In economic theory, “signaling” is an action one party takes that has, superficially, no plausible economic explanation. The reason the action is undertaken isn’t because the action itself is helpful, but because the action transmits important information to a second actor.
So, for instance, the entire field of higher education is essentially a big production in signaling, with students paying lots of money to achieve-not because a college education is worth anything as a good, but because the students hope that the the credential will signal value to potential employers. You don’t pay $200K for a bachelor’s in history from Williams because the class on colonial oppression in West Africa is worth the price of a house. You pay it because you hope that Goldman Sachs sees a Williams diploma as proof of intelligence and will want to hire you.
