The Economics of Status

They say in Harlan County
There are no neutrals there
You’ll either be a union man
Or a thug for J.H. Blair
Which side are you on?
Which side are you on ...

Some people view the world, at least major parts of it, as a zero sum game where one person gains only to the extent that another loses. Starting with this point of view, it is natural enough to see all disagreements as questions of which side you are on. Do you favor workers or employers, landlords or tenants? The alternative is to see disagreements as not only about how to divide up the pie but about how to change its size. It then becomes not only a question of us vs them but also of our arguments vs their arguments, with some hope that one set of arguments will eventually persuade almost everyone.

These different viewpoints are reflected, in political rhetoric and political thinking, in the difference between relative and absolute measures. If we define the poor as the bottom ten percent of the income distribution we can be confident that they will always be with us. If we define the poor by the real income of the tenth percentile as of the US in1900 the problem of poverty has been solved for developed countries, since the number of people in them with incomes that low is now close to zero.

Economists mostly reject the zero sum point of view since they routinely deal with issues of how to expand the size of the pie, how to increase economic efficiency. One plausible criticism of their approach is that although economists may care only about absolute outcomes people care also, and a care lot, about relative ones. How much one employee is paid is often less important to him than how his pay compares with that of other employees. Robert Frank, an original and interesting economist, has written a whole book (Choosing the Right Pond) on incorporating the fact that people care about relative status into economics.

It seems obvious that, if one’s concern is status rather than real income, we are in a zero sum game, that if my status increases relative to yours, yours must have decreased relative to mine. That point of view seems to support the approach to politics that sees it mainly as a question of who gets to benefit at the expense of whom, of which side who is on.

Like many things that seem obvious, this one is false. It is true that my status is relative to yours. It does not, oddly enough, follow that if my status is higher than yours, yours must be lower than mine, or that if my status increases someone else’s must decrease. Status is not, in fact, a zero sum game.

This point was originally made clear to me when I was an undergraduate at Harvard and realized that Harvard had, in at least one interesting way, the perfect social system: Everyone at the top of his own ladder. The small minority of students passionately interested in drama knew that they were the important people at the university; everyone else was there to provide them with an audience. The small minority passionately interested in politics knew that they were the important ones; their friends were there to be herded into meetings of the Young Republicans and Young Democrats in order to get them elected to positions in those organizations that were the stepping stones to further political success. The small minority ... .

I exaggerate; no doubt there were some students who regarded themselves as at the bottom. But what was clear from that experience was that status was not a simple objective ordering on which everyone agrees. We all value status. But what matters to me is my status as I perceive it and as it is perceived by people important to me; what matters to you is your status as you perceive it and as it is perceived by people important to you. Since each of us has his own system of values and his own set of people important to him, it is possible for my status as I view it to be higher than yours and yours as you view it to be higher than mine.

The point has been born home to me repeatedly since then in other contexts. There are quite a lot of people in science fiction fandom, the Society for Creative Anachronism, and I am sure many other social circles, who work at a not very high status and not very highly paid job while putting their real passion and energy into their hobby. One reason to do so, although not the only reason, is that it lets them buy status. They may succeed in their hobby because they are really talented in it, they may succeed because they are willing to put much more of themselves into the hobby than other people are.

Being a male nurse is not a terribly high status job but that may not much matter if you are also King of the Middle Kingdom. And the status you get by being king does not reduce the status of the doctors who know that they are at the top of the medical ladder and the nurses at the bottom.

Consider, for another example, teachers. Elementary school teachers have a positive public image but not much status outside the classroom. But in the classroom, where they spend quite a large part of their time, they are king, queen, mother, father, alpha wolf, wise mentor, ultimate figure of authority for fifty minutes out of every hour, or at least can be those things if they want to be and are competent at the job. That may be one of the most important fringe benefits of teaching. Professors get it too, along with more status outside of the classroom. That may be part of the reason that both professors and schoolmarms have a reputation for being bossy sorts who are sure they know best; they spend a large part of their lives in an environment where they probably do know best and are entitled, to a considerable degree, to boss the other people in the room around. It may also be part of the reason that people are willing to take those jobs even when they can make more money doing something else.

For a third example, consider advertising designed to confer status on products: clothes, perfumes, automobiles. People it convinces buy the products and get status with other people it convinces. People who do not see the ads or see them but are unconvinced do not associate the goods with status and so do not lose status by not buying them.

If status is not a zero sum game, one way of evaluating a society is by the degree to which it expands the size of the status pie, allows practically everyone to be above average. It follows that the last thing we want is a system for objectively ranking people, for defining status in a way that everyone agrees on. A second conclusion is that if we are so unfortunate as to get such a system, rational individuals in search of status will promptly subvert it, create their own subgroups with their own rankings. It is, after all, easier to increase your status if you can find a way of dong so that does not decrease anyone else’s.

I do not know if my description of Harvard in the early sixties is true of Harvard today but my guess is that it is, of Harvard and many other schools. Perhaps if one of my readers is a current Harvard student or a recent graduate …

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