In 1998 The Journal of Economic Behavior and Organization published a paper^[i] by Sara J. Solnick and David Hemenway that contains questions similar to those Kahneman & Tversky used in their research. That questionnaire ultimately won Daniel Kahneman the Nobel Prize in Economics.

In 1995, Solnick and Hemenway surveyed 257 faculty, students, and staff at the Harvard School of Public Health about their view of their position, relative to others (where “others” is defined as “the average other person in society”). Here was their first set of choices:

Which state would you prefer to live in:

Option A: Your current yearly income is $50,000; others earn $25,000.
Option B: Your current yearly income is $100,000; others earn $200,000.

The authors called the first option the “positional” state and the second option the “absolute” state. The survey was run with two forms: the first like the one above; the second with the order of the options reversed. Respondents tended to view the first state as the status quo and then decided if they would prefer to change to the second state.

In their current order, to move from A to B is viewed as a “gain.” When the order was reversed, to move to the second state was viewed as a “loss.” For Altruists, State B was preferred, regardless the order because everyone has more. Sadly, we aren’t all altruists!

Here’s the shocker. Roughly 50% of respondents preferred Option A. in which they had half the real purchasing power if their relative income position was higher. Let that one sink in.

The survey instrument contained eleven other sets of choices. These were related to Level of Education, Weeks of Vacation, Criticism by your Supervisor, IQ, Physical Attractiveness, Praise by your Supervisor, Your Child’s Level of Education, Your Child’s IQ, Your Child’s Attractiveness, a Variant on Weeks of Vacation, and the Number of Papers You Must Write.

The authors concluded, “Both absolute well-being and relative position seem to matter to people. Our evidence indicates that positional concerns are extremely important.” Of all the variables, Child’s Attractiveness, Praise from Supervisor, Own Attractiveness, Child’s Intelligence and Child’s Education ranked the highest Positional Answers.

Having to make choices about Attractiveness, Intelligence, Level of Education for yourself and then for your child created interesting answers. Respondents consistently wanted something better for their Child than themselves. That’s not surprising.

To me, at its core, this research is about fairness. Humans can have funny ways of measuring fairness. The perception of fairness is driven more by our relative position to one’s peer group and/or family members than by objective measures. The idea that living in a world where your income doubles is bad if the people to whom you compare yourself do better, is incredibly irrational. Yet human beings aren’t always rational.

I enjoy the great blessing of learning life’s lessons from my older clients. I have watched clients navigate life through their 80s and 90s happy as clams, regardless their net worth. The lesson I’ve learned is that they have made an intentional choice of contentment instead of measuring themselves against others. They have learned to enjoy life, friends, relatives and the time they have left without feeling a constant pressure for more. They are cheerful, joyful and fun to be around, most of the time. They make me love what I do!

I hope you have a joyful weekend and pay no attention to your peers!

^[i] SOLNICK, Sara.J., and David HEMENWAY; (1998) “Is More Always Better? A Survey on Positional Concerns.” Journal of Economic Behavior and Organization, no. 37ss: 373-383.

Rick Adkins, CFP®, ChFC, MBA

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