Counterintuitive Facts (18): Why Is More Expensive Waste Paper Worth More?

I. Have you ever wondered: Why buy diamonds for proposals? It's carbon, doesn't hold value and has no practical use. Why do companies insist on Harvard or Tsinghua degrees? The calculus learned in four years of college is never used at work. Why do peacocks drag around tails that are huge, heavy, bright, and easy for predators to spot? In survival terms this is practically suicide.

II. Intuitively, these all seem like massive waste. But to Nobel laureate Michael Spence and biologist Amotz Zahavi: Precisely because they are expensive waste, they are valuable signals. This is called Costly Signaling Theory.

III. The world is full of information asymmetry. You want to tell others: "I'm rich," "I'm smart," "I have good genes."