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Growth Comes From Ideas, Not Degrees | Podcast Highlights

Blog Post | Education Spending

Growth Comes From Ideas, Not Degrees | Podcast Highlights

Marian Tupy interviews Bryan Caplan about the relationship between formal education and innovation.

Listen to the podcast or read the full transcript here.

Get The Case Against Education here.

I want to start with a broad question. What is economic growth, and where does it come from?

Economic growth is just change in economic well-being. Usually, we measure it with GDP.

Where does it come from? There are a lot of stories that people tell. Traditionally, people said it comes from capital accumulation and better-quality labor. But when you really go to the numbers, neither of these things can explain anywhere close to the full change, so most growth has got to be from technological progress, broadly defined. That is the main difference between the world of today and the world of 2000 years ago.

In your piece, you distill it to a single word: ideas.

That’s right.

Why is economic growth important?

In any given year, it seems like getting another percentage point of growth couldn’t make much difference. You barely even notice it. And yet, as many people have pointed out, when you compound an extra percentage point of growth per year over the course of 100 years, it’s the difference between poverty and riches. And riches are what allow you to buy free time. Riches are what allow you to buy culture, to save your child from worms.

Right. So economic growth is an increase in wealth, it comes from new ideas, and ultimately, it is highly correlated with things like better infrastructure, better hospitals, and so on.

Absolutely.

What is the purported relationship between education and growth?

The normal view is that education is the crucial determinant of growth, that it turns unskilled humans into the skilled workers of the modern economy. This is an idea not just from politicians, teachers, and the general public, but also from economics. If you take a class in economics, they will constantly talk about how it’s important to have lots of education because that’s how we build human capital.

So, the purported relationship is that education creates human capital, which creates new ideas and thus more growth?

That’s one version. The more common one is simply that education leads to human capital, which immediately leads to growth. The typical college grad isn’t going to invent anything, but they’re capable of being a more valuable cog in the machine.

Right, so the standard inference is that if you have a more educated workforce, they can accomplish more sophisticated tasks. What does the evidence show?

So, I have a book called The Case Against Education, and I’m not going to be coy about this: I expected to find that education was overrated. However, I also expected to find that a lot of other people researching would say they had clear evidence that education raises economic growth.

However, when I read all the mainstream work on education, there was a big debate about “how come we’re not finding what we know to be true, which is that education is the crucial cause of economic growth?” I think that they are finding the truth, which is that education isn’t a factory for building human capital, but a certification machine for stamping people: good worker, great worker, not so great worker. People like to think about education as a way of building skills, but actually, it’s more like a passport to the real training, which happens on the job.

So, by going to university, you are offering your employer a sign that you are intelligent and conscientious enough to do so.

You’re showing intelligence, conscientiousness, and also conformity. There’s no “I” in team. Most jobs require you to follow a chain of command to achieve the goal of the group. While on some level I don’t like conformity, on a deeper level it’s really important for most purposes.

I want to read you something that you wrote. “Contrary to conventional stories about the positive externalities of education, mainstream estimates of education’s national rate of return were consistently below estimates of education’s individual rate of return.”

What does that mean?

Great question.

A rate of return is basically a measure of how good an investment is. So, for example, you might try to calculate the rate of return of putting extra insulation on a house. We can do the same for education and figure out how all the costs of education compare to the payoffs.

When you do this from the point of view of an individual person, it’s pretty common to get a 10 percent inflation-adjusted rate of return. In my book, I say this is probably too high, but you can bring it down to maybe 7 or 8 percent.

We can also think about this at the level of the country. What if we raise the education level of the whole workforce of a country by a year? How much does that enrich the country? What that quote is saying is that even the high estimates of how much a year of education does for a country are typically around half of what it does for an individual. And a lot of the estimates find that sending the whole country to school for an extra year increases national income by 1 or 2 percent.

In other words, a stamp is a good way for one person to get ahead in life, but stamping the whole country does not help that country get ahead; it just creates credential inflation. You need more and more degrees in order to get the same job that your parents and grandparents got with fewer.

