Categories:
Income Distribution
John Nye writes on this post,
precisely because the West is much richer, positional or status goods are consequently more important. The struggle over status goods can be masked when you have rapid growth and a lot of mobility. But ultimately, middle and upper middle class people DO care more about health care, location of housing, and elite schooling than poorer people.
…So yes, objectively speaking, people are a LOT better off on many dimensions, but people’s utilities are such that status goods and positional goods will make conflicts in periods of stagnation really vicious.
READER COMMENTS
Badger
Oct 16 2011 at 6:34am
The corollary of Nye’s statement is that established positional goods should expect to see increasing contesting. For example, I expect that Harvard degrees will lose reputation in *relative* terms exactly due to the fact that not everybody can study in Harvard. Contesting will arise from the most unexpected places, and will succeed because the majority will want contesters to succeed.
Tracy W
Oct 16 2011 at 8:13am
Is this really true? When I think of history, I tend to think that positional goods were more important in the past – consider for example the detailed status symbols around noble titles in Europe, compared with their relative absence not just in the USA but also in Canada, Australia and NZ, or the detailed caste system in India,
Or how for most of human history fashion was designed to show off that the rich didn’t need to work (eg long fingernails, starched ruffs, massive wigs, wide skirts), but if you look at say Prince William and Kate Middleton’s wedding, everyone there except perhaps the bride were wearing clothes that were more practical. I’d say that positional goods have become less important if anything. Yes, schools and location of housing is important, but if you read 19th century English novels then they were important back then too.
And do the middle class or upper middle class really care more about health care, location of housing, and elite schooling than poorer people if we control for cognitive ability? I can believe that, say, drug addicts, or the continually feckless aren’t that interested, but if someone is poor say because ill health prevents them from working, are they really not going to care about health care, or their kids’ education? This doesn’t match with what I know about my father-in-law.
And do people care about health care because it’s a status good, or because they think it’s important to personal comfort and survival?
John Nye
Oct 16 2011 at 9:28am
I think the best way to see how the traditional middle class is affected by positional goods is to consider the role of housing.
Blue collar workers or lower management don’t like to move. They tend to want to stay in local neighborhoods. But as population and incomes both grow, many traditional areas that were quite affordable will become more expensive faster than the CPI (think areas of New Jersey or California that have become “unaffordable”). Yes, they can do as well materially but it requires relocation.
Also, as the standard of what is “minimal” health care rises, you’ll expect the basic treatments and new medicines and take them for granted but you’ll chafe at the worsening personal service while feeling that your health care hasn’t “risen.” To imagine otherwise, try to offer someone a health package limited to 1980s treatments and meds and see how many workers would balk at that. Offering the new “minimum” doesn’t feel like a vast improvement to many until you threaten to take it away.
I recommend my earlier essay on this:
http://www.econlib.org/library/Columns/Nyepositional.html
Jack
Oct 16 2011 at 6:26pm
Not to suggest delving into armchair sociology, but it seems an important issue is why some workers are willing to relocate while others aren’t. Even with up-and-down escalators, everyone should be able to find a job and a home if they are willing to relocate, perhaps dramatically. Why don’t they? Is it endogenous, that is, are “good” workers also the sort to be more willing to relocate? The positional goods story should, if anything, further encourage workers to relocate. If my situation, absolutely and relatively, worsens quite a bit, I should move somewhere I can get a better job, an affordable home, and greater relative status. Why don’t I?
Steve Sailer
Oct 17 2011 at 2:53am
All else being equal, relocation makes people less happy. It tears them away from family and friends. More subtly, people imprint on certain landscapes, typically around puberty. So, relocation leads to homesickness.
Tracy W
Oct 17 2011 at 6:19am
John Nye, how many people in poor countries need to move, though, for example because of natural disasters, wars, or changing trade patterns (eg shifts in farming practices)? I understand from my history lessons that in cities in medieval times deaths exceeded births, so population levels were only kept up by people moving into the cities. And nowadays the biggest cities are in the 3rd world, so poor people must have been moving to them.
I’ll add that with better air and water quality, and better sewage systems, the incentives to move now are probably less than in the old days. Consider for example the advantages of being upstream of the bulk of London’s population when the sewage systems (such as they were) emptied into the Thames directly.
On the healthcare issue, I think my father-in-law would object as much to being offered only 1980s healthcare as the average rich man. And I don’t think that’s because medical care is a positional good, instead I think people generally want the best quality medical care available in order to increase their own chances of living, and living in better comfort. I know that my own comfort levels during a cold went up drastically with the wide availability of aloe vera tissues, which I don’t recall being available in my local supermarkets in the 1980s. I find it hard to believe that the relative pleasure I derive from blowing my nose for the 100th time that day on something soft and moistourising derives from status effects.
John Nye
Oct 17 2011 at 9:19am
Tracy,
Let me clarify one point. It’s not the aloe vera that’s the status/positional good. It’s the labor based service that becomes more expensive. So if you compare minimum health care in (e.g.) 1980 with 1980 meds, treatments, and service with 2010 meds and service you tend to treat the minimum as the new “zero”. If personal attention, waiting times at the doctor’s, likelihood of good nursing, access to rare cancer treatments, or the likelihood of top surgeons working on you have become costlier or less available, you don’t think “Ok. At least I have aloe vera, newer drugs, and better diagnostics to make up for it.” You just perceive minimal care as getting “worse.” So you have to pay more to get what you might consider “minimal acceptable care.”
