Yes, the signaling effect only works for those who don’t much value the social good. If someone is overinvesting in costly signaling then there must be some form of social good they don’t value (namely the welfare of the other people who are engaged in the signaling game). If you align these negative externalities perfectly with the positive externalities you create, then everything works out perfectly (and this is obvious to observers). Otherwise, you are counting on the person not much preferring the beneficiaries of the charity to the losers from the signaling game. That’s often going to fail in the conspicuous philanthropy case, and I’m not sure how to make an alternative that comes closer.
Of course as long as the conspicuous philanthropy is not the absolute most effective philanthropy for the signaler then you could in principle just scale up the signaling costs appropriately. But this introduces lots of extra problems, since by giving you are then mostly signaling that you like charity.
Yes, the signaling effect only works for those who don’t much value the social good. If someone is overinvesting in costly signaling then there must be some form of social good they don’t value (namely the welfare of the other people who are engaged in the signaling game). If you align these negative externalities perfectly with the positive externalities you create, then everything works out perfectly (and this is obvious to observers). Otherwise, you are counting on the person not much preferring the beneficiaries of the charity to the losers from the signaling game. That’s often going to fail in the conspicuous philanthropy case, and I’m not sure how to make an alternative that comes closer.
Of course as long as the conspicuous philanthropy is not the absolute most effective philanthropy for the signaler then you could in principle just scale up the signaling costs appropriately. But this introduces lots of extra problems, since by giving you are then mostly signaling that you like charity.