All because of the Joneses
Imagine the scene. You have just taken delivery of a shiny new car. You are over the moon. At last you have replaced its clapped out predecessor, which excelled in unreliability as much as in lack of cool. This one totally looks the business, drives like a dream, and is more comfortable to sit in than your settee.
But what is this you spot from the corner of your eye? Your neighbours, the Joneses, also have a new car? And it’s bigger and shinier than yours? Way to ruin your day. Good thing you’re an animal lover, otherwise you’d definitely give the cat a good kick.
When we’re talking about the irrationality of us, people, then this kind of situation would seem to be a good example. Your new car met all your needs… except, the Joneses have a better one. To work out the value of a car we don’t just look at the practical, material characteristics like boot space, acceleration and reliability, or even at the emotional satisfaction we experience from placing our derrière in the leather seats or from the badge on the bonnet. We also want it to be a car that puts us at least on a par with to that of our colleagues, our friends and indeed our neighbours. The same often applies to homes, holidays, clothes and even education. We have to keep up with the Joneses.
Economists call these positional goods, a term coined by economist Fred Hirsch (coincidentally, I am writing this piece just a couple of miles from the place where he lived until his premature death, aged 46). Hirsch had observed that people are not satisfied with being better off than their parents and grandparents. If everyone is middle class, then nobody is. To be truly middle class, you need to be better off than your neighbours too, and that means acquiring scarce goods that they cannot afford.
This relativity with respect to our peers is quite likely an evolutionary phenomenon. It is not the absolute height of a flower that determines how much sunshine it gets: what matters is that it is taller than the ones surrounding it. To really impress a potential mate, a peacock needs to have a tail that is larger than that of its rivals; to become the leader of the herd, the male elk needs antlers…