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The Hidden Cost of Getting Noticed
Research quantifies the wasted effort people expend trying to stand out.
- By
- September 14, 2026
- CBR - Economics
Starting in high school, if not before, many students launch into what can feel like a never-ending carousel of competition. Standardized tests, have a big hand in determining whether they attend college and where they are accepted. Schools orient their curriculum to prepare students for the exams, and many students put in additional time and money preparing.
These tests are controversial. In the United States, some universities (including the University of Chicago) have stopped requiring test scores of applicants. Others stopped during the COVID-19 pandemic but have reversed course. In India, a dozen students committed suicide and protests erupted after the government canceled and rescheduled a high-stakes exam after some questions leaked online.
Entrance exams are just one example of signaling, the name given by Stanford’s A. Michael Spence, a Nobel laureate, to the phenomenon of trying to stand out. As he explained in landmark 1973 research, some of the time, effort, and expense required to get noticed (and chosen) has the important benefit of building skills that advance economic value. However, some of it makes us neither better nor smarter and adds nothing to overall economic productivity. Chicago Booth’s Alexander P. Frankel and Yale’s Navin Kartik find that this wasted effort represents a sizable cost—one that’s unlikely to disappear soon.
Spence’s insight was that people often undertake costly actions—such as completing exam-preparation courses, attending college, adding certifications, or working long hours—to distinguish themselves from others. Much of that signaling effort helps gatekeepers sort candidates but is otherwise largely performative. The framework did not pin down how much of that signaling effort is wasted, but Frankel and Kartik built a model to quantify this.
In winner-take-all competitions, they demonstrate, signaling waste rises directly with the number of competitors. If just two candidates compete for a single prize, the model implies that half of the total value up for grabs is burned through signaling. Both candidates expend effort to stand out, but only one can win.
As the field grows, the waste climbs rapidly. With 100 contestants, the model predicts, 99 percent of total value is consumed in the competition to distinguish one candidate from another. In effect, as the crowd gets larger, the hidden tax on everyone’s effort approaches 100 percent.
The researchers also uncovered a result that runs against a common instinct about how to fix the problem. When debates flare over testing, credentials, or hiring systems, the usual argument centers on where to set the bar. Some want to lower hurdles and make the process less punishing. Others argue that raising them will discourage wasteful effort and improve sorting.
In Frankel and Kartik’s model, neither approach changes the share of effort that gets wasted, because signaling is about relative position, not absolute effort. The goal is not to work as hard as possible but to do enough to stay just ahead of the next competitor. Think of two law-school applicants preparing for the LSAT: Neither needs to achieve a perfect score, just test well enough to edge out the other.
Higher-ability candidates already have an advantage. It takes them relatively less effort to produce a stronger signal than weaker rivals. When a gatekeeper changes the signal required of everyone, candidates adjust their effort until they once again sit just ahead of the next competitor. The amount of effort needed to maintain that separation changes, but the overall share of value burned in the process does not. The race simply resets at a different level of effort.
Changing the stakes works differently but leads to the same result. A bigger prize induces more signaling effort, but also raises what everyone is competing for in equal measure, so the share that gets wasted stays the same.
What does matter, however, is how unequal the rewards are. When finishing just slightly ahead of rivals brings much larger payoffs—as in winner-take-all environments—the incentive to differentiate yourself becomes stronger, and more effort gets devoted simply to standing out.
Reducing waste, the researchers find, comes down to identifying a more discriminating signal, one that is easier for genuinely high-ability people to produce and harder for weaker candidates to imitate. When it comes to testing, a more meaningful test would be differentially harder, producing results that would make it easier to identify the students who truly have high abilities. “If someone could design a test like that, then our results suggest that it actually would help reduce wasteful test-prep effort,” says Frankel.
In nature, many signals work this way. A peacock’s elaborate tail feathers, for example—an essential signal of health and strength in the mating game—are relatively easy for a healthy bird to grow but much harder for a weaker one.
Designing human signals with that property is hard but not necessarily impossible, says Frankel. The difficulty would depend on the exact subject matter and details of the material being tested. He notes that when it comes to standardized testing, dropping scores or creating an easier exam in serve of fairness, which is often how the debate is framed, wouldn’t actually end systemic inequities. “The problem is that if the test is easier, it’s harder to stand out,” says Frankel. Students will put in just as much effort as before, and potentially more.
The research doesn’t explore what happens when a signal such as testing is taken off the table. Families could end up putting additional effort into other signals, be they from participating in expensive activities or securing hard-to-get internships—and, says Frankel, “another bigger issue is that we would end up losing all the information that the test was giving us.”
But more than 50 years after Spence showed why signaling can burn resources, Frankel and Kartik demonstrate how stubborn that waste may be. Changing the signal or simply increasing the size of the prize does not alter the underlying mechanics. As long as many people compete for prizes that only a few can win, a large share of the effort spent trying to stand out will simply be wasted.
- Alexander P. Frankel and Navin Kartik, “How Wasteful Is Signaling?” Preprint, arXiv, April 2026, arXiv:2601.14454.
- Michael Spence, “Job Market Signaling,” The Quarterly Journal of Economics, August 1973.
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