At the beginning of the seventies a biologist called Amotz Zahavi, a professor of zoology at Tel Aviv University started examining the question that has puzzled scientists from Darwin on: why do animals, in terms of energy consumption, often behave in wasteful ways? Why do peacocks have bushy tails which only hinder their movement through the natural environment? Why do gazelles, at the sight of a lion, not run away, but start to jump high into the air?
Zahavi developed a theory according to which the seemingly irrational and wasteful behavior has no meaning in itself, but functions as a message (signal, sign). With its high leaps the gazelle is telling the lion that it is healthy and strong, so that any attempt to catch it would be useless. The lion would need more energy to catch it, than if it decided to look for another animal, less agile and fast. Similarly, a peacock with its bushy tail informs its potential mates that its genes and physical condition are excellent; otherwise, it would not have been able to grow such a magnificent tail.
Which signals can be trusted?
But why would animals “tell truth” with these signals? Would it not be most convenient for every living being to boast and show itself in the best light possible in order to survive? Could an animal gain anything at all by “telling the truth”? How can sincere communication be established among living beings in nature when there is a conflict of interests between the sender and the receiver of information?
According to the theory developed by Zahavi, and independently by several economic theorists, the solution to the problem of trustworthy communication lies in the high costs of creating such signals. Zahavi claims that the very fact that animals have to invest such amounts of energy into creating these signals is of key importance. It is exactly because producing these signals in the natural environment seems to be an irrational waste of energy that they can be acknowledged as genuine and not deceiving in the eyes of the receiver. If every signal has a certain price and if the creation of false signals is in average and in the long term more costly than the creation of true signals, it simply does not pay to lie.
Drawing from sports, Zahavi named his hypothesis the handicap principle. The energy-wasting signals function as a sort of an additional difficulty which guarantees that messages are truly genuine and not false. The peacock’s tail is the perfect example of such a “handicap” or energy-wasting signal. The purpose of the bushy tail is to communicate to potential female mates what they cannot perceive directly. Maintaining a lustrous, bushy tail requires a great amount of energy, which only strong and healthy males can afford to spare. Sickly and weak peacocks would be so exhausted by such an investment that they would not be able to reap its benefits. They have to direct all of their energy into survival alone and have no extra energy left to invest into luxury goods such as a bushy tail.
Another important fact is that peacocks can not benefit from lying in the long term. Investing in a tail requires such an expenditure of energy that it is better for them to hope to succeed with one of the females without growing a bushy tail. It might be that they are only weak one year and will be able to grow a magnificent year by the next, but for the time being it is of foremost importance to survive until that time. It is because of its high energy cost that a bushy and colorful tail makes a good indicator of a peacock’s condition which would have otherwise remained hidden from the females.
Biologists discovered similar communicative signs in birds. The chicks in the nest can be very loud when they are hungry, because their feeding depends on what their parents bring them. The dilemma a bird parent faces is how to know which of the little beaks is really in the greatest need of the worm it had just brought to the nest. Is it the chick that chirps the loudest? If the chicks had no natural enemies in their surroundings, the bird parent could not be sure whether the loudest chick is also the hungriest. As the loud calling can also attract enemies, the chick, once fed, is better off not making any more noise which could cost it dearly in the wilderness where it is threatened by other animal species.
Why it makes sense to tax luxury goods
Similar conclusions as those made by zoologists, who studied animal behavior in the wilderness, were also reached by economists. People also like to invest in goods which are not really necessary for their survival. It was already in the eighteenth century that Adam Smith realized that people are very fond of displaying their wealth, while they tend to conceal their poverty. However, he did not (yet) think of displaying wealth as of a status symbol, but formulated the theory that people prefer to identify with happiness rather than with misery, so it made sense to show off wealth and hide poverty.
A more modern point of view was adopted in the middle of the nineteenth century by John Stuart Mill who perceived luxury goods as a status symbol and suggested that they be taxed. As people do not buy expensive things because they need them, but to show how well they are doing, their price naturally does not correlate with their usefulness. In Mill’s opinion that is why it is only proper that the government makes these items even more expensive by imposing taxes. “When we do not buy an object for its practical purpose but for its high price, lowering the price does not make any sense … nobody really pays the tax for such an item. Taxing these goods is ideal; this way, the state treasury fills up without costing anybody anything.”
If wealth was once no more than a sign of an individual’s success, it gradually became a value in itself. At the end of the nineteenth century, the economist and sociologist Thorstein Veblen analyzed the ways in which people exhibit their wealth in his book The Theory of the Leisure Class. At first, the mark of a well-off individual was that he did not have to work in order to survive. Having plenty of spare time to dedicate to leisure activities was a good indicator that a person was wealthy.
As an example of displaying an abundance of spare time he also stated excessive education which he contrasted with education aimed at developing the skills to perform real, practical tasks. Like in sports, excessive education aimed at learning unimportant skills was not much more than an exhibition of the abundance of spare time.
On the subject of spare time it should also be mentioned that modern science started to develop in these very wealthy circles, because someone who researched only to guarantee his survival could not be entirely credible. A trustworthy scientist could only be someone who researched for pleasure in his own spare time, not having to rely on his work to support his family. Scholars who were employed at universities received money for teaching and not for research. This belief remained unchanged until the nineteenth century, when being a scientist became a profession like any other.
What is an education good for?
The theory of education as a signal was perfected by the economist Michael Spence and earned him a Nobel Prize in Economics in 2001. While Veblen defended the claim that higher education was a signal of belonging to the work-free social class, Spense developed a theory according to which the level of education is primarily a signal to potential employers, conveying information about the characteristics of an individual which would otherwise be impossible to perceive. In 1973 he published a mathematical model of the employment market based on the level of education as a signal which, much like a peacock’s tail, communicates the otherwise unperceivable characteristics of an individual.
In a simplified version of this model there are two sorts of people on the employment market: in group A there are the highly productive workers, and in group B there are the less productive workers. However, an employer can not evaluate in advance whether the potential employee is a group A or a group B worker. In his original model Spence does not take into consideration that additional education would directly increase the worker’s productivity. The essential question is why would potential workers in this model educate themselves at all, and why employees would give higher salaries to more educated people?
With his analysis, Spence demonstrated that the level of education can be a good indicator of the type of worker. Much like in the case of the peacock’s tail a degree or a doctorate which requires a considerable effort and the investment of a great amount of energy in average functions as a credible signal indicating the potential productivity of an individual. However, let it be pointed out once again that, at least in this simple model, education has no practical significance and in itself does not increase the productivity of an individual. It is only a signal aimed at the employee, which is in most cases trustworthy. For the less productive group B, investing in additional education which would guarantee them a higher salary has no sense, because they would have to invest more in doing so than they could gain by having it. That is why education, according to this model of the employment market, is as trustworthy a signal for employers, as the high leaping of a gazelle in front of a lion or the peacock’s proud exhibition of its magnificent tail.
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