Let’s talk a little bit about innovation. Where do new ideas come from? Are we talking about a very small group of individuals who share certain characteristics?

It’s an exaggeration to say that innovation only comes from a few people. There are millions of small-scale improvements coming from many different people. Opening a new kind of restaurant is not revolutionary R&D, but so much of the improvement in our living standards comes from these small acts of entrepreneurship. When I was in high school, there were only three kinds of restaurants: American, Italian, and Chinese. Now we have a cornucopia of different cuisines. The same goes for so many other simple products. Dog collars now come in 100 more varieties than they did back when I was growing up in the ’80s.

However, the really revolutionary stuff—new vaccines, new business models, new forms of energy—comes from very special people. I think it’s reasonable to say that almost all the really big ideas are coming out of the top sliver of the IQ distribution. There was a psychologist named Lewis Terman in California who, I believe, in the 1920s, saw that there was a standardized test administered to all the kids in the state of California school system. He managed to get data on the top hundred scorers in the whole state of California in that year, and he followed them through life. In his honor, these kids are named the termites, and there’s been a lot of research on them.

While the vast majority of this group didn’t do anything really impressive, they had many times, maybe a thousand times, the normal rate of stellar success. So, just doing these kinds of tests is a good way of identifying the most promising people. At a minimum, just have a system where you basically let children advance as rapidly as they’re capable of. A lot of very intelligent people feel very isolated from their own age group, and it makes sense just to advance them as far as their talent will take them.

I have a personal view, which is that our society is very open to the idea of the STEM prodigy, but we are very closed to the idea of there being a prodigy in, say, history. And I think that there are history prodigies. I have met kids with not just a broad, but a deep understanding of history by the time they’re 13 or 14. People think it’s crazy to put them in a PhD program in history when they’re 14 years old, but I don’t. Why not skip that kid ahead and let him become a star? Look, maybe he wants to be a regular 12-year-old even though he is a genius, but maybe he doesn’t. Maybe he wants to be with a peer group of geniuses. Let’s pave the way for him if that’s what he wants.

Do you think that AI will allow us to continue innovating if the population starts declining?

There was a long period where people working on AI kept over-promising and under-delivering. I would personally hear extravagant claims and check them out and find that they weren’t true. Finally, about two years ago, they started being correct. I was as shocked as anyone. I actually have a bet out about AI, which I’m probably going to lose. It’s embarrassing because I have otherwise a perfect public betting record.

That said, one incredible achievement does not mean that they’re going to have a whole series of incredible achievements. And there’s a lot to the idea that AI is basically just amazing at compiling what has already been said rather than truly coming up with new stuff. While it’s not impossible for it to get better, a lot better, it’s also not guaranteed.

Another thing worth pointing out is that we’ve had, by many measures, falling rates of innovation despite a rising population. There’s an idea that we’ve already discovered a lot of the low-hanging fruit, and so we need to keep multiplying our efforts to maintain the same rate of growth. Another plausible story is that we have doubled the number of people that we call researchers, but really only the best ones count, and the other ones are kind of fake.

Given that much of the money we spend on education is spent poorly or even counterproductively, what should we do with the money instead?

I’m totally on board with giving it back to the taxpayers or just paying down the national debt. We badly need austerity. We are driving at 100 miles per hour towards a brick wall, but there’s still time to change course and get our foot on the brakes. One of the easiest ways of doing that is by spending less on education.

Is education more useful in the developing world?

Poor countries have a severe problem with teachers even showing up. They, on paper, have many years of education—I think Haiti now is around where France was in 1960—but mostly they are just throwing money at a corrupt system that doesn’t even teach basic literacy and numeracy. The way that people in the third world are learning to use technology is the way that almost all normal people learn anything, which is by doing.

It seems to me that we are doing the exact opposite. We are keeping people in the education system for many years, which could prevent them from starting to work and learning by doing.

Yeah. It would be much better if people started adult life at an earlier age. They’re totally ready for it. There’s no reason why 13- or 14-year-olds should not be working. One of the best ways to get kids to actually learn stuff, especially the kids who hate school, is to make it practical. They need to see concrete results and make money.