In the same way, the best locations will give access to the best jobs and also are more likely to connect you to the people you want to be with but those will get proportionately more expensive.
In that sense positional goods — because of the rising cost of labor and location — still affect those who say that they don’t “care” about status.
As I said, people should first read my longer essays on this.
Jack
Oct 17 2011 at 9:59am
@TracyW, I think the health care issue is one where findings from behavioral economics do stick (I am in general skeptical of that research). Regret aversion for example, probably explains well as you say “people generally want the best quality medical care available”. What-ifs are very powerful in health, but the problem remains of how to pay for health care when its cost increases much faster than do incomes. Even if we suppose Baumol’s cost disease is not a big factor, and that cost increases in fact reflect quality increases, society simply cannot pay for it all. The Canadian answer is health care rationing, which in this light isn’t all that crazy.
Tracy W
Oct 17 2011 at 2:06pm
John Nye – I’ve read your longer essays and I’m still not convinced that positional and status goods are more important now, you haven’t shown me the data to outweigh my impressions that positional goods were more important in the past than they are now. Of course, I don’t have the data to show that you’re definitely wrong, my Bayesian probability is something like I think it’s about 65% more probable that positional and status goods are less important now than in the past.
As for healthcare, well, yes, if they have become costlier or less available then one is worse off. But I don’t think that that is driven by health care being a labour-based service, after all, cosmetic surgery has become cheaper and more available. I think the increased costs are because of third party payments. (And who is this “you” who is perceiving minimal care as getting “worse”? That’s not my experience.) Let’s take your points:
Access to the top surgeons – I think this has gone up with increased wealth, as people can travel now more easily to more specialised areas. Now people are even helicoptored in emergencies to specialised regional centers, so instead of getting a jack-of-all-hands surgeon at your local hospital, you get to see the regional specialist who treats a thousand cases like yours a year, which apparently is important for survival outcomes. As I understand it, medical treatment has moved from there being top surgeons, to there being top surgeons for general areas such as abdominal surgery, to there being top surgeons for much more specialised areas, such as cancers in the stomach, versus hernias intruding on the stomach or cancers in the bowel (I might be wrong about the details). So now we have a lot more top surgeons in each specialised area. So as the number of top surgeons go up, more people overall should have access to them. After all, the royal family could possibly monopolise the top surgeon in the country if there’s only one top surgeon, but there’s a limit to how many ailments any royal personage can have at once, the top surgeon in cancers of the mouth is going to be treating further down the status ladder just to get the experience to maintain their position as top surgeon in cancers of the mouth.
Access to rare cancer treatments: if cancer treatments have a fixed cost component (which seems plausible) then increased wealth means more access to rare cancer treatments as more people with the rare cancer can afford the treatment. And see my previous point about cheaper travel. When my mother-in-law got breast cancer, she travelled to a major regional centre for treatment, rather than staying in her small home town. Again, more prosperity means more resources available for things like maintaining both the homes that people normally live in and apartments for people visiting a specialised regional center.
Likelihood of good nursing: To the extent that there are advantages to specialisation in nursing again I’d expect increased prosperity to increase this, as in access to cancer treatments and top surgeons.
Waiting times at the doctor’s: seem to have fallen since the 1980s, in my experience (UK and NZ), do you have any data on this?
Personal attention: I don’t have any reason to think that that’s changed overall. I mean, it may have gone down, or it may have gone up. Do you have any data?
Of course, if access to all of these has gone down, then yes, in that sense healthcare is worse. But I’m keeping an open mind about whether they have or not. And then, if you’ve shown this, the next step is to show that this is the result of them being labour-based services rather than being driven by cost insulation or alternative explanations.
And, on the best locations giving access to the best jobs, wasn’t that more important when average wages were much lower? A high-paying job is much more important when “low-paying” meant spending 50% of your income on food, in a year with normal harvests. I agree that the best locations will get proportionately more expensive as incomes rise, I just think that getting the best location is less important now than it was 200 years ago (air and water quality is less variable, access to the best jobs is less important when the low-paying job isn’t at subsistence level).
In that sense positional goods — because of the rising cost of labor and location — still affect those who say that they don’t “care” about status.
I’m inclined to agree, I just think that, based on the evidence available to me, that positional goods are less important than they were in the past and that people care less about them. My disagreement is about the direction of the change – the first derivative if you like.
Dan Weber
Oct 17 2011 at 4:05pm
Robin Hanson has talked at length (and demonstrated with good evidence, IMO) about how health care spending is more about signalling than being in better health. People consistently choose the most expensive option and actively don’t care if it’s the best or not.
Tracy W
Oct 18 2011 at 5:22am
Dan Weber – maybe, but the more specialised healthcare is, the greater the relative number of people who can signal that they’ve got their dear-old-mum the best healthcare.
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