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It's about signals, not reality:

He claims that the goal of fashion is to signal status. So far, so obvious. But low-status people would like to subvert the signal. Therefore, the goal of lower class people is to look like upper class people, and the goal of upper class people is to not look like lower class people.

Signals aren't interpreted the same way by everyone (hence "high-status" and "low-status" are very coarse terms), but anyone actively trying to control the signals they give off through clothing has some idea of how they will be interpreted by those they are seeking to impress.

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