From TED’s Q&A with Rory Sutherland: Positional Externality

Are you familiar with Robert Frank, The Darwin Economy?

No.

He does a very good thought experiment, which is that you ask yourself, in honesty: “Would you rather live in a society where everybody has a six-bedroom house, but you have a four-bedroom house, or would you rather live in a society where you have a three-bedroom house, and everybody else has a two-bedroom house?”

Most people say, “Well, I’d actually have a three-bedroom house and everybody else has two.” What that’s starting to suggest, is that property, certainly above a certain size, is becoming a positional good, not an intrinsic good, an absolute good. Now, you can take the same question you ask at vacation time, at holiday time, “Would you rather live in a world where you have four weeks off holiday and everybody else has six, or would you rather live in a world where you have three weeks’ holiday and everybody else has two?” Most people say, well, they’re a bit pissed off in the first world, but they say they’d rather have four weeks’ holiday than to have three. So that suggests that holiday time, vacation time, is not a positional good, whereas property size is becoming a positional good.

And those things are very complicated. Cars are both really. Most people who buy an expensive car do, it’s fair to say, derive probably more pleasure from the intrinsic engineering excellence of the thing than they do from making their neighbor feel a bit shit – although it’s complicated.

To what extent is foreign travel positional? You can also go even further and say, well actually to some extent of course, boasting about your lack of need for positional goods is itself a form of positional status-seeking. I mean it’s exactly like self-handicapping in animals where you say basically, “I’m so secure in my status and so successful in other fields, I don’t need a gold Rolex to actually establish my own position.”

(Source: blog.ted.com)

  1. carenvy posted this