Lion of the Blogosphere

Positional goods

This is the Wikipedia definition of a positional good:

Positional goods are a subset of economic goods whose consumption (and subsequent utility), also conditioned by Giffen-like pricing, depends negatively on consumption of those same goods by others.[1] In particular, for these goods the value is at least in part (if not exclusively) a function of its ranking in desirability by others, in comparison to substitutes. The extent to which a good’s value depends on such a ranking is referred to as its positionality.

A degree from Harvard is a positional good because of its rarity and not because of its intrinsic value. If Harvard opened its doors to everyone, lowered its prices, expanded its student body to hundreds of thousands, the degree would become as worthless as a degree from the University of Phoenix.

Private school primary and secondary education follow the same rules. If the Dalton School or Trinity allowed everyone to attend, for free, just like public schools, they would become just as bad as public schools.

A house in a “good” neighborhood is a positional good because other people can’t afford to live there. If they built a bunch of housing projects in East Hampton, it would stop being a desirable place to live.

The examples above are of positional goods that have practical utility even though they are positional goods. An elite education will get you into better career tracks, you don’t have to worry about your kids getting beaten up at school if you can afford to send them to Dalton (and they are also able to get accepted), living in East Hampton you would enjoy low crime, the view of nicely manicured mansions, and even receive the financial benefit of being able to do business deals with your wealthy neighbors.

My theory of the modern post-scarcity economy is that the majority of money spent by the middle-class (which I generally consider to be the class of people who have at least a college degree) and above is on positional goods.

Written by Lion of the Blogosphere

March 17, 2015 at EDT am

Posted in Economics

42 Responses

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  1. “A house in a “good” neighborhood is a positional good because other people can’t afford to live there. If they built a bunch of housing projects in East Hampton, it would stop being a desirable place to live.”

    That’s like saying a yacht or a private jet is a positional good because most people can’t afford them. I get your point that the status we assign to them is contextual, and everyone could afford yachts, they wouldn’t been seen as signs as wealth, but they do have functionality.

    But that speaks to relative poverty vs. absolute poverty.

    (Also, check your e-mail.)

    JayMan

    March 17, 2015 at EDT am

    • I did state that positional goods can have practical utility. But the extent that they do have utility is also an externality imposed on those who cannot afford them.

      Lion of the Blogosphere

      March 17, 2015 at EDT am

    • Many people would be up in arms, if they saw blacks having the same access to desirable things, as everyone else, who otherwise had to earn it one way or the other. This will happen nevertheless, as liberals become increasingly emboldened that underprivileged racial minorities need to be uplifted by those who are privileged. And privileged meaning the White middle class. These moral grandstanding hypocrites will never drop a dime for anyone who is under-served.

      JS

      March 17, 2015 at EDT am

      • Harvard has affirmative action and no one cares besides a few bitter people on the internet.

        Lion of the Blogosphere

        March 17, 2015 at EDT am

      • blacks are a small demographic at Harvard. People will be up in arms, if suddenly blacks in large numbers, get to access all the goodies afforded to the upper middle class.

        JS

        March 17, 2015 at EDT am

      • No they won’t, white liberals love blacks.

        Lion of the Blogosphere

        March 17, 2015 at EDT am

      • @JS

        This is why I don’t stick around for the comments here.

        JayMan

        March 17, 2015 at EDT am

      • White liberals are a smaller demographic, compared to the sea of working and middle class Whites.

        JS

        March 17, 2015 at EDT am

      • Jayman, you have the audacity to believe in HBD and say you’re a black person on your blog, when in fact, you’re a mixed race individual with 2 higher IQ components of White and Asian!

        JS

        March 17, 2015 at EDT am

      • These moral grandstanding hypocrites will never drop a dime for anyone who is under-served.

        I’ve noticed this over and over. Limousine liberalism is a perennial problem on the left. In Brooklyn you will see legions of dredlocked white kids whose parents subsidize their exorbitant rents, wringing their hands about white privilege and raaaayycism and gentrification and whatnot. They think they are so enlightened. But you never see these people volunteering week after week at warming shelter visiting old folks in a nursing home. That’s something conservative flyovers do.

        New York Sucks

        March 17, 2015 at EDT am

      • No they won’t, white liberals love blacks.

        Liberals love blacks in theory and they love the carefully curated pet blacks they allow into their institutions. They would never actually move to Detroit and send their kids to school there. They are very awkward when it comes to socializing with actual black people.

