky no-brand clothing that I'll never wear again.

Sometimes I buy brand clothes and am disappointed, but this happens much less often than with no-brand stuff.

Prestige is always retrospective. It's building on what brought prestige in the past. If you're willing to bet on a new field or a new angle on an old field, and you think learning that (or associating with the up-and-comers) is best served at a less prestigious university, then you have a more complicated choice.

Or you might think an institution is going to lose prestige. Will the Harvard business school continue to be respected?

Personal taste: quality of life is the bottom line, and it isn't that bad even if you aren't at the top. You might be looking for something that isn't offered at the most prestigious institutions.

About those studies of the return for getting into a top university: Do they include the costs of competing to get in?