Costly signaling

The economic principle, formalized by Michael Spence in 1973, that a signal only conveys real information to the extent it is costly to produce — a job applicant's effort, a metal's scarcity, a grade's difficulty to earn. Cheapen the cost of producing the signal without cheapening the underlying quality it was supposed to indicate, and the signal stops working: employers, buyers, or institutions can no longer sort on it. This is the structural twin, in labor and credentialing markets, of Szabo's unforgeable-cost-of-production account of monetary value — the same law, read once through money and once through hiring.

References

• claim-llm-collapse-of-costly-writing-signal-cuts-meritocratic-hiring · claim-generative-ai-availability-compresses-university-grade-distributions