        There was a buppie mulatto who used to comment regularly on Guy White’s old site who would use liberals black fetish to his advantage all the time. Apparently, if you are a well spoken, non-threatening black white libs will line up around the block to kiss your ass. Wealthy white libs, however, strongly dislike aspirational working class whites. There is a lot of data to support this. If you are a conservative white kid from flyover territory with good grades you will be discriminated against by the admission committees at elite institutions. Asians are similarly discriminated against, I think because subconsciously whites don’t want to compete with them.

        Pointing out liberal hypocrisy is just so satisfying because these people frequently live in a circle jerking bubble. They think they are enlightened and they are the ones who will save the world from “white privelege” when in reality they are the ones who everyone wants to push out of the way to get ahead. They need someone to bring them back down to earth.

        New York Sucks

        March 17, 2015 at EDT pm

      • Liberals love blacks who behave like the Obamas and can’t get enough of them.

        But yes, liberal hipsters who move to Bed-Stuy do not hang out with the longtime non-hipster residents. But they genuinely believe that such people, or at least their children, can be turned into clones of the Obamas with better government funding of education. Although it’s racist to state a preference blacks who act like whites or praise blacks for acting that way.

        Anyway, just because liberals have beliefs that are contradictory or irrational doesn’t mean they lack sincerity.

        Lion of the Blogosphere

        March 17, 2015 at EDT pm

    • If one actually uses the yacht and enjoys using it then that utility is not in itself positional. Of course one might own a yacht both for the pleasure of sailing as well as for the status owning tt brings.

      I don’t think that an undergraduate education at Harvard is necessarily much better than one can get at many other less prestigious institutions but of course the Harvad degree has a lot of status For graduate education, at least in some fields, a Harvard education may have more intrinsic value relative to other institutions than for undergraduate education.

      A purely positional good might be a very large and expensive diamond that one keeps in a bank vault and never actually wears or hardly ever sees because it is too risky to do so. The utility there is just the status that comes from being the owner.

      Jim

      March 17, 2015 at EDT pm

  2. I guess it’s good that there are a lot of positional niches in today’s society.
    If you are single you can position yourself with
    -a cool jacket
    -camera
    -truck
    -outdoor activities
    -motorcycle
    -bling
    -designer smartphone
    -knowledge of organic food
    -cute dog
    -learning foreign language
    -fitness
    -travel

    Fiddlesticks

    March 17, 2015 at EDT am

  3. Lion — This post of yours, has finally put the last nail in the coffin, as to why would anyone committed to normality, would want to live in this 1st world country. America has descended into the ranks of a 3rd World Sh*thole, along with the nations of Latin America, Africa, and any other region where its inhabitants have lower than average IQs, usually of the brown or black skinned garden variety, and anyone with half a brain lives in a gated community, branded as a “positional” good.

    JS

    March 17, 2015 at EDT am

    • No one is branding goods as “positional” besides me. Few people bother to think about the real reasons they are willing to pay so much to live in a “good” neighborhood.

      Lion of the Blogosphere

      March 17, 2015 at EDT am

      • Positional means luxury in a normal sense. In America, it will eventually signify privilege w/o association with poorer people, especially NAMs.

        JS

        March 17, 2015 at EDT am

      • There’s a broader definition than just “luxury” goods.

        Lion of the Blogosphere

        March 17, 2015 at EDT am

      • The value of the Harvard degree is mostly positional in the sense that one could probably learn just as much as an undergraduate at many less prestigious institutions. The reason for going to Harvard instead of say to Texas A&M is for the prestige value of the Harvard degree. For graduate education Harvard may provide more value.

        Living in a nice neighborhood however has more than positional value. It is worth it to pay more to be more insulated from crime and the underclass.

        Jim

        March 17, 2015 at EDT am

      • As I keep saying, just because a good is a positional good doesn’t mean that it doesn’t have utility, but the utility it does have is an externality imposed on those who can’t afford the good. Raising the cost of living in a “good” neighborhood is an externality on those would would be well behaved residents of such a good neighborhood but can’t afford entrance.

        Lion of the Blogosphere

        March 17, 2015 at EDT am

      • Lion — One definition of luxury is the condition of great comfort, ease, and wealth. One can argue that most, if not all positional goods and services provide this kind of environment. Residing in a wealthy neighborhood, carefree of NAM miscreants is luxurious. Bobos who seek a high priced tax accountant/CPA during this time of the year, get their tax related finances taken care by a specialist, providing them with a comfortable and stress free experience. Your local prole and average NAM who seeks a 3rd party, go to a corporate chain like H&R Block, which is staffed by other NAMs and proles, who are usually rude, low IQ and not very savvy with their tax expertise.