If you read biographies or autobiographies of people in earlier eras, it is amazing how far people got at young ages. By the age of 15, Malcolm X had worked four different jobs and been all over the country. Many people listen to me and say, “Oh, that’s so dystopian.” I think the system we have now is dystopian, where someone has to sit in a classroom until they’re 30 listening to some boring windbag talk about things he doesn’t even know how to do.

Banco Bilbao Vizcaya Argentaria | Charity & Aid

1.1 Million Mexicans Lifted Out of Poverty Thanks to Remittances

“During the first nine months of 2025, remittances to Mexico totaled 45,681 million, 5.5% less than the 48,360 million received during the same period in 2024.

Despite this decrease, remittances increased in several states in the central-southern region during the first nine months of the year, notably Chiapas (+1.2%), Oaxaca (+2.0%), Puebla (+1.9%), Guerrero (+4.2%), Veracruz (+0.9%), and Morelos (+1.3%).

1.1 million people in Mexico have been lifted out of multidimensional poverty thanks to remittance transfers. If remittance income is not included in the 2024 measurement, the population living in poverty in Mexico would increase from 38.5 million to 39.6 million people.”

From Banco Bilbao Vizcaya Argentaria.

Blog Post | Pollution

From Waste to Wealth: the Alchemy of Innovation

Environmental challenges can be transformed into economic opportunities.

Summary: Scientists and engineers are finding ways to turn pollution and waste into valuable resources. From recovering fertilizer from toxic lakes to creating biodegradable packaging from farm residues, innovation is transforming environmental problems into opportunities for growth. By reimagining waste as a resource, we can make the planet cleaner while fueling new industries and jobs.


Every summer, toxic algae blooms turn Lake Erie and other US lakes into a green soup, threatening drinking water for millions. Every year, American farmers burn millions of pounds of grain stalks after harvest. And every day, Americans throw away enough packing peanuts to fill an Olympic swimming pool. What if I told you that each of these waste streams could become valuable resources—and that the solutions are emerging from university laboratories right now?

We stand at a unique moment in history. For the first time, we possess the scientific tools to transform our most pressing environmental challenges into economic opportunities. The numbers tell a compelling story. According to the World Bank’s “What a Waste 2.0” report, global waste is projected to rise by 70 percent, from 2.01 billion tons today to 3.4 billion tons in 2050. Yet, the circular economy, or using waste productively to create wealth, could unlock $4.5 trillion in economic benefits by 2030. The question isn’t whether we can afford to innovate—it’s whether we can afford not to.

Three Breakthrough Innovations from North Dakota

The convergence of nanotechnology, materials science, and biotechnology has created unprecedented possibilities for environmental remediation. In a laboratory at North Dakota State University, my research team is developing three innovations that exemplify this waste-to-wealth transformation:

  1. Calcium peroxide nanoparticles that absorb phosphates from polluted lakes and convert them into sustainable fertilizer
  2. Flax-fiber composites that transform agricultural waste into biodegradable packaging materials
  3. Starch-based foam alternatives that replace petroleum-based packing peanuts with compostable materials

These aren’t pie-in-the-sky concepts. They’re practical solutions that could scale from our Fargo lab benches to global implementation within a decade. Here’s how each one works—and why they matter.

Turning Lake Poison into Farm Food

Over 500 “dead zones” now plague our planet’s bodies of water, with the number doubling every decade since the 1960s. These oxygen-depleted areas, caused primarily by phosphate runoff from agriculture, cost the United States $2.4 billion annually in economic losses. The 2014 Toledo water crisis, which left half a million people without access to drinking water for three days, was just a preview of what may come unless we act.

Here’s where nanotechnology can change the game. At our NDSU lab, we’re developing calcium peroxide nanoparticles—imagine particles 5,000-times smaller than the width of a human hair—that act as molecular sponges for phosphate pollution. When deployed in eutrophic (nutrient-rich) lakes, these nanoparticles serve a dual purpose that borders on alchemy: First, they absorb phosphates from the water with an efficiency 500-times greater than conventional materials; second, they slowly release oxygen over 30 days, breathing life back into suffocating bodies of water.

