Mobility As A Positional Good Implications for Transport Policy and Planning

Positional” (also called “prestige”) goods confer status on their consumers. However, this increased status is offset by reduced status to others, resulting in no direct net benefit to society. As wealth increases so does the portion of consumption motivated by positional value. Many mobility-related goods and services have positional value, including vehicle ownership and use, and exotic holidays. This paper investigates how positional value affects transportation decisions, explores the resulting economic impacts, and discusses implications for transport policy and planning. Originally presented at: AutoConsequences: Automobilization and its Social Implications 6 October 2006, Vancouver, Canada Simon Fraser University Traffic Safety Project (www.sfu.ca/traffic-safety/events.html) Mobility As A Positional Good Victoria Transport Policy Institute 1 Contentment is natural wealth; luxury, artificial poverty. Socrates (469-399 BC) Introduction Social position (also called prestige and status) refers to a person’s social rank. Many goods have positional value (as opposed to functional value) because they increase the status of their consumers (Wikipedia 2006). These are called positional (or prestige or status) goods, the consumption of which is considered conspicuous (Veblen 1899). Examples include fashionable jewelry and clothing, ostentatious homes, luxurious vehicles and extravagant entertainment. Conceptual tests of positional value are, “Would I choose this particular good if it were unpopular?” and “Would I choose this good if nobody else knew?” Prestige value is often a component of functional goods. For example, many motorists choose vehicles with greater potential speeds and offroad abilities then actually needed because these features are considered prestigious. From an individual’s subjective perspective positional value is very important. Popular culture embodies vehicles and travel decisions with symbolic value – they help define a person’s identity. An offhand judgment about a person’s transportation (“Take me away from here in that nice car of yours,” or “He’s riding a loser cruiser”) can cause delight or pain. Having a prestigious vehicle can increase a young person’s chance of dating, and therefore mating, a popular partner. Employees can enhance their self confidence and careers by driving fashionable cars. Living in a prestigious neighborhood raises a person’s social status and networking opportunities. Business competitiveness often requires accommodating customers’ preferences for status goods. However, from society’s overall perspective, positional goods provide little or no net benefit because gains to one individual are offset by losses to others (Hirsch, 1976; Frank, 1999). For example, if one person drives a prestigious car his or her peers must obtain equally prestigious vehicles to maintain status. It represents a form of inflation, popularly called “keeping up with the Joneses,” that raises everybody’s costs without increasing overall welfare. Positional value is therefore an economic trap, a situation in which individuals compete in ways that waste resources (also called a social trap, reflecting society’s overall perspective, a zero sum game, reflecting the fact that gains to one represent losses to another, or a treadmill, because to the degree that social position is based on economic success in competitive conditions, people feel that they must work harder to maintain a given level of status). Described differently, prestige value is an economic transfer rather than a net economic gain. This paper investigates how positional value affects transportation decisions, explores the resulting economic impacts (including impacts on social welfare and external costs), and discusses implications for transport policy and planning. Although the general implications of positional goods have been discussed for decades, research regarding mobility as a positional good is relatively limited and primarily theoretical, suggesting that it is fertile ground for analysis and application to decision-making. Mobility As A Positional Good Victoria Transport Policy Institute 2 The Science of Happiness To evaluate the overall value of positional goods requires a deeper understanding of how consumption decisions affect overall happiness, which economists call social welfare. Most economists recognize that material wealth is just one factor affecting welfare, but that critical concept is often ignored in practice; economic progress is usually evaluated based on indicators of material wealth and productivity such as changes in income, property ownership and Gross Domestic Product (Redefining Progress 2006). Developed countries have achieved a high level of material wealth that could provide a high level of social welfare. But happiness is elusive. Residents of wealthy countries complain about excessive stress, inadequate leisure time and social isolation. If we had 21st Century productivity with 19 Century expectations we would live in Eden, but economic traps erode much of the potential welfare gains from material progress, reducing the efficiency with which we achieve happiness. Researchers have investigated factors that affect how much happiness people achieve and the efficiency with which wealth provides happiness (Frank, 1999; Easterlin, 2003; Diener and Seligman 2004; Stutz 2006; The Economist 2006; Dolan, Peasgood and White 2006; Gilbert 2006; Leonhardt 2008). This research indicates that rising from poverty to moderate wealth increases happiness, but once people’s basic food, housing and medical care needs are met the relationship between wealth and happiness weakens. Increased wealth can increase happiness if used efficiently or it may provide little additional happiness if squandered. Some people learn to be happier with less wealth, for example, by choosing a more satisfying but less lucrative job, as illustrated in Figure 1. Figure 1 Wealth and Happiness (Based On Stutz 2006) Poverty Luxury Increased Material Wealth ==> In c re a s e d H a p p in e s s = = > Efficient Learned Efficiency Inefficient Starting from poverty, increased material wealth tends to increase happiness. But once people achieve basic material comfort, wealth may either be used efficiently, providing more happiness, or inefficiently, with large increases in consumption that provide little additional happiness. Some people learn to achieve greater happiness with less wealth. Mobility As A Positional Good Victoria Transport Policy Institute 3 Economic traps reduce the efficiency with which wealth creates happiness (Easterbrook 2003). Increased aggregate wealth raises the amount of consumption required to achieve a given status level and the portion of consumption devoted to positional value, as illustrated in Figure 2. Material affluence (abundant money) often requires sacrificing time affluence (abundant free time) and social affluence (abundant friendships). Since material affluence is more conspicuous than other affluence types, positional competition skews people’s decisions toward more work and consumption than optimal. For