Getting ahead of the Joneses

She had read in the “Boudoir Chat” of one of the Sunday papers that the smartest women were using the new pigeon-blood notepaper with white ink; and rather against her mother’s advice she had ordered a large supply, with her monogram in silver. It was a disappointment, therefore, to find that Mrs Fairford wrote on the old-fashioned white sheet, without even a monogram – simply her address and telephone number. It gave Undine rather a poor opinion of Mrs Fairford’s social standing…

– Edith Wharton, “The Custom of the Country”

I was reminded of The Custom of the Country when reading a working paper from INSEAD on Getting Ahead of the Joneses, which looks at whether conspicuous consumption is more or less likely in societies that are fairly equal versus those that are not.

The received wisdom is that in unequal societies, those at the bottom are more likely to feel envious and dissatisfied with their lot, and therefore engage more in conspicuous consumption. Like Undine, in “The Custom of the Country”, they buy products like pigeon-blood notepaper, not because they particularly like those products, but because it increases their perceived social standing (or at least they hope that it does). Arguably, this type of consumption is wasteful, resulting in a never-ending race to the top, where no-one gains without someone else losing.

Pierre Chandon and Nailya Ordabayeva look more closely at the choices facing those at the bottom, and based on studies with individuals, argue that in fact, if a society is made more equal, conspicuous consumption may actually increase. Why? Because in a more equal society, someone at the bottom who cares about their status can achieve a large increase in social standing by choosing to conspicuously consume. If most people use plain white paper, you can easily increase your social position by buying pigeon-blood notepaper instead.

This poses a tricky issue for policy – because it means that reducing income inequality will not necessarily reduce conspicuous consumption. What really needs to change is people’s desire for social status. Which isn’t something you can achieve by progressive taxation alone.

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2 Responses to Getting ahead of the Joneses

  1. Pingback: Can the happiness index makes us happier? | Five Minute Economist's Blog

  2. Jonas says:

    Is such consumption wasteful? I am not sure that assumption is valid. You may choose a particular product among th range of options for any number of reasons. Whether it is status-image, or some other emotional benefit, a connection you feel with a brand’s values, etc. I don’t see any way to distinguish that the selection of one product or type of product is wasteful and the selection of some other product is not, on a societal level.

    On an individual level, such purchases may indeed be wasteful. But the approach to discussing an individual’s choices’ benefits to that individual is quite different to the approach for discussing the societal benefit of certain product selection trends. On an individual level, the approach would be to study if in fact status-enhancing investments actually pay off financially or in other ways (say acceptance to a higher-quality school that may cost the same for example).

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