Steve Omohundro on Costly Signalling

This year’s Edge question is, what scientific term or concept ought to be more widely known? Here’s a bit from Steve Omohundro’s entry on Costly Signalling.

If something doesn’t make sense, your go-to hypothesis should be “costly signalling.” The core idea is more than a century old, but new wrinkles deserve wider exposure. Veblen’s “conspicuous consumption” explained why people lit their cigars with $100 bills as a costly signal of their wealth. Later economists showed that a signal of a hidden trait becomes reliable if the cost of faking it is more than the expected gain. For example, Spence showed that college degrees (even in irrelevant subjects) can reliably signal good future employees because they are too costly for bad employees to obtain.

Darwin said, “The sight of a feather in a peacock’s tail, whenever I gaze at it, makes me sick!” because he couldn’t see its adaptive benefit. It makes perfect sense as a costly signal, however, because the peacock has to be quite fit to survive with a tail like that! Why do strong gazelles waste time and energy “stotting” (jumping vertically) when they see a cheetah? That is a costly signal of their strength and the cheetahs chase after other gazelles. Biologists came to accept the idea only in 1990 and now apply it to signalling between parents and offspring, predator and prey, males and females, siblings, and many other relationships.

Technology is just getting on the bandwagon. The integrity of the cryptocurrency “bitcoin” is maintained by bitcoin “miners” who get paid in bitcoin. The primary deception risk is “sybil attacks,” where a single participant pretends to be many miners in an attempt to subvert the network’s integrity. Bitcoin counters this by requiring miners to solve costly cryptographic puzzles in order to add blocks to the blockchain. Bitcoin mining currently burns up a gigawatt of electricity, which is about a billion dollars a year at US rates. Venezuela is in economic turmoil and some starving citizens are resorting to breaking into zoos to eat the animals. At the same time, enterprising Venezuelan bitcoin miners are using the cheap electricity there to earn $1200 per day. Notice the strangeness of this: By proving they have uselessly burned up precious resources, they cause another country to send them food!

Posted by on January 9th, 2017 at 11:24 am


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