But here’s the truly exquisite part: Those absorbed phosphates don’t disappear. Our research team harvests them to create sustainable fertilizer. Consider the irony—the very phosphates that are killing our lakes came from fertilizer runoff, and now we’re capturing them to make new fertilizer. It’s the circular economy in its purest form.

The timing couldn’t be more perfect. The global phosphate fertilizer market, currently valued at $72 billion, is facing a sustainability crisis. Morocco controls 70 percent of the world’s phosphate rock reserves, and at current extraction rates, most of these reserves will be depleted within a century. By recovering phosphates from water pollution, we’re not just cleaning lakes, we’re securing agriculture’s future. Our preliminary calculations suggest that phosphate recovery from US agricultural runoff alone could replace 15 percent of imported phosphate fertilizer, saving farmers billions while restoring water quality.

From Farm Waste to Amazon Packages

The second innovation transforms an agricultural nuisance into packaging gold. North Dakota grows 90,000 acres of flax annually, primarily for the valuable oil in its seeds. But after harvest, millions of pounds of stalks are typically burned or buried, a waste of remarkably strong natural fibers that have been used for over 30,000 years for textiles, food, paper, and medicine.

At our NDSU lab, we’re extracting these fibers and mixing them with biodegradable polymer matrices to create packaging materials that rival petroleum-based plastics in performance while completely biodegrading in three to six months. The resulting composite materials achieve tensile strengths of 50–70 megapascals—stronger than many conventional plastics—using 35 percent less energy to produce.

The market is hungry for such solutions. The biodegradable packaging sector is experiencing rapid growth, projected to reach $922 billion by 2034. More important, consumers are voting with their wallets: 82 percent say they’ll pay premiums for sustainable packaging, and 39 percent have already switched brands for better environmental practices. Major corporations aren’t waiting. Dell already uses mushroom-based packaging grown on agricultural waste, while IKEA has committed millions of dollars to eliminate polystyrene entirely.

North Dakota sits on a gold mine of opportunity. The state’s two million acres of various crops produce enormous volumes of agricultural residue. By viewing these stalks, husks, and shells not as waste but as industrial feedstock, North Dakota could become a hub for sustainable packaging materials. A single processing facility could create 200 rural jobs while generating $50 million in annual revenue from materials currently worth nothing.

Replacing Satan’s Snowflakes

The third innovation addresses what some environmentalists refer to as “Satan’s snowflakes”—namely, those infuriating polystyrene packing peanuts that seem to multiply in your garage and never decompose. Americans generate enough polystyrene waste to circle the Earth in a chain of coffee cups every four months. This material persists for 500 to one million years, breaking into microplastics that contaminate our food chain.

In our NDSU lab, we’re developing starch-based foam alternatives using corn, wheat, and potatoes, all crops that North Dakota grows in abundance. These “bio-peanuts” dissolve completely in water, compost within 90 days, and require just 12 percent of the energy needed to produce traditional polystyrene. They even eliminate the static cling that makes unpacking electronics feel like wrestling an electric eel.

The economics are compelling. Companies such as electronics retailer Crutchfield report saving $70,000 to $120,000 annually in freight costs after switching to lighter, bio-based packing materials. With 11 states and 250 cities already banning polystyrene foam, and the European Union implementing strict regulations on single-use plastics, the market for alternatives isn’t only growing, it’s becoming mandatory.

Perhaps the most profound impact is psychological. Every online purchase delivered with biodegradable packing materials sends a message: Modern conveniences can be maintained without mortgaging the environment. While a small victory, such progress is building momentum for larger, more significant changes.

The Scaling Potential: From Lab to Global Impact

The opportunity is enormous: If just 10 percent of US agricultural waste were converted to packaging materials, it would replace 33 million tons of petroleum-based plastics annually. If our phosphate recovery technology were deployed in the 100 most-polluted lakes globally, it could recover enough phosphorus to fertilize five million acres of farmland while restoring recreational value worth $10 billion.

