There is without
doubt a fascination in many to look or appear beautiful or handsome. They want
to score one up over their family members or friends or those in the social
circle. There is no doubt an attraction towards spending on beauty products
like cosmetics or dresses. There is further an attraction towards owning latest
electronic gadgets, a keen inclination to own a car or at least a two wheeler,
an innate desire to own house preferably in an upmarket belt, a tendency to
possess and wear jewellery different from the rest. All these are instances
which one observes around them in everyday life. To some it might be a
necessity, to some it might be an aspiration, to others it might be fulfilment
of desire to square up with their prospective rivals so as to speak. Yet in
each of these actions or movements towards those actions, underlies a concept
that is innate to economics. While as perceived from outside, economics might
appear abstract, but as the explanation for these phenomenon unravels, the
hidden hand of economics is more than visible.
Certain business
professions demand ownership of a car and higher brands in particular. Whether it
is about a doctor or a lawyer or a businessman or an architect, car becomes a
kind of status symbol. Yet this symbol is not about showing up but indicating
certain signals to the prospective clients. Let us assume a doctor keeps coming
to his clinic walking or in a public transport. The signal he or she conveys
would perhaps be of poor business. Any outsider would wonder why the doctor doesn’t
own a car. The conclusion what one might derive would be he or she doesn’t have
sufficient clients and thus earnings are relatively poor. Clients are
relatively few because the doctor does not seem efficient. Similar conclusions
can be derived about lawyers or architects etc. Therefore to demonstrate they
are competent and have enough clients and therefore earn well, they need to
convey a signal to the prospective clients. Therefore, ownership of a car and
high end one in particular becomes a sort of indispensable. This however might
not apply let us say to a professor. To a professor, it is the publications and
the research output alongside the teaching skills that become essential for
prosperity. External signals like car or house ownership might not indicate
much. Therefore, their method of conveying signals would obviously be knowledge
related and niche circles rather than a public signal.
Dress maketh a
man or as so the saying goes. Humans spend enough on dresses and the way they
look. Again, it is economics at work. In each human agent, there is an
inclination to look different. There is a desire to outperform someone else. There
thus arises a need to stand out in the crowd. This is possible when one looks
different and thus gets noticed. It is virtually a perfect competition wherein,
the agent looks towards creation of differentiation. This is where the dress
comes into picture. The dress conveys signals about the human agent and his or
her standing. Expensive and attractive dress might indicate they are affluent and
thus convey different signals. To professionals like businessmen, this becomes
critical as clients perhaps judge their tendency or their affluence through the
dress. Apparently, at some level, the dress also conveys the affluence in the
family. It is considered a bad custom to boast about oneself. Therefore in a
world of information asymmetry, there has to exist methods that are indirect
and yet convey the prosperity levels of a family or a social group. The dress
what one wears conveys this.
In addition to
dress, the jewellery one wears or the accessories one carries with also perform
the similar task. The fascination for women towards jewellery is not merely to
look beautiful but to convey to their neighbours, social circles and family
circles about the earnings of their family. It is a virtual arms race with each
one trying outperform or outshow the other. The resultant outcome might be a
prisoner’s dilemma, yet in absence of that, the signals do not convey their
standing and hence might suffer in some ways in the social standing. While prisoner’s
dilemma might entail certain costs without being better off, yet they perhaps
think a way to be individually better off than the other.
The business of
beauty industry too functions on a similar paradigm. If the humans did not care
about their beauty, the industry would have been dead or non-existent. Yet for
ages, humans have more than competed to appear themselves as more beautiful or
handsome than the others. Again it is the question of the arms race. In a crowd
resembling a perfect competition, the only way to stand out is to
differentiate. The differentiation thus comes through appearing beautiful or
handsome. One has to get noticed and only someone appearing different gets
noticed. Therefore, though an outcome might lead to prisoner’s dilemma, people
still spend large amount of money on their appearance through looks, jewellery
and other accessories, dress, travel mode among others.
The same
principle can be further extended to ownership of durables. As one seeks to own
the latest iPhone, or in pursuit of an electronic home, it is about conveying something
about the family to the rest of the crowd. If someone owns the gadgets it would
indicate their prosperity level. Since they cannot reveal directly, they have
to look towards indirect means of revealing. Thus these durables and their
ownership come in handy.
As such, economic
agents want to reveal about themselves, about their competency, talent,
attraction, and like. They want to demonstrate they are one-up over the others.
Yet it cannot be demonstrated directly. There thus has to be created methods
that convey the same information indirectly. These methods are primarily
signals intended to convey something of desirable in them. This leads to an
inclination to appear different. The outcome of a pursuit of sustained
differentiation is the manifestation of such signals as illustrated above.
Contrary to perception, these have nothing to do with human greed nor anything about
religion nor above professional demands. These are essentially embedded in signalling
theory seeking the conveyance of the intended signal in a universe of
information asymmetry. The costs might be a prisoner’s dilemma as indicated
above or a commodity trap. But the costs of not conveying those signals is
perhaps higher. Thus the signals.
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