It's All Signalling
But signalling isn't enough
If you know me well, you should know these about me:
I like samosas. Nay, I love samosas.
I initiate conversations defending the existence of veg biryani.
I like economics. I almost never stop thinking about the world from this lens.
My life mantra is: “It’s all signalling”.
“It’s all Signalling” was the first name for this Substack, before I settled on its current name. As members of society, we interact with many individuals, day after day. We may read and like a strangers’ post on the internet, go out with friends and have tea from a tea seller, or go out on a date with someone. Each of these activities require some degree of coordination and communication with other individuals, but hardly ever is it explicit.
Liking a person’s post tells them that I either approve, agree or find it interesting. Having tea with a friend tells them that you value the friendship and the time you spend with them. Buying tea tells the tea seller that you like their tea, and you have a demand for it. Holding hands with a person on a date might tell you that they are interested in you.
This, in economics, are broadly the ideas of “signalling” and “revealed preferences”. Signalling in economics refers to the idea that one person in an interaction (exchange) conveys meaningful information about themselves to another person through their actions or choices, which the other person does not have access to otherwise. In the examples discussed above, this information is your preferences (what you like, or what you value), which is considered revealed through your actions.
We don’t always explicitly convey our preferences. We hope that our actions can signal them for us.
Some time ago, Bryan Caplan shared an email he received from someone on the spectrum:
“My brain would come up with reasons for why even if they DID like me, it was irrational for them to do so because of opportunity cost, and that they should really go somewhere else, that I was scamming them by just being around them…
The big breakthrough that other people actually genuinely LIKED me came after I went to an Effective Altruism meetup. Someone heard that I had these feelings and also that I'm a fan of economics, so they brought up "revealed preferences.” If I see someone spend hours and lots of money on movies, I don't think they are mistaken about their enjoyment of movies, so why should I think differently about someone spending their time on me?”
Understanding the concept of revealed preferences can be very helpful. It gives us valuable information. Which can reduce uncertainty. But sometimes, signalling through revealed preferences isn’t enough.
I was reminded of this today while reading Amit Varma’s brilliant post, Tell Me You Love Me. Amit asks why it is difficult for one male friend to say to another, “I Love You”?
People you’re close with, you may have your own language. Many things don’t need to be said, but they are understood. But it is important to remember that signals are not enough.
Assuming goodwill, signals can still be ambiguous or imprecise. There can be a weak relationship between the signal and underlying message. Or, there may be multiple potential signals and messages. Maybe the other person completely fails to pick up on the signal. I tackled this problem to some extent in a previous piece on disentangling inferences from changes in prices or preferences.
Even with people you’re very close with, sometimes, it is helpful to be more explicit with your communication. I’ve learnt the importance of doing this a bit more recently. The point largely is more intentionality of it.
The effort made in the communication itself can be an important signal for the other person.
I love the little story about when Amit told Ajay that he loved him, Ajay responded with “:-) yes”. And Amit writes about it:
“In the moment, of course, I made the excuse for him that as an economist, he would argue that his revealed preferences made words irrelevant.”
Now that's a good signal of a friend (Amit saying that for Ajay, haha!)
Maybe my new mantra for life is: “It’s all signalling, but signalling isn’t enough (sometimes).”