Microeconomics, Module 10: “Knowledge and Information” (Chapter 9)

Homework

(The attached PDF file has better formatting.)

Professional Education

Landsburg explains who gains and who loses from college education, and why employers desire applicants with BA’s, even if the knowledge learned in college is not useful.

Apply Landsburg’s reasoning to actuarial education, answering the following:

A.    Are the years spent studying for the actuary exams the most productive use of time? (The exams may be more useful for a business career than liberal arts college courses; are they the most efficient way to teach the needed information?)
B.    Why are the exams expensive to employers? (Exam costs and study time are minor; the major cost is the high turnover rate of candidates who do not complete the exams. Examine the cost of training new actuarial applicants and the loss to the employer if a high percentage of applicants do not continue.)
C.    Why do most employers support the actuarial exam system? (What do they gain? Examine the value of the exams in selecting industrious and loyal employees.)
D.    How do successful candidates benefit from the exams? (Examine the salaries paid to Fellows compared to salaries paid to other workers without post-college training.)
E.    Who loses the most from the actuarial exam system? (What is the value of exam study to candidates who do not continue with the actuarial career? Is this a social waste?)

{There is no correct answer to this homework assignment. Read carefully Landsburg’s discussion of college education and apply his reasoning to the actuarial exams.)

I'm not sure I understand what Part A is asking:

Are the years spent studying for the actuary exams the most productive use of time? (The exams may be more useful for a business career than liberal arts college courses; are they the most efficient way to teach the needed information?)

Do you mean MOST productive, as compared with all other uses for time? Clearly, they aren't a productive use of time for people without the ability or inclination to become actuaries. For those that could become actuaries, they could probably learn the necessary information more effectively other ways, but without the exams they can't work anyway. Are we just supposed to talk about signalling here (i.e. even if you don't learn anything by studying, it still signals to potential employers that you are smart/hard working enough)?

[NEAS: The last sentence of the first paragraph is correct, not the first sentence. Apply Landsburg's concept of signaling to actuarial exams. As the homework says, there is no correct answer here. The exams combine work skills with signaling, and it is hard to determine how much is each part.]