It's strange that Bryan Caplan doesn't drink; I haven't experienced his work as sobriety-promoting.
Transfer of Learning turned out to be a great book on education, and it forced me revise my educational strategy away from trying to teach critical thinking to trying to teach content. So I read The Case Against Education when it came out, and it was also fantastic. I also watched Caplan's debates and tried to follow the arguments, though the most important critiques required an economics background that I don't have. Eric Hanuschek made a really strong counterargument in one of their debates, but there are no citations in debates, and I was never able to figure out what was going on there. It also seemed like Raj Chetty's work on early teachers affecting adult earnings clashed with the signaling model, but I don't recall seeing that addressed.
My best guess is that Bryan Caplan is right, but not as right as he thinks he is. If I remember correctly, Caplan thinks 80% of education is signalling after accounting for ability bias. If I had to bet money, I'd say it's closer to 60% signalling. Even 60% signalling is depressingly high, and if I had read The Case Against Education in graduate school I would never have specialized in teaching and pursued a career at a community college. Same thing goes for Freddie deBoer's The Cult of Smart, which I've almost finished.
That said, having a tenure-track position at a community college is great fun. The pay isn't high, but the freedom is immense, and most of my work is so enjoyable that I'd do it even if I were independently wealthy and didn't need a job. Scott once wrote about going to an effective altruism conference and avoiding the 80,000 hours people after their analysis on medicine being low-impact. To an extent I feel the same way, but in my case it's mixed with a low-agreeability dose of "Fuck it, I'm not going back to work at Burger King."
I also think it's possible to do good work in education even if 60% of education is signalling. Most of my students are pre-nursing, and every semester I try to improve my courses by focusing more on major issues in healthcare. I just finished the first half of a project designed to address an issue the nursing faculty are encountering with their students, and I feel great about it. My biased guess is that my own classes are about 25% signalling, and each semester I work to push that percentage down.
For policy, I think we should divert the tax revenues spent on higher education into universal health care or a basic income. But I don't see that one fitting through the Overton window anytime soon. I'll enjoy my job until it does.