        JS

        March 17, 2015 at EDT pm

  4. I haven’t found an acceptable alternative to the beats I buy at the boutique grocery store. The boutique grocery store also stocks 3 times as many rice variates as the local chain store. I do know proles don’t care for beats, so the local chain store doesn’t stock that many of them. I’m not going to make 2 separate trips to two separate grocery stores so I can acquire the acceptable beats. Sometimes I have to shop at the local boutique grocery store for no other reason than it has acceptable produce that the local chain store does not.

    I’ve found that most of the people who shop at the boutique grocery store shop there so they can tell others that they shop there. That’s fine. However, the local chain stores have long adjusted to “foodie” demands for traceable food. They tell you who the distributor is and who the distributor acquired the crops from. When it comes to in-season crops, a lot of the produce the boutique store stocks is the same produce that the chain stocks. Out-of-season crops is a different story.

    Exactly why would someone shop at the boutique grocery store for any other reason than it’s less crowded, the clerks are attractive SWPLs (vs the NAMs who work at the chain store) who pretend to be your buddy, and they can tell others they shop at the boutique grocery store and are loyal to it’s “values”? For most intents and purposes, the local chain store is a place to get food, that’s it. It’ doesn’t have “values” and the clerks certainly don’t care about your “values”. In comparison to the chain store, it costs 3 times as much to get the same food at the local boutique store, minus the outliers outlined above. My liberal friends insist it’s all about good health standards. I think it’s mostly about status seeing as the food is (for the most part) the same, as long as it’s in-season, and the clerks at the boutique grocery store will agree with you that you are an upstanding citizen for shopping there.

    Point is, others could try to gain status by going to the boutique chain store and telling others that they are doing it, but they don’t. I think it really matters who you tell. I do know when I tell my prole friends that I occasionally go to the boutique grocery store they think I’m stupid and “gay” for paying three times as much money for groceries and eating beats.

    What does this mean?

    princeton grocery shopper

    March 17, 2015 at EDT am

    • Do you mean “beets” not “beats”. I like beets but I wasn’t aware of their status value.

      Jim

      March 17, 2015 at EDT am

      • This reminds me of the scene from Damsels In Distress where Lily sees an uncooked artichoke.

        Lion of the Blogosphere

        March 17, 2015 at EDT am

      • No, he just really likes Dr. Dre’s artisanal headphones.

        jimbo

        March 17, 2015 at EDT pm

    • The boutique stores in NYC, aren’t even remotely in the league of quality and classiness, of which you describe. They are usually staffed by poorly dressed hipsterish women who remind you of HBO’s Girls. Occasionally, you’ll find a few token NAMs, who don’t speak in ebonics and come across as affable, receptive of your needs and wants, but any reader here, understands the liberal phoniness surrounding this arrangement.

      JS

      March 17, 2015 at EDT pm

  5. I will freely admit that I am an upper middle class yuppie who enjoys luxury goods. The fact is, I enjoy some of the finer things in life for what they are, and I’ve worked hard to earn them. I enjoy driving a nice car to work every day not to show off, but because I like fast cars, all wheel drive in the snow, heated seats and satellite radio. I am saving up to buy an oriental rug because I think they are beautiful, not because it’s a status symbol.

    New York Sucks

    March 17, 2015 at EDT pm

  6. The Obama team has been hard at work in the Israeli elections.

    Dan

    March 17, 2015 at EDT pm

    • Or it’s just because 20% of the population there are Arabs?

      Hashed

      March 17, 2015 at EDT pm

  7. The economist Robert Frank, mentioned at least a couple of times on this blog, gives an excellent example of a positional good that nonetheless has an obvious utility function: bull elks and their huge set of antlers. Maintaining a 15-point set of antlers (or whatever), requires eating a lot of food, and weighs the elk down, making it more difficult to escape predators. All bull elks would probably be better off if they could limit their antlers down to something half the size, but there’s a lot of utility when it comes to battling other males for mates.

    I think it’s widely appreciated that a degree from Harvard is more about signaling than inherent value. The real value of going to Harvard is owed more to the networking opportunities than whatever Michael Sandel taught you in your justice class, which anyone can view online or read in his books. You also won’t get a personal connection with Sandel, and not just because the class has a few hundred people in it, but because you’re an undergrad.

    East Hampton as a positional good seems flawed. It’s more about being selective. It takes a certain type of person to buy property in East Hampton, or gain admission to Harh-vard. All positional goods have scalability problems, but not all scalability problems deal with positional goods.

