We mostly learn by doing, yet school mostly replaced apprenticeships as a form of learning.
One reason why schools replaced hands-on learning is that apprenticeship is suitable for smithing and weaving, but modern work is mental and needs dedicated training inside the classroom. However, this answer is false as many knowledge positions need some apprenticeship. For example, doctors must complete a residency, lawyers need to article, and grad school for scientists is really an apprenticeship.
Teaching students in a classroom is cheaper than training them on the job, which can be very costly.
However, apprenticeship suffers from credible commitment - the master wants cheap labour, and the apprentice wants to learn. But if the apprentice learns too quickly, he can take his knowledge and leave, robbing the master of his payment. The master may also drag out the apprenticeship to retain cheap labour.
Education serves two purposes:
If an apprenticeship is costly, it makes sense to only focus on top applicants. A school could serve to filter students who can learn the best. However, signalling also increases competition. Students may go deeper into debt to get an MA so that they can gain an edge over the competition.
While formal apprenticeship programs have declined, learning by doing has not. For example, how much of what you do now was learned on the job compared to in school? Yet, schools get most of the credit for knowledge gained.
Most people still learn their jobs by training under experienced practitioners, from plumbers to particle physicists. This means that our mode of learning hasn't changed in modern times, but we often don't recognise it.
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