From Scott Alexander’s review of Inadequate Equilibria:

Or, to take a ridiculous example from the text that will obviously never happen:

Suppose that there’s a magical tower that only people with IQs of at least 100 and some amount of conscientiousness can enter, and this magical tower slices four years off your lifespan. The natural next thing that happens is that employers start to prefer prospective employees who have proved they can enter the tower, and employers offer these employees higher salaries, or even make entering the tower a condition of being employed at all. The natural next thing that happens is that employers start to demand that prospective employees show a certificate saying that they’ve been inside the tower. This makes everyone want to go to the tower, which enables somebody to set up a fence around the tower and charge hundreds of thousands of dollars to let people in.

Now, fortunately, after Tower One is established and has been running for a while, somebody tries to set up a competing magical tower, Tower Two, that also drains four years of life but charges less money to enter. Unfortunately, there’s a subtle way in which this competing Tower Two is hampered by the same kind of lock-in that prevents a jump from [Facebook to a competing social network]. Initially, all of the smartest people headed to Tower One. Since Tower One had limited room, it started discriminating further among its entrants, only taking the ones that have IQs above the minimum, or who are good at athletics or have rich parents or something. So when Tower Two comes along, the employers still prefer employees from Tower One, which has a more famous reputation. So the smartest people still prefer to apply to Tower One, even though it costs more money. This stabilizes Tower One’s reputation as being the place where the smartest people go.

In other words, the signaling equilibrium is a two-factor market in which the stable point, Tower One, is cemented in place by the individually best choices of two different parts of the system. Employers prefer Tower One because it’s where the smartest people go. Smart employees prefer Tower One because employers will pay them more for going there. If you try dissenting from the system unilaterally, without everyone switching at the same time, then as an employer you end up hiring the less-qualified people from Tower Two, or as an employee, you end up with lower salary offers after you go to Tower Two. So the system is stable as a matter of individual incentives, and stays in place. If you try to set up a cheaper alternative to the whole Tower system, the default thing that happens to you is that people who couldn’t handle the Towers try to go through your new system, and it acquires a reputation for non-prestigious weirdness and incompetence.

Sometimes the towers take more than four years off your life.  For women, sometimes they destroy their chance for family.

Some towers offer a Satanic bargain when you walk in the door.  They will give you your four years of life back–but you have to agree to drink and drug until you can tolerate strangers having sex with you. But this isn’t wildly recognized as a Satanic bargain because Satan is clever.  He doesn’t offer it as a bargain at all.  Instead, there is a cultural expectation that anesthizing yourself like a whore to let your body be used like a whore is the exciting part of Tower Time.  It is as if there were a widespread notion that the best part of receiving riches and power from the devil was the chance to offload your soul.

There are a few niche towers where in exchange for not losing four years of your life you get marriage and maybe a first child.  These are viewed as retrograde and oppressive.

There is a rumor that there used to be a mythic tower where you didn’t lose four years of life if you sought beauty and wisdom.  The employers don’t like the rumor, because if there were another reason to go to the Towers other than getting a good job,  you couldn’t count on the aspirations of Tower alums.  The Towers hate the rumors as a vampire hates garlic.

Continue reading at the original source →