Spence is noted for his job-market signaling model, which inspired research into this branch of contract theory. In this model, employees signal their respective skills to employers by acquiring a certain degree of education, which is costly to them. Employers will pay higher wages to more educated employees, because they know that the proportion of employees with high abilities is higher among the educated ones, as it is less costly for them to acquire education than it is for employees with low abilities. For the model to work, it is not even necessary for education to have any intrinsic value if it can convey information about the sender to the recipient and if the signal is costly. Spence received his middle and high school education at the University of Toronto Schools of the University of Toronto. Spence attended Princeton University as an undergraduate student and graduated summa cum laude with a B.A. in philosophy in 1966, completing a senior thesis titled "Freedom and Determinism". Spence then studied at Magdalen College, University of Oxford as a Rhodes Scholar, and received a B.A./M.A. in mathematics in 1968. Spence then began graduate studies in economics at Harvard University with the support of a Danforth Graduate Fellowship in the fall of 1968. He received a Ph.D. in economics in 1972, completing a dissertation titled "Market signalling" under the supervision of Kenneth Arrow and Thomas C. Schelling. Spence was awarded the David A. Wells Prize for outstanding doctoral dissertation in 1972. He is the Chairman of the Commission on Growth and Development, and a distinguished visiting fellow at the Council on Foreign Relations. Spence joined the faculty of New York University's Stern School of Business on September 1, 2010. He joined the faculty of SDA Bocconi School of Management in Italy in July 2011. He is a senior fellow at Stanford University's Hoover Institution and the Philip H. Knight Professor Emeritus of Management in the Graduate School of Business. Spence is also a Commissioner for the Global Commission on Internet Governance. Additionally, Spence is also a member of the Berggruen Institute's 21st Century Council. He is the author of three books and 50 articles, and has also been a consistent contributor to Project Syndicate, an international newspaper syndicate, since 2008. Among his beliefs are that high-frequency trading should be banned. Spence had both Bill Gates and Steve Ballmer in a graduate-level economics class at Harvard. In a 1999 Fortune interview, however, Gates and Ballmer admitted not attending class and passing only after cramming for four days before the final.