These aren’t distant possibilities—our NDSU innovations are progressing through the typical stages: proof of concept, pilot testing, demonstrations, and commercialization. We’re currently in pilot testing, with plans for field demonstrations next year. Industry partners have expressed strong interest, particularly from agricultural cooperatives seeking value-added opportunities for crop residues.

Innovation Beats Despair: Lessons from Environmental History

Some critics might ask, “Aren’t these solutions just Band-Aids on the gaping wound of industrial civilization?” Such a question, however, misses the profound lesson of environmental history. Every major pollution crisis we’ve faced, from London’s killer smog to acid rain and the ozone hole, seemed insurmountable until human ingenuity proved otherwise.

Consider the track record. Since 1970, the United States has reduced major air pollutants by 78 percent while increasing gross domestic product by 321 percent. The Montreal Protocol has eliminated 99 percent of ozone-depleting substances, saving approximately two million people from skin cancer each year. Acid rain, once predicted to cost $6 billion annually to address, was solved for less than $2 billion per year. These victories weren’t achieved by abandoning modern life but by making modernity cleaner and more efficient.

The same patterns are emerging in clean technology. Solar panel costs have plummeted 90 percent in the past decade. Renewable energy is often among the lowest-cost power sources, especially when comparing marginal generation costs. When accounting for storage or backup needs, however, total system costs can vary by region and grid mix. Battery prices have decreased by 97 percent over the past 30 years. Each follows Wright’s Law—costs decline predictably as production scales. Our NDSU waste-to-resource innovations will follow similar trajectories.

The investment community recognizes this potential. Clean technology attracted $1.8 trillion in investments globally in 2023, surpassing fossil fuel investments for the first time. The bioeconomy, currently valued at $4 trillion, is projected to reach $30 trillion by 2050. These aren’t charitable donations, but rather hard-nosed bets on profitable technologies that happen to benefit the planet.

From Lab Bench to Marketplace

Numerous university spin-offs have traveled the well-worn path from laboratory to marketplace. Companies such as Membrion (ceramic membranes developed at the University of Washington) and Integricote (nanocoatings developed at the University of Houston) demonstrate that academic innovations can achieve commercial success while addressing environmental challenges.

The Optimistic Imperative

The waste crises facing our generation are real and urgent—but so is our capacity to transform them into opportunities for prosperity. The toxic algae choking our lakes could become tomorrow’s sustainable fertilizer. The agricultural waste burning in our fields could become the packaging protecting tomorrow’s e-commerce deliveries. The petroleum-based foams polluting our oceans could be replaced by materials that harmlessly dissolve back into the earth.

This transformation, however, won’t happen automatically. It requires continued investment in research, supportive policies that incentivize innovation over incineration, and entrepreneurs willing to scale laboratory successes into industrial realities. The trajectory is clear: Waste is becoming wealth, pollution is becoming profit, and environmental restoration is becoming economic opportunity.

From my lab bench in Fargo, I see a future in which every environmental challenge sparks a thousand innovative solutions, every waste stream becomes a value stream, and the same human ingenuity that created these problems engineers their solutions. That’s human progress at its finest.

Center for Global Development | Poverty Rates

Latin American Poverty Drops by Nearly Half in 20 Years

“Poverty in the region [of Latin America] has dropped by nearly half over the past 20 years, from 58 percent in 2003 to 30 percent in 2023, equivalent to a decline of 28 percentage points (Figure 5A). Argentina, Chile, the Dominican Republic, and Brazil have experienced the most significant reductions in poverty during this period, with decreases between 31 and 61 percentage points. The trend is downward in all but three countries. In Guatemala and Honduras, poverty has remained roughly constant over the available data period. Venezuela is the only country where poverty has increased overall, from 65 to 71 percent during this period.”

From Center for Global Development.

World Bank | Poverty Rates

Tajikistan’s Remarkable Poverty Reduction over past Decade

“Over the past decade, Tajikistan has achieved a remarkable poverty reduction, with the national poverty rate dropping from 56 percent in 2010 to just below 20 percent in 2024.

During the same period, the share of middle-class households — defined as those living on more than $15 per person a day — quadrupled from 8 to 33 percent, signaling profound improvements in living standards.”

From World Bank.