Falling Behind The Joneses

Happiness discussions frequently examine the phenomena of jockeying for social status and consumption. The topics range from virtuous consumerism, the freedom to choose, the collateral damage caused by our financial markets and social structures, and the moral consequences of economic growth, to what has been identified as a quiet crisis of unhappiness.

There are vigorous defences on both sides. Some commentators argue that consumerism is damaging our individual well-being and social fabric. Others argue that consumerism drives economic growth and that is essential to improving everybody's well-being and quality of life.

Rick Harbaugh is firmly grounded in the latter camp. He argues for the economic and social upside of chasing status and consumerism in Falling Behind the Joneses: Relative Consumption and the Growth-Savings Paradox.

Consumers in rapidly growing economies should borrow against future earnings to smooth consumption, or at least should save at a lower rate than consumers in countries with stagnant or falling incomes...the pattern in most rapid-growth economies has been for rapid income growth to precede sharp increases in household savings rates...

...Rising incomes would appear to induce excessive consumption as consumers attempt to "keep up with the Joneses"...Rather than increasing consumption, concern for relative consumption can induce a fear of falling behind which raises precautionary savings. As societal income growth increases this fear intensifies, allowing for a positive effect of growth on savings rates and potentially explaining the growth-savings paradox.

Some of the comparisons Harbaugh describes are similar to those discussed by Ben Friedman in The Moral Consequences of Economic Growth. Friedman details the social and political consequences of economic growth. He argues that economic growth is essential but because it is an investment in a public good (rather than something that is owned by an individual or a group of individuals such as a family) individuals will undervalue it and not allocate appropriate resources to it. Friedman says that the government can redress this imbalance through adjustments to fiscal policy that reward savings and investments. I think that Harbaugh argues that individuals can be relied upon to supply their own motivation because the drive to maintain status and consumption contributes to the apprehension about "falling behind the Joneses" which is the tax/fiscal motivation to stimulate investment in growth.

So, striving to keep up with socially-mandated levels of consumerism can make many of us unhappy or ill. However, comparing our social status and material assets with our peer-group may be the stimulus that motivates us to behaviours that will result in our own happiness at some time in the future. Or such investment will contribute to the public good in such a way that we will benefit from the raising of standards. I'm glad that is clear and so easily implementable in our everyday lives.

Copyright 2006, Tony Plant Happystance Project