Ezra Klein and Paul Krugman are having a friendly argument about hipster topknots and tattoos (full disclosure: I played an indirect role in the prehistory of this debate). As Krugman noted in an earlier post, this seems like a trivial topic to argue about. However, it actually touches on important questions of communication in economic theory.
Tattoos and topknots are forms of signalling
Krugman is a Nobel Prize-winning economist, and his ideas about tattoos and topknots stem from game theory, a set of mathematical arguments developed by economists about how human beings interact in strategic situations. In certain games, you may not be sure about the type of actor you are playing with (e.g., you may not know if she will respond positively if you make a concession to her), and other actors may not know which type of actor you are either. In these games, actors can send signals to each other to communicate their type (for instance, to say “I am a nice person — if you trust me, I will behave in a trustworthy way”).
Krugman and Klein both agree that tattoos and topknots are signals of this kind, but disagree about what is being signalled. For Krugman, tattoos and topknots are ways of signaling that you are not interested in conventional jobs, since many employers will find them unattractive. For Klein, tattoos and topknots are ways of signaling that you are interested in conventional jobs, but only of the right, creative kind. You’re also signaling to people around you that you’re well paid enough to be a hipster living in Brooklyn, but you’re still unconventional (for conformist values of unconventionality) and cool.
However, tattoos and topknots are different kinds of signals
For most relevant purposes, game theorists think that signals should be costlyif they are going to provide real information about the type of actor that you are. Anyone can claim that they’re honest, whether they are or not. If you really want to demonstrate your honesty to others, you are best advised to take some visible and costly action which a dishonest person would be unlikely to take (being honest, for example, in some situation where your short-term self-interest might lead you to cheat). This kind of signal will be much more credible to others.
Read the full piece at The Washington Post.