The writing on the wall

Many readers may not remember those times — they were probably not even born — when the pen was not just mightier than the sword, but a symbol of status.

Indeed, pens were ubiquitous in pockets. I remember everyone — well, maybe not everyone, but many — carrying at least one. These were mostly fountain pens. The classic brands were Sheaffer, Parker, Cross and Waterman.

The less affluent resorted to Chinese makes that were also a favourite among college students: I remember using the likes of Wing Sung, Doctor and Hero.

But those days are gone. Today feels almost like another era. We rarely see people carrying pens, let alone showing them off. And when they do, it’s usually plain ballpoint pens that have an innate tendency to get lost without causing anything more than minor irritation to their owners.

One argument for fewer pens in pockets today is that technology has rendered them somewhat obsolete. It’s just like fewer people wearing watches. The plethora of smartphones and their vast range of functionalities probably make it unnecessary to carry a pen.

But I contend there’s more to this story.

Recently, I met a friend from IIT Bombay at a conference organised by the Department of Mathematics at Dibrugarh University. I was surprised to see him still carrying a fountain pen in his pocket. When I expressed my surprise, he told me a story.

Once, as a little boy, this friend of mine happened to go the post office near his village in Andhra Pradesh. Just before putting his letter in the mail box, he realised he had not written the pincode. When he then asked the man at the post office for a pen, the latter shot back: “Don’t you go to school? What kind of educated person are you — not even having a pen?” Since that day, some thirty years ago, my friend claims to have never stepped out without a pen in his pocket!

The point I am trying to make is that there was a time when education was highly prized in India. It still is, but the fact is that back then it was a scarcer commodity.

There weren’t many engineers around and overall literacy rates, too, were lower. Besides, the number of job options in pre-liberalised India was limited, making education all the more prized a commodity.

So, the ones who had it flaunted it. And one certain way to do this was to display the pen in the pocket!

This was what economists would call the classic signalling model at work. The basis for it lies in “asymmetric information”.

To explain: In many economic transactions, the parties involved do not possess the same information whether of a quantitative or a qualitative nature. For example, a doctor typically has more information about diseases than a patient.

Similarly, a buyer of a flat under construction is less likely to know of it being delivered on time than the project’s promoter.

But let’s consider a situation more relevant to our purpose. Consider a firm seeking to hire new employees. In this case, the prospective employee is likely to be more aware of his or her abilities than the employer.

Whether it is for a high-skill or low-skill job, the employer cannot simply look at an employee and tell whether he/she will be a good or a bad worker. The employee, on the other hand, knows how good or bad he/she is.

This, then, creates information asymmetry, which the market mechanism cannot ordinarily resolve. The problem for the employer is that both the good and bad workers will pretend they are good workers.

It was Michael Spence, winner of the Nobel Prize for economics in 2001, who first proposed the notion of signalling. In a classic 1973 paper, he showed how education could act as an effective signalling device in the job market prone to information asymmetry. By acquiring more education, even if not relevant to the job at hand, a prospective employee could suggest to the employer that she was a person of higher ability.

Education, in fact, satisfies all the characteristics of a good signal. First, it comes at a cost enough to discourage those with lower ability. Since education is costly in terms of money, time and effort, only those with the appropriate ability will invest in acquiring higher education. Second, it is verifiable since you can furnish a degree to prove it.

This is one reason why firms look in your resume for how much education you have. They also check out from where you have got your degrees. Thus, having an IIT degree signals higher ability than a non-IIT degree.

Further, it is well documented that people tend to seek more education during economic downturns.

When jobs are hard to find, you basically want to signal that you are the one with better abilities. How? By accumulating more degrees.

Hence in the pre-liberalisation days, when education was scarcer and mattered more for finding jobs and status, carrying a pen in the pocket was a signalling device to show oneself as belonging to the educated class.

Of course, this raises a question: What stopped the less educated from mimicking by keeping pens in their pocket? The answer is that while carrying a pen in the pocket may not be a costly signal, the person’s credentials were still verifiable simply by talking to him or her. Incidentally, signalling is rife in the animal kingdom. For peacocks a brighter plumage signals that they will be better mates. The peahen by comparison is rather dowdy looking.

Signalling is only one way to solve the asymmetric information problem. While potential employees may resort to it, employers also have other means to make their selection. That includes interviews and exams that form a part of the selection process to sort out the grain from the chaff. Economists call this screening.

But screening is costly, with the costs borne by the employer. On the other hand, signalling imposes costs on potential employees. In practice, the labour market looks for a reasonable mix of the two — signalling and screening.

Now back to why pens in pockets are no longer ubiquitous. Well, it could be because the post-liberalisation Indian economy values not just Saraswati (education), but also Lakshmi (money).

Hence, the signalling devices have changed. We flaunt our smartphones — this is a sign both of our education and our wealth!

What does this mean for the humble pen? Since it has ceased to be a signalling tool, the pen has been reduced to its basic functionality — a writing instrument. No wonder, even if people do carry one, they confine themselves to just plain ballpoint pens, that too purely for writing purposes.

The writer teaches microeconomics and game theory at Louisiana State University

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