Positional good: ‘How much do I need?’ vs. ‘I want more than the next guy!’

I love behavioral economics because the field defines helpful concepts for understanding humans behaving as humans; oh, and they often back it with real empirical research, not just opinion. The better we understand how we behave the better we can design for good outcomes.

An example of such a concept from the Rotman Magazine’s Q&A interview with Dan Ariely, the behavioral economist:

Q: You have said that people don’t know what they want, unless they see it in context. What are the repercussions of such ‘relativism’ for decision making?

A: The term ‘positional good’ refers to the idea that in many cases, people don’t really care how big something is, they just want to have more than the next guy. Take sea lions, for example: they want to be bigger than the other sea lions, because if you’re bigger, you will attract more females. But in the race to become bigger, they tend to get much too big, and many die from health complications. Now think about humankind, and how nice it would be if our collective ‘footprint’ was half the size that it is now: we would use less energy; we would need less resources. In the race to have ‘more’, we have hurt the species — all because we care so much about comparing ourselves to others. Executive salaries fall into this category as well. Many executives make a substantial amount of money. The fact is, nothing would happen to their lifestyle if they made a bit less. But the way they look at it isn’t, ‘How much do I need?’, but, ‘I want more than that guy over there’. And it’s not just executives — we are constantly making these types of comparisons in many domains of life.

So, could one design for positional good, where having more or doing better than the next guy could help people actually make better decisions?