It was noticed that those who were in more higher education went on to achieve more success later in life (where success is often more income, but obviously many other things too). Over time some inferred causality from this: clearly the reason why some were successful was because they had a degree or even a masters or PhD. Thus in order to encourage success, it was decided that higher education should be strongly recommended as a means to achieve success.
But what was not considered was that the causality here could be incorrect, instead showing us that people with traits optimized for success in life chose to enroll in higher education to use the additional knowledge and experience as a catalyst for their success (or they just otherwise loved academia or learning).
Due to the extent of which this first hypothesis was treated as a fact, we are left with a system that attempts to reinforce it at many levels of society, ignoring the large cost that it takes.
The causality / endogeneity problems with estimating returns to schooling (due to unobserved individual "ability" variables) have been known to economists if not politicians) since since at least the 1960s, probably even earlier, see e.g. the intro of http://davidcard.berkeley.edu/papers/causal_educ_earnings.pd...
Measuring the true returns of education is impossible, both on the individual level (we can't replay history with alternative choices) and the population level (clean randomisation on education is socially unacceptable), so all we have are approximations and methodological hacks (technical summary in linked summary paper). But such approximations typically found that "ability bias" was not all that large.
Right, but so are parental income and parental achievement.
And last I checked, there is a strong correlation between maternal educational achievement and child educational achievement even after controlling for various things including wealth. The correlation with paternal achievement when controlling for other factors is much lower.
But what was not considered was that the causality here could be incorrect, instead showing us that people with traits optimized for success in life chose to enroll in higher education to use the additional knowledge and experience as a catalyst for their success (or they just otherwise loved academia or learning).
Due to the extent of which this first hypothesis was treated as a fact, we are left with a system that attempts to reinforce it at many levels of society, ignoring the large cost that it takes.