Signaling, stereotypes, humor

I am fascinated by the concept of signaling, a concept too little discussed. Tyler Cowen and Alex Tabarok have a video in their economic series discussing signaling.


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From Wikipedia's article on signaling.

In contract theory, signalling (or signaling; see spelling differences) is the idea that one party (termed the agent) credibly conveys some information about itself to another party (the principal). For example, in Michael Spence's job-market signalling model, (potential) employees send a signal about their ability level to the employer by acquiring education credentials. The informational value of the credential comes from the fact that the employer believes the credential is positively correlated with having greater ability and difficult for low ability employees to obtain. Thus the credential enables the employer to reliably distinguish low ability workers from high ability workers.

Signaling is often used in the context where there is asymmetric information. One party knows something that the other does not or cannot know. In the video, they use the example that Hyundai was able to overcome their prior reputation for poor quality by offering a 10 year/100,000 mile warranty, signaling to customers that Hyundai quality was improved sufficiently to make it worthwhile offering such a warranty.

I was at the Apple store the other day to replace a dying iPhone. The sales person was pushing hard on the reliability, security and value of the Apple Wallet for making securing digital purchases. I am extremely skeptical of tech company claims about security. The sales person was making claims of extreme security, absolutely no cause for concern, etc. "Is there a financial security guaranty against any hacks?" No. So no matter how much they say they believe in their security, they clearly don't believe in their security. This is a negative signal, or possibly a variant on revealed preference. Then there is, of course, the old adage that actions speak louder than words.

What I don't see often discussed at all is the intersection between intentional signaling and the necessity of reliable stereotypes. Again, from Wikipedia.

In social psychology, a stereotype is any thought widely adopted about specific types of individuals or certain ways of behaving intended to represent the entire group of those individuals or behaviors as a whole. These thoughts or beliefs may or may not accurately reflect reality.

In order for signaling to work, there has to be a reliable stereotype. In order for employers to attach value to a university degree, the group average of performance capability of college graduates has to be higher than the group average of non-graduates. If there is not a real difference in the group averages, then the signal of a sheepskin cannot function.

And, as with all stereotypes, group averages are never a substitute for individual data. Bill Gates may be a college drop-out but his personal income outstrips that of virtually every college graduate.

I see little research about this interplay between signaling and stereotypes. Or the even more intriguing issue of accidental signaling. Inadvertent signaling occurring when you attempt to signal one thing and signal another instead. Trying to signal sophistication by using foreign phrases but accidentally mangling them, for example. Inadvertent signaling can be the source of a lot of humor.