wedrifid comments on What Is Signaling, Really? - Less Wrong
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Possibly a side issue, but one motivation for signalling occurs when measurement is difficult for some reason e.g. regulation.
Giving prospective employees an IQ test can be quite hazardous for the employer. http://en.wikipedia.org/wiki/Intelligence_and_public_policy
Spending $50,000 on college - and incurring toxic student debt in the process - to prove something that can be demonstrated by a $500 test seems strange, in the absence of other factors. Particularly when colleges use a near-IQ test (SAT) as one important criterion for admission!
College degrees are better signals for conscientiousness than intelligence, which is no coincidence, since employers in real life care more about conscientiousness.
Both those things are true but much of that could well be coincidental. Mechanisms for the distribution of prestige, status and affiliation are not always sane from the perspective of the system.