Economics of education

Economics of education treats schooling as an investment: it costs money now and pays returns later, to the individual and to society. But is a degree valuable because it builds skills, or because it merely signals ability to employers? That is the human capital versus signalling debate, and it changes how we judge spending on education. Worked example: if two graduates earn the same, but one studied a demanding course and the other an easy one, human capital theory says the first built more skill; signalling theory says the degree itself did the signalling, whatever was studied.