    Vince

    March 17, 2015 at EDT pm

    • East Hampton is full of proles, that is, those with money. That area has seen a prole drift for quite sometime of heavy drug use, sex orgies and rowdy binge drinking, that comes with people who are the nouveau riche.

      JS

      March 17, 2015 at EDT pm

      • Helicopter parents and forcing their kids to grind out math problems to get into the ivy league is far more prole than the east hampton carefree rich drug sex dubstep lifestyle

        jjbees

        March 17, 2015 at EDT pm

      • To be fair to the Asian parents, what they are getting by getting their kids into Stuy is that the kid doesn’t have to go to a local high school where they’d get beat up by non-Asians. Rich white people who can afford a second home in East Hampton don’t have to worry about their kid attending a school like that, because money can easily buy them a safer school.

        It’s possible that Asians are deluded into thinking that Stuy helps get their kids into the Ivies, but really it’s just the opposite, they think that Stuyvesant grads lack diversity and they have too many Stuyvesant kids applying. Really they’d have a much better shot at the Ivies if they attended public school in a state that normally doesn’t send many kids to the Ivies, like Oklahoma, and they participated in leadership activities like sports (although skinny little Asian kids would probably not compete well on sports teams dominated by big athletic Midwestern teens).

        Lion of the Blogosphere

        March 17, 2015 at EDT pm

      • Prole drift is less prolish than a striving prole!

        JS

        March 17, 2015 at EDT pm

      • and this way of doing admissions is unique to les etats unis merdeux.

        in the entiure rest of the world:

        everything other extra-curricular is we don’t give a shit. what’re you a fucking pushy american?

        Robert Gabriel Mugabe

        March 17, 2015 at EDT pm

  8. So then positional goods are goods most likely to be conspicuously consumed?

    swanknasty

    March 17, 2015 at EDT pm

    • No, positional goods are goods whose utility or perceived value is based on the fact that not everyone can have one.

      Lion of the Blogosphere

      March 17, 2015 at EDT pm

      • I’m not getting you here. Everyone would like a big, nice house in a safe neighborhood, a fancy car, to take vacations to places that are interesting and that they’d read about since childhood. Even if *everyone* had these things, people would still want them. You seem to think these are positional goods.

        CamelCaseRob

        March 17, 2015 at EDT pm

    • And for whatever reason those goods wouldn’t be the type of goods people would seek to display economic power or provoke envy in others, per the definition of conspicuous/invidious consumption?

      It seems like the best way to flaunt my economic power or provoke envy in others with my purchases is to buy goods that not everyone can have.

      swanknasty

      March 17, 2015 at EDT pm

  9. Post-scarcity is a theoretical alternative form of economics or social engineering in which goods, services and information are universally accessible.[1] This would require a sophisticated system of resource recycling, in conjunction with technologically advanced automated systems capable of converting raw materials into finished goods

    So, according to wikipedia, we don’t live in a post scarcity economy. Noone does because it’s theoretical. So you either need to stop saying we live in a post scarcity economy or stop citing wikipedia as an authority.

    A positional good is one whose value is determined at least in part by its postion among others rather than anything intrinsic to it. You’re twisting the wikipedia definition to mean something not intended. You’re misinterpreting the wikipedia definiton to mean that the goods value is determined by the characteristics of the other people consuming it.

    Despite the fact that ~95% of what makes a neighborhood good or bad is determined by the people in it, it still has both positional (e.g. prestige of neighborhood) and non positional (e.g. safety) elements.

    Howie Stern

    March 17, 2015 at EDT pm

  10. here again is the bls’s break down of employment by sector in the us, it’s not much better in other developed countries: http://www.bls.gov/emp/ep_table_201.htm.

    and this overstates the fraction employed in real work as within large organizations even in goods producing industries the majority of the workforce is engaged in things like sales and marketing, compliance, accounting, and finance, etc. and not in actual production or r & d. of course, in small goods producing businesses everyone or almost everyone is engaged in the real work.

    just drive around town and country.

    look at all the coomercial real estate. that’s where people work! and you can tell what kind of work it is from the outside. the modern economy is a joke just like economic science. but it’s a joke way over the heads of most.

    Robert Gabriel Mugabe

    March 17, 2015 at EDT pm

  11. […] was reminded of this the next day when I read a post over at LotB about “positional goods.” It seems like a dubious exclamation of economic jargon; one can surmise from definitions of […]


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