Signaling Theory…or why the hardest bit is getting past the secretary

Good Heavens! For more than forty years I have been speaking prose without knowing it…Mr Jourdain in Molière’s Le Bourgeois Gentilhomme

To survive, animals need to show their strength, express their desire to mate and warn others of danger and sources of food. Humans, more than any other species, go through great lengths to affirm their position in society. The rich consume conspicuous goods to distinguish themselves from the poor, companies offer dividends and engage in costly advertising to inform about their profitability, suitors spend long hours on the phone and treat their chosen ones with expensive presents while professors reduce time spent with students to show that they are busy working on funded projects! One often witnesses and even practises signaling, without knowing it! Thankfully, Economics provides us with the tools to articulate the blindingly obvious.

Doom-and-Gloom Economics

The purchasing power of workers has never been so low…prices will escalate as the economy dips into recession…globalisation will soon grind to a halt as oil prices hit record levels…local firms ought to import goods from India and Madagascar rather than from Australia and Europe to prevent the Mauritian Rupee from falling – a lead column in a local newspaper

No other discipline attracts the kinds of authoritative comments from non-specialists like Economics does. And few actually listen to what serious economists have to say. Surprisingly, the most amazing insights are to be had from those who don’t claim to know much about Economics.