Well.. In my experience #2 would be far more likely to be the arrogant one and more likely to be doing things in a way that can only be described as "wrong", only because that's how he has always done things. He might be a better investment, in that he does have experience, but #1 has an education which will start becoming a serious advantage as soon as he starts gaining experience. On the other hand, he's probably more likely to switch jobs, than the older one.
Sometimes true, sometimes not, in many cases the older more experienced one will have been humbled by some experiences that the younger one has yet to encounter.

And yes, the younger one will most likely change jobs looking for that better deal. (more than once in most cases)

Many years ago I was fired from a job for refusing to subordinate to a child. (OK she was 22 I was somewhere around 30) That experience knocked my arrogance level down quite a bit.

Later on I did hire a college student, he was great and I learned a lot from him, in fact that was the point behind hiring him in the first place, So I could "steal" the college information for a lot less than going myself, Joe and I are still friends to this day. (I traded my experience for his education, we both reaped the benefits)

However something does have to be said about the growing number of "older" college students enrolling over the last couple decades. Again, that is most likely someone looking to better their value in the career of choice.
then either seek a pay raise or change jobs..

If the older one is "dead set" in their ways, they most likely start a new company of their own, and either succeed or fail miserably, depending on their desire to learn and apply the knowledge gained along the way.

A former colleague once told me that if you can swallow your pride, and admit that one person cannot do everything, that to truly succeed, hire others that specialize in what you cannot do yourself.

After a few years, he'll have both.
Indisputably correct.. But around here, most employers are not willing to wait that few years for the "student" to "season" into the professional.

Not necessarily. The teachers we have, are not just teachers, they also conduct R&D and really are more than just reciters of textbooks. They've pretty much written those textbooks. The tests we have (and all of them aren't really tests in the traditional sense) do not rely on the student's ability to memorize facts, they actually test whether or not you understand and are able to apply the knowledge you have gained.
Again indisputable, it is known that some of the finest universities are located in Europe, now I know why...

They don't have much in common, really. Both book smarts and experience are about learning, but intelligence can't really be learned, it's a separate concept. And wisdom is the ability to apply the knowledge you have, whether it's learned through reading or learned through experience.
Again so very true, Never thought about that so thoroughly...

I am still to this day making payments for my oldest daughters college "education" so she can work part time at minimum wage doing something completely unrelated to what I sent her to the institute in Pittsburgh for.

Along this journey of life, I have met some intelligent people who struggle to tie their own shoes, and met some "dumb" people who hold patents.

Application of the gray matter located inside ones skull is a choice we either consciously or unconsciously make ourselves.

Stefan, Your level of intellect exceeds your years...