In a recent spring clean, I stumbled across stacks of notes from my university economics courses, including ones on matrix algebra, 19th-century British farming and dissertation data assessing how far company branding could explain car prices. Flicking through, I soon realised that, at best, I might use 10 per cent of the subject knowledge or skills acquired from these courses in my present job. That figure is probably high relative to most other arts graduates.

Yet Tony Blair sees piling up more degrees as crucial to our future prosperity. Not satisfied that his own 50 per cent target has been hit, the former prime minister thinks UK governments should aim for 70 per cent attending university by 2040, supposedly to boost productivity and compete with South Korea and Japan.

The theory is seductive. If education really builds job-specific or transferable skills that make us more productive workers, then why not encourage that investment for more people? Blair’s team believes that a government effort to increase university participation could boost GDP by almost 5 per cent by solving skills shortages as people obtain better jobs.

Unfortunately, experience suggests this is unlikely. Since 1990, university participation has surged from 20 per cent to 53 per cent, yet annual productivity growth has more than halved since 2000 compared with the previous three decades. Blairites retort that growth would have been slower still without our graduate boom, but the evidence hardly screams that university expansions will solve our productivity malaise.

The idea that encouraging those unsure about attending university into higher education will solve significant skills deficiencies is intuitively unlikely. Research by the Institute for Fiscal Studies has found that a fifth of overall graduates already would have been financially better off not going to university, while just under half of recent graduates now find themselves working in non-graduate roles.

Will the government suddenly be able to create talented software engineers of those who even today spurn university? Or is it more likely that this target would create pressure to enrol students in low-quality courses to obtain degrees they don’t need? Already employers bemoan that graduates have qualifications but lack basic numeracy and literacy skills. The net discounted returns of university for those in creative arts and language courses are near zero, at best, with even graduates in lower-tier universities for subjects such as law and economics seeing slim payoffs.

Where, then, does the idea come from that ever more enrollments in higher education will benefit students and the economy? The instinct is to look at the large gross lifetime earnings premium of £240,000 for men and £140,000 for women and assume it is a market signal that skills acquired while an undergraduate improve one’s productivity. But Bryan Caplan, the American economist, provides another explanation: that employers pay more for a degree not because of your algebra or essay-writing skills but because the certificate sends a signal about you — that you are smart, hard-working and conformist, all desirable traits for most jobs.

The signalling theory helps to explain some education puzzles, such as why people who attend universities but never sit exams have smaller wage premiums, despite learning the material. It tends to upset both those who believe that education is about “learning for learning’s sake” and those who invoke the obvious exceptions of engineering, medicine and law to show how certain skills are essential to jobs.

Yet the implications of the signalling theory to Blair’s policy are devastating. If Caplan is right that at least half of the graduate premium is about certificates showcasing your pre-existing characteristics, then cajoling more people to university waters down the signal’s value.

While attending university may be privately profitable, encouraging more of it through policy in a world of signalling is socially wasteful. It merely escalates the arms race of advanced degree-seeking to obtain a new signal, delaying people from gaining new on-the-job skills needed to work more productively.