This is apparently rational at a single level of analysis (at least if you take the stereotypical sociopathic corporation stance and don't care about the waste

This is apparently rational at a single level of analysis (at least if you take the stereotypical sociopathic corporation stance and don't care about the waste of life involved - I understand some people do think like this, though I'm mildly surprised to see someone admit to it on HN). It breaks down as soon as you step the analysis up to the next level and remember you're not the only employer in the world. People who have pieces of paper with high numbers on them and are actually good, can easily find jobs. Which, unless you are Google or Fog Creek, probably means they already have jobs. Very few employers get to cherry-pick from all the world, those candidates with the highest perceived desirability. The vast majority will be looking at applications from candidates whose perceived desirability was slightly lower. The question you should ask yourself is, would you rather hire someone whose perceived desirability was slightly lower because of the lack of a piece of paper with high numbers on it, or because of actual inability to do the job?