Favourable selection at the beach

Have you wondered why people look better in bikinis than in clothing? Wonder no more!

The other day, sitting on St Kilda beach, I got looking at all the pretty people. You are all aware I am an amazingly handsome man, with fully sick pectorals, and a washboard stomach; despite these (genetic) advantages, my Irish skin (which happily alternates between pink and white) had me keep my shirt on. I was able to resist taking my shirt off, in part, because the slightly more handsome men around me (who had that Mediterranean skin my kiddies will) would make me look ugly by comparison. I'm way to vain to be comparatively ugly.

A central idea in economics, credited to Akerlof (1970), is `adverse selection'. It states that when information about the quality of a good is known only by its seller, buyers will be prepared to pay only for the average quality. This leads sellers of superior goods to withdraw their goods from sale, lowering the average quality, and so the price buyers are willing to pay, ad infinitum.

`Favourable selection' then, is the inverse, and I believe, the reason for the beach being a damn sexy place.

Let's say we start with a warm day, and the average population at the beach. There are pretty people, and there are ugly people. The pretty people feel good (for they are pretty), and the ugly people feel less confident (for they are ugly).

The next warm day comes along, and everyone considers going to the beach. But, the ugly people remember last time--the beach made them feel ugly--and so choose to stay at home. This time, the average quality of the people increases, and people who felt good last time (for being less ugly than the truly ugly people) now feel ugly. This bunch stays at home next time, raising the quality again, and again, and again.

Hey presto, and St Kilda beach becomes a sample of the most tanned, buff, Goose-in-Top-Gun-looking people in the human population, while the ugly stay at home playing PS3.
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From a policy perspective, this presents a problem, as the beach ceases to be a public good, and becomes effectively excludable (even if the ugly exclude themselves)--there is a transfer of welfare (use of the beach) from the ugly to the pretty.

Do we have any ideas on how to correct this market failure?