KEEPING UP WITH THE JONESES
Social scientists have long suspected that people’s sense of self-worth is related to their position in the groups they see themselves as part of—their neighborhoods, their peers, their country.
If this were true, inequality would of course directly affect well-being. Given how plausible this seems to us, it has been surprisingly difficult to prove beyond doubt. For example, evidence suggests that, at any given income level, people tend to be less happy when the average income in their locality is higher than their own.76 But it could be because they live in an expensive neighborhood where everything, from housing to cups of coffee, costs more. In other words, the facts can be explained without reference to inequality per se.A recent study from Norway shows that increased awareness about one’s place in the distribution of income increases the extent to which a person’s happiness depends on their income.77 In Norway, tax data has been publicly available many years, but the records were kept as hard copies and were therefore hard to access. This changed in 2001, when they were put online, and it became possible to snoop on your neighbors or your friends with just a few clicks of your mouse. This was very popular, to the point it was dubbed “tax porn,” and everyone seemed to know exactly where they stood. What we saw right after the data went online was that the poor were sadder and the rich happier. The awareness of one’s place on the totem pole does seem to affect well-being.
In a way, we are all living in some version of the Norway experiment. Bombarded as we are by images of the lives of others on the internet and in the media, it is impossible for those who are stuck to not be aware that the rest of the world looks like it is moving ahead. The flip side of this is the impulse to show the world that we too are able to “keep up with the Joneses” and, if possible, do better than them.
This is the logic behind “bling” purchases, designed to show off status. In a recent experiment, an Indonesian bank offered some of its higher-income customers (largely urban and upper middle class) a new platinum credit card.78 In the control group, customers received an offer upgrade of their existing credit card, with all the benefits of a platinum card except the platinum look. Customers understood the cards had exactly the same benefits, but that did not stop them from liking the platinum card more; 21 percent of those offered the platinum card went for it compared to 14 percent of those offered the nondescript alternative.Interestingly, the urge to show off is less strong when people feel good about themselves. The experimenters found that simply writing a short essay describing a moment when the person did something she or he was proud of reduced the demand for platinum cards. This creates a vicious cycle, with people who feel economically vulnerable being particularly eager to demonstrate their worth through useless purchases they can ill-afford, and an industry all too ready to provide these services for a handsome fee.