Gazelles sometimes stot or pronk, that is they jump straight up on all four legs instead of run away, when pursued by a lion. The theory behind this is that they are signalling to the lion, effectively saying “hey dude, I’m healthy – I can jump over a metre high – go chase someone else.”
This is an example of larger signalling theory that looks at communication between individuals. (In the above example, you can think of it as an interspecies communication.)
Honest and dishonest signals
One aspect of signalling theory is determining whether a signal is honest or dishonest. For example, a gazelle wouldn’t be able to jump straight up if seriously injured. Bench-pressing a heavy weight is an honest signal of strength – you can’t fake it.
Driving around in a Lamborghini Gallardo may be seen as an honest signal of wealth. Then again, the driver could just be a lackey taking it to the car wash – or perhaps the driver sold his house and is in debt on the repayments. It could well be a dishonest signal.
Conspicuous consumption and the handicap principle
You can take these example a little further when applied to humans with the delightfully named conspicuous consumption - spending wealth on luxury goods is not really for the sake of the luxury good, but rather as a signal to others that you have the wealth to do so. It’s a public display of wealth – probably for the sake of status. As an aside, folk have even proposed a luxury tax on such consumption.
Thorstein Veblen proposed this in his book The Theory of the Leisure Class – together with other terms like conspicuous leisure – here’s a nice quote that sums this up: “Time is consumed non-productively … as an evidence of pecuniary ability to afford a life of idleness”
There’s a whole game-theoretic side to signalling theory, some of which you can find in the handicap principle, which proposes that honest signals must be costly to produce and send (they’re handicaps) – and looks at the evolutionary conditions for such a system.
In everyday life
Perhaps this explains, to some degree, why my neighbour drives that big car he does, why that woman buys her Louis Vuitton bag, and why some of my Twitter network do nothing other than retweet famous people. Perhaps they’re all signalling something – in this case status (either via wealth or association).
I’m sure it’s a little more complex (who you signal to is probably limited to those within your social class, close to yourself in the social hierarchy) – but nevertheless, I hope you agree that it’s fascinating stuff.