I enjoyed this post.

It also hints at the notion of signaling equilibria. Consider the Helen of Troy example - this is clearly not an equilibrium, because Helen ends up marrying a bankrupt. Soon "spends lots of money on diamonds" will no longer be a signal of wealth, but will instead be a signal of profligacy - as indeed it is where I live. A man walking around in flashy jewellery would be considered low-class, presumably because in the past there has been exactly this signaling reversal.

In a stable signaling equilibrium, the signal needs to be hard-to-fake. This is why easy-to-fake signals are unstable - in the flowers example, the proles can and will catch on, and switch to the upper-middle-class flowers, so the upper-middle-class have to keep moving to stay ahead of them. The same phenomenon is seen in baby names, where upper-middle-class names become prole after a generation.

One thing I would have preferred is a discussion of the positive externalities of signaling, not just the negative ones. For example, if Yvain and lukeprog are both trying to signal their superior intelligence by writing insightful posts, this may get into an "arms race" for them, losing utility. However, the Lesswrong community gains utility overall. I think the externalities of signaling are generally positive in the real world, they only tend to be negative in what are anyway zero-sum games (e.g. begging).