Friday, May 08, 2015

"Signaling" isn't about signaling

Robin Hanson responds to my Bloomberg View post about signaling.
More generally I call a message “signaling” if it has these features:
  1. It is not sent mainly via the literal meanings of words said.
  2. It is not easily or soon verifiable.
  3. It is mainly about the senders’ personal features, perhaps via association with groups.
  4. It is about sender “quality” dimensions where more is better, so senders want others to believe quality is as high as possible, while others want to assess more accurately. Such qualities are not just unitary, but can include degrees of loyalty to particular allies.
Cheap talk cannot send a message like this; one cannot just say such a thing, one must show it. And since it cannot be verified, one must show it indirectly, via how such features make one more willing or able to do something. And since willingness and ability track costs, these are “costly” signals.
This seems to add a few arbitrary restrictions to the set of things we might try to describe with a Spence-style signaling model. That's perfectly OK (especially since I was complaining about the overuse of the term, not the underuse!). But I think it also makes things a bit more complex than they need to be.

Let's focus on what I think are the three key characteristics of signaling models:

1. The signal must be costly to send for all types.

2. Different types must have different costs to sending the signal.

3. If you take away the cost differential there will be a pooling equilibrium.

The first condition assures us that the asymmetric information imposes costs on the economy; without (1), the model just becomes a truth-telling mechanism. Without (1), you just say which type you are, pay 0 cost, and society knows you're telling the truth.

The second condition creates the separating equilibrium. It means that signaling "works", in terms of revealing people's true types.

The third condition is why you need signaling in the first place. The separating equilibrium isn't first-best (that's guaranteed by condition 1), but it's constrained-optimal. The pooling equilibrium - the thing you avoid by creating the cost differential in (2) - is even worse than the separating equilibrium.

Robin thinks that my example of the hipster moustache is signaling, and explains why:
Let’s distinguish three different kinds of messages I might send with my waxed moustache:  
1) “I have thick shiney (sic) hair.”... 
2) “Hipster is one of my interest areas.”...Technically, this is a “cheap talk” message. 
3) “I am especially devoted to the hipster ethos” or “I especially embody hipster ideals.” That is, I am especially willing to identify myself as a hipster, and my personal features are an especially high quality match to ideal hipster features, including having a creative and contrarian yet attractive and coherent personal style that fits with current hipster fashions. These messages are hard to verify, and the interests of observers and I conflict. While observers want to accurately rank me relative to others, I may want them to estimate me as having maximal devotion and quality. Since verification and cheap talk won’t work here, I have to show, not just say, my messages. 
To show my hipster devotion, I can choose an appearance that is sufficiently off-putting to many people’s work, home, church, etc. associates. By paying the cost of putting off possible associates, I show my devotion to hipsterism. To show my hipster features, I can pay to track hipster fashions and to continually search in the space of possible appearances for a combination that simultaneously reflects current fashions while being creative, coherent, and showing off my best personal features. Not being a hipster, I don’t know how exactly that works for them. But I do know, for example, that since lipstick and tight clothes make some bodies look better while making other bodies look worse, they are costly signals of the quality of lips and body shape. There must be similar factors for showing off hipster qualities.
#3 is why Robin thinks of hipster moustaches as "signaling."

I think it's obvious that hipster moustaches satisfy my condition 2 from above - hipsters definitely pay a lower cost for having hipster moustaches, for a variety of reasons (most importantly, they like the style more than others do).

But do they satisfy my condition 1? Do hipsters pay a net cost for their moustaches? Robin suggests that they do, because the moustaches are "off-putting" to people at work, church, etc. But I doubt that this is, in fact, true. Do hipsters look in the mirror and think "Dang, I wish I didn't have to grow this stupid moustache just to prove I'm a real hipster"? I doubt it. I bet they intrinsically enjoy having the moustaches. This is very different from the experience of someone who has to work hard to get some pointless credential just so he can get a job - i.e., the situation Spence originally suggested.

I also doubt that the moustaches are particularly off-putting to most of the people hipsters want to associate with. Sure, people in some Baptist church in Alabama would be put off if I walked in with a big ol' moustache. But I bet hipsters have no desire to actually go hang out in that Baptist church. Also, I bet they tend to have jobs with people who aren't offended or repulsed by hipster moustaches, because I bet they would really hate the kind of workplace environment where people are repulsed by moustaches. So the mere fact that some people are repulsed by hipster moustaches doesn't mean that hipsters actually pay a cost from that repulsion. In fact, offending those people may give hipsters pleasure.

Next: do hipster moustaches satisfy my condition 3 from above? Are there a bunch of wannabe hipsters who would love to pass themselves off as hipsters if they just didn't have to grow that damn moustache? I doubt it. What non-hipster wants to be a hipster? Maybe a few. Maybe there's some guy out there who really has a thing for hipster girls, and who thinks that they only date hipster guys (False, btw!). But I bet these wannabes are few enough in number that distinguishing themselves from the wannabes is not a huge concern for the hardcore hipsters. (I could be wrong; perhaps America gazes upon envy at the hipster community, bitterly wishing it could be part of the fun!)

Anyway, it's possible that hipster moustaches satisfy all 3 conditions of a true signaling model, but I doubt it. More likely it's just a truth-telling equilibrium.