example, it dissuades people from choosing more satisfying but lower-paying jobs or working fewer hours to have more time for family and friends because these are less prestigious. This explains why people often complain about the long hours they work to afford expensive holidays they need to recover from job stress. Increased consumption also tends to increase problems such as congestion, obesity, smoking, alcoholism and drug use. This helps explain why happiness is so elusive (Scitovsky 1976). Figure 2 Positional and Functional Value (Galbraith 1958; Stutz 2006) Poverty Comfort Luxury Extravagance Increased Material Wealth ==> T o ta l H a p p in e s s = = > Positional Value Functional Value Starting from poverty, increased material wealth provides significant benefits (happiness) by improving health and comfort, but once people’s basic physical needs are met, an increasing portion of wealth is devoted to positional goods. These goods raise the status of people who consume them but reduce the status of others and so provide no net benefit to society overall. The efficiency with which wealth provides happiness is affected by both individual and public decisions. Individuals can choose more satisfying but lower paying jobs, avoid wasting money on unsatisfying luxury goods and choose friends who value their behavior rather than material wealth. Public policies and community values can contribute to inefficient consumption. For example, if planning decisions or social attitudes favor automobile travel over lower-cost modes, people are forced to drive more than they actually prefer, contributing to a cycle of more costly travel, declines in more affordable alternatives, and increases in external costs such as congestion, risk and pollution. Mobility As A Positional Good Victoria Transport Policy Institute 4 Money and Happiness: Here’s Why You Won’t Laugh All the Way to the Bank By Jonathan Clements, Wall Street Journal, August 16, 2006. It’s only money. Really. If you’re reading this column, you are no doubt looking to get ahead financially. But don’t kid yourself: All those extra dollars won’t make you extra happy. In recent years, economists and psychologists have turned their attention to “happiness research” – and the results are a little disturbing if your life’s goals are a bigger paycheck and a fatter nest egg. Money alone just doesn’t buy a whole lot of happiness. To be sure, high-income earners often express greater satisfaction with their lives. In a 2004 survey, 43% of those with family incomes of $90,000 or more reported being “very happy,” versus 22% for those with incomes below $20,000. But the truth is messier than such surveys suggest. Yes, if you live in poverty, more money can bolster your happiness, but once you’re safe and warm and fed, it makes surprisingly little difference. “Once you get to the lower-middle class, then it takes a lot of income to make a difference. Income does matter, just not as much as people think,” says Professor David Schkade. Indeed, despite rising standards of living, just 30% of Americans described themselves as “very happy” in the late 1990s, down from 34% in the early 1970s, according to a study by economics professors David Blanchflower and Andrew Oswald published July 2004 in the Journal of Public Economics. Researchers speculate that our happiness is influenced not by our absolute level of wealth and income, but rather by how our financial situation compares with friends and colleagues. This may help explain why so many high-income earners describe themselves as “very happy.” Other studies indicate that people with higher incomes tend to spend more time working, commuting and engaging in obligatory nonwork activities such as home maintenance, all of which are associated with less happiness. The results indicate that people who are richer aren’t having a better time, but if you ask them about their lives, they report being a little more satisfied than those who are less affluent. This raises the question: If more money won’t make us much happier, what will? Here are four pointers.  Keep your commute short. Tempted to use your latest pay raise to buy a big house in a distant suburb? Don’t do it. While we often adjust amazingly well to life’s hardships, commuting is an exception. “You can’t adapt to commuting, because it’s entirely unpredictable,” says Daniel Gilbert, author of Stumbling on Happiness. “Driving in traffic is a different kind of hell every day.”  Choose time over money. Cutting back work hours will likely leave you happier, even if it means less pay. What about the fall in your standard of living? It may hurt less than you imagine. True, you are thrilled when you buy a new car. Soon enough, however, the good feelings fade.  Think carefully about how you spend your dollars. While a new car may not boost your happiness for long, maybe a trip to Europe would. “Money itself doesn’t make you happy,” Prof. Gilbert says. “What can make you happy is what you do with it. There’s a lot of data that suggests experiences are better than durable goods.” The car might seem like the better purchase, because it has lasting value. But, in fact, it sits in the driveway, slowly deteriorating. Experiences don’t hang around long enough to disappoint you. What you have left are wonderful memories.  Use your leisure time wisely. Surveys show that leisure is better for your happiness than work. But much also depends on how you spend your leisure time. Passive activities like watching television usually don’t make folks as happy as eating. A good meal, in turn, doesn’t rank quite as highly as active leisure activities, such as socializing with friends. “Going to a dinner at a nice restaurant, where you’re going to see friends and eat good food, is one of the best combinations,” Mobility As A Positional Good Victoria Transport Policy Institute 5 Spending on positional goods can increase individual’s position in society, and their feelings of confidence and success, but provides little net benefit to society, since gains to the prestige good consumer are offset by losses to others (those who compete for status) (Verhoef and van Wee 2000). In addition, some prestige goods impose indirect and external costs. In particular, increased vehicle travel increases congestion, road and parking facility costs, accidents, pollution, physical inactivity, and reduced accessibility for non-drivers (Litman 2006). It is important for economists and decision-makers to account for this when evaluating policies (Stutz 2006). Since this affects resource consumption it is a sustainability issue (TRB 1997; Litman and Burwell 2006). Sustainability requires maximizing the social welfare provided by material resource consumption, as illustrated in Figure 3. Some factors that increase help create more efficient and sustainable transport can increase people’s quality of life and happiness (Steg and Gifford 2005). For example, reducing automobile travel and increasing walking and cycling tend to increase fitness and health, and increase equity. Figure 3 Sustainable Development Poverty Comfort Luxury Extravagance Increased Material Wealth ==> In c re a s e d H a p p in e s s = = >