My colleague Steve Landsburg made a great observation that the behavior of our current Presidential candidates indicates a rejection of the “Frankian” idea of the importance of relative measures of well-being. Do read it. But a terrific comment is down below:
I’ll believe the relative income nonesense when someone shows me evidence that people leave high wage jobs to take equivalent jobs that pay 10% less in firms where average wages are 20% less.
Great point!
And coincidentally, I think the same applies to immigration.
For example, think of all of the immigrants, legal or not, who risk a great deal to come across the border from Mexico to the U.S. They undertake this journey knowing that while they will perhaps be wealthier in absolute terms, they will quite likely become much poorer in relative terms, compared to the majority of Americans. Yet that is what they want.
I’m not sure why this is such a great comment. Someone moving to a firm that pays 10% less and on average 20% less to it employees still knows that people at other firms are still making more than them.
This is no less true than the observation that people who seem to say that relative status matters move in the other direction regularly, and they report increased levels of unhappiness even as they surely still know that there are lots of people at other firms that are still making less than them.
The positional goods folks actually argue that “its the company you keep” that matters – so even if we accede the good point you make, thinking about the place you left (with high income) is not as strong an emotion as seeing the lower income of folks at the new firm. Frank has a book called “Choosing the Right Pond” where he goes into much more detail on this.
My Agway fieldman used to say that farmers (and others, too) had two kinds of income: real income and psychic income. The problem with farmers, he said, was that farmers had too little real income and an abundance of psychic income — they prized the wonderful family life and the care and feeding of Holsteins and were willing to be poor, if that is what it took to hang onto the farm.
I think there are very many people who prefer to work at a job they enjoy and to live in a civilized small town over living in Connecticut, riding the train to Grand Central and hacking through the jungle of New Yoik City.