It also seems likely that much of the fad for labeling non-signaling mechanisms "signaling" is just a nerdy way of insulting countercultures and subcultures. It's a fancy way of saying "Hey hippie, get a haircut!" - of attempting to enforce social conformity by accusing standouts of inauthenticity. But it doesn't really seem to get the economics right, except maybe in a few scattered situations.

(P.S. - If you want mathematical models of conformity, nonconformity, subcultures, hipsters, etc., I would recommend this or this.)


  1. Does this hold for cooperative game theory as well, or just competitive?

  2. zrichellez2:32 PM

    Ah ..those Star Bellied Sneetches.
    I found this an interesting read. Short version: if you are really cool in Silicon Valley the author says you have mastered the art of countersignalling not signalling.

  3. *No* mustache is the costly signal. For non-hipsters, it's not that costly a signal. They would kinda like to don a mustache, but they also really like interacting with the church folk. For hipsters, it's a very costly signal because they really like the look and hate boring church-goers anyway. Non-hipsters choose to forgo their hidden desire to wear a mustache in order to prove to the church folk that they aren't secretly hipsters.

  4. I let my beard grow for a part in a play where I was Igor the assistant to the re creator of Dr. Frankenstein's Monster. The signal was Igor is a dofuss. I have kept the beard because my wife and her woman friends like the look. I am not sure what signal they are returning.

  5. Just because you are willing to pay a cost, that doesn't mean the cost doesn't exist. Maybe they are willing to alienate the Baptist church & maybe they are selecting jobs where they can have their mustaches, but those are still costs. Not a deep cost, but sure. Not to mention opportunity cost-- you could be doing something else instead of grooming-- or the literal cost of mustache trimmers & wax. Same for condition three: sure, lots of people don't want to be hipsters, but some people probably do, but their job or church or whatever presents a barrier.

  6. While this is very interesting, I think the problem is that Hanson - and to a lesser extent you - conflate signalling with costly signalling, wrongly believing that cheap talk can't effect outcomes (strangely, he implies this in nice cheap words...). A good hint to the truth is to look at the picture you posted. The young man doesn't just have a mustache - he has a _hipster_ mustache. Like a poison tree frog, the signal must be made complex so that it is harder to jam. I'll explain with a complex story (with apologies to all for the gender roles within), which you'll see through immediately but is for the other readers of your blog comments.

    Before the law (school) there stand two hangouts, a bookstore and a library. There are two kinds of people in the world, hipsters and Baptists. There are obviously two kinds of equilibrium behaviors for hanging out - one where the hipsters and Baptists are mostly separate (a "separated" equilibrium) and one where they are mostly together (a "babbling" equilibrium). You can draw a simple normal form diagram to cover this situation. Hipster and Baptist girls both prefer to be separate, so that nice baptist girls meet nice baptist boys, and fun hipster girls meet fun hipster boys. Imagine you're a nice baptist girl. If you look at the library and the bookstore, you'll see people and judge which is better for you. Their non-spoken signals help you do that. (You and the other students _can_ talk beforehand to all meet at a particular place, but that's just another - albeit important - layer of costless signalling). At first, hipster boys can display who they are by wearing facial hair and the girls can make their decisions based on that. But that signal can be easily imitated, which creates a risk that we'll fall back into the unpleasantness of mixing hipsters and baptists. The response is to _increase the dimension of the signal_, making it harder to imitate. Over time, facial hair (or bird calls or frog skin color or ...) become very complex and particularized, just as we see above (or on coral snakes or when dogs growl or anytime we read words...).

    In my opinion, cheap talk is actually far more important and extensive than costly signalling, but costly signalling is less intuitive so we devote more brain cells to understanding it.

    Unrelatedly, I think Hanson believes - but I don't think anywhere ever says - that signalling is bad because it prevents you from being your unbiased self (which is, of course, a person astonishingly similar to Robin Hanson). Where he got this belief, I don't know, but it is crazypants.

    As to mordicai's idea that the signal is secretly costly, I don't think he gets what constitutes a "cost" (a cost has to have an effect on the payout). You can tell this is costless by looking at the picture. If the signal was costly, then the signal wouldn't have to be complex, just damaging to the whole goal.

  7. "Are there a bunch of wannabe hipsters who would love to pass themselves off as hipsters if they just didn't have to grow that damn moustache"

    What about the other way around: what if I really like oiled moustache but don't want to be identified as hipster so I forgo it?

    I think this is the case most of the time. Maybe I like to party, and to meet a lot of interesting young people. But the only socially acceptable way to do it is to go to a collage. So I can definitely get up, look at the schedule and say that I really dislike the courses that I have to go through this semester. But I pay the cost just to enjoy the other things.

    As for the whole university education as signaling just one thought: if singnaling is not that important then why people dislike students cheating? If students cheat on exams it means they will not get the knowledge and therefore they will be useless to employers. Supposedly such students will be easily discovered and fired. So people who want to cheat should not even have incentive to go there.

    Compare this to some other situation, like for instance hiring ski instructor. I somehow find it hard to imagine that somebody would pay for ski lessons and then secretly slacked whenever instructor was not looking. It may happen if your spouse or parents forced you to do it. Or it may be a case if you then receive some "Trained in Aspen" certificate that you can hang in your office or whatever.

  8. I have seen these freak economics books in many a place but thought them tabloid like in scholarship essay writing assistance with brains. I have never bought any of them. Maybe Harford will be a better buy.