Bryan Caplan writes:

According to the human capital model, failing (i.e., never knowing) course material should have exactly the same career consequences as forgetting (i.e., no longer knowing) course material.  Either way, you lack the skills – and the labor market should treat you accordingly.

According to the signaling model, in contrast, the consequences of failing and forgetting can totally diverge. When you fail to learn useless material, you send a bad signal.  When you demonstrate mastery of useless material, you send a good signal – whether or not retain what you learned.  Employers naturally snub people who fail, yet smile upon those who merely forget.

Caplan is right on both accounts. But what he neglects to consider is, for instance, employers’ interpretation of the signal. If someone failed their computer science courses, for example, it’s highly unlikely they’ll do well as a computer scientist. On the other hand, if someone studied computer science in undergrad, did quite well, but chose to go into another field upon graduation (and consequently forgot most of what he learned in those CS courses), is that equivalent to the student who failed most of his courses? Absolutely not. Why? Because the person who has mastered the courses previously has a very likely chance of re-learning the material. What’s more, he’ll do so quicker because he has familiarity with the material better than the person who failed.

It comes down to this: in most cases, the person who forgets is a better candidate than the one who failed.