ARE WE DEVOTING our time and money to things that are important to us—or are our actions driven by what we want others to think? This sort of signaling is often associated with conspicuous consumption. Folks may buy the big house and the luxury sedan because they imagine these possessions will make them happier. But they might also do so to signal their financial success to others. This is one of the downsides of a society where we don’t openly talk about how much we earn and how much wealth we’ve amassed. Instead, we telegraph our success by spending money—which, ironically, leaves us poorer.
But signaling isn’t always so crassly materialistic. Our neighbors might buy an electric car to show their concern for the environment—a purchase that skeptics might dub “virtue signaling.” Our colleagues might tell us they slept all weekend, so we realize how hard they work. Our in-laws might mention the opera they attended, so we appreciate how cultured they are.
We’re all trying to present an image of ourselves to the world, and we do so with the money we spend, the activities we pursue and the anecdotes about our life that we choose to tell. Even when examining our own life, it’s hard to know why we do what we do—whether these are things we truly enjoy or whether they’re part of the image we’re manufacturing for others.
Arguably, it doesn’t much matter: Even if we don’t enjoy going to museums, we might enjoy telling others about our museum visits—and get ample satisfaction from their improved opinion of us. Of course, there’s a risk that these efforts at signaling may backfire, and that our friends may think we’re poseurs.
From a financial standpoint, none of this much matters, provided we can afford the image we’re seeking to project. Not saving enough for retirement and your other goals? Perhaps you need a less costly way to signal your self-image.
Next: Human Capital
Previous: Hedonic Treadmill
Article: Calling the Shots