The Economist summarizes the notion of “information asymmetry” pioneered by George Akerlof and others. Using a used car lot a setting for a thought experiment, Akerlof showed (in a paper published in 1978) that the information asymmetry between buyers and sellers kills the market. Sellers can tell the good cars from the bad, and know if they’ve covered up flaws. Buyers can’t know if they are getting a lemon or a peach, so they bid low. If they could be guaranteed they were getting a peach, they’d be happy to pay more.
It was a new idea to many economists, and they began applying it to other sectors of the economy. Michael Spence looked at “Job Market Signalling.” Firms can’t really know what kind of worker an applicant will be, so applicants collect “gongs, like college degrees.” It’s a decent signal, so long as it takes some work and talent to get a degree.
They make you uncomfortable on purpose. You suspected it. Now you know.