Sunday, June 01, 2008


I finally finished the latest EconTalk with Robin Hanson on signaling. The best description I can give it is "non-linear and interesting." I enjoy thinking about signaling because it makes you think hard about how markets work, if for no other reason than to debunk the signaling explanation.

One interesting discussion in the podcast was when Roberts and Hanson ask why, if you take a date out to an expensive dinner to signal your prosperity, you do not just show them a bank statement instead? If they answered this in the podcast, I missed it, which is possible because the discussion seemed to lack path dependence. It seems like it has a simple explanation:
  1. A bank statement signals wealth, but not your propensity to spend it on your new potential mate.
  2. A bank statement does not send as much information about future wealth as an expensive meal does, which you must pay off on your next credit card bill.
By the way, EconTalk receives the TPS Seal of Approval.

1 comment:

Matt E. Ryan said...

I like #1, not as much #2 (though I think the idea has some merit...perhaps that you have good credit? When people worry about the financial security of a potential mate, are they worrying one month down the line or years down the line?). Perhaps simply showing a bank statement signals a lack of modesty, a desirable trait in itself.