Jul 24, 2009

Signaling: Politics, labor markets, and the human nature.

We should start the analysis by establishing a realistic assumption mostly never considered: perfect information doesn’t exist. Although the information gap between the employer and the employee, between a presidents and its people and between a couple can be minimized if one party sends a signal to the other party to reveal unknown information.

Obviously, there are different aspects we should consider about the it: can the signal really be trusted?

The process is simple; I have certain set of skills, certain knowledge, or certain feelings, which you don’t know I posses. So in order to avoid misjudgments I signal them thru diplomas, speeches and gifts. Doing this, we reduce the information gap and ensure a different treatment for ourselves because this signal we sent should set us apart from the others.

Now that the process of signaling is quite clear, it’s time to identify different situation where the signaling often takes place. As the title of the article mentions, we will talk about politics, labor markets and social relationships.

The president of any given country represents it people, so, to remain being president his actions and speeches should send empathic signals to the people: if people are concern about the gas prices or the health care, he must let them know he is aware of such condition and actions have taken place.

Can the action of any politician be trusted, if they serve their own interest, yet act as they care about a country?

There are hundreds of CV sent for any job application. Many of which comply with the basic job requirements, those that doesn’t, by exceeding it, are very likely to be hired. So the candidates must signal these exceeding abilities or knowledge in order to attain their goals.

The many books about HRM are great guides on how to receive these signal, understand them, and more important, how to verify them.

The information gaps between any supplier and buyer force us to signal somehow these that sets us apart. But we must be cautious enough to understand the reasons behind any signal and the reliability of the information given, because for each pound we give out, our human nature will hide 3 pounds.

So each time we applause someone’s actions, stop one second and think, what is being hidden?

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