Brainstorm on Positional Domination

This is not an argument of any kind. I’m not trying to make a point. This is thinking out loud. And you are going to help me.

Anne and Betty each prefer to positionally dominate the other—they both like coming in first better than coming in second. However, each has a different hedonic payoff from positional domination and subordination. How do we think this through?




1st;  1000h

2nd; 800h


2nd; 900h

1st; 900h

Which world state, A or B, does a benevolent planner choose?

In Pareto terms, the planner is indifferent. Both Anne and Betty prefer to come in first, but both can’t.  The Benthamite planner is also indifferent: same sum of hedons.

What about willingess to pay? Well, pay for what? Positional domination or hedons? When Layard says that people undermine their own welfare by seeking status despite the fact that it doesn't make them "happy," it sort of sounds like he’s saying that people sometime value status more than they value hedons, but are wrong to do so. Let’s get rid of the normative judgment and think about what it could mean to value positional domination independent of hedons.

Suppose that whoever pays most to positionally dominate positionally dominates. You can have an auction. Anne’s highest bid is $2000 and Betty’s is $2700. So does that mean that Betty gets a bigger hedonic payoff from dominating. No, by the stipulation of the matrix, she doesn’t. (And by stipulation of the matrix, the distribution of hedons is not the dimension of positional competition.) So does this mean that Betty is willing to pay more for a hedon? Maybe, maybe not. Why think Betty is bidding on hedons? It could be that Anne and Betty value the marginal hedon at the exact same rate. In which case, Betty is just bidding for positional domination, which she values for its own sake, not for the hedons that fall out of domination.  

Or maybe you can think of the choices between A and B as choices between packages of hedons and positional domination, which are independently valuable, but causally connected. This is value pluralism. There are lots of independent values: hedons, positional domination, etc. The value-to-money and money-to-value exchange rates may not be the same for each value. (Or in each direction; the endowment effect for a hedon and a dollar may be different. Misers may trade hedons for dollars, on the assumption that the dollars will pay off in even greater hedons, but, when the time comes, they are unwilling to give up dollars for hedons, so the dollars just accumulate.) And the money worth of some values might decline on the margin faster than others.

Suppose that there is a point of hedonic saturation (I believe this is true.) At the point of saturation, an extra hedon will have no money value, since there is in some sense nowhere to put another hedon. (Hedonically saturated states dry up pretty quickly though.) Suppose that positional domination doesn’t saturate, and remains ever valuable. It is never enough to be mayor, or governor, or president, or ruler of earth; there is always value in dominating on another positional dimension, or dominating a dimension of broader scope. So, one could be hedonically saturated, and unwilling to pay for another hedon, but not be positionally saturated, and perfectly willing to pay to become Generalissimo of the solar system.  

Suppose the willingness-to-pay planner chooses world state B on the strength of the higher money value of positional domination to Betty. Is such a planner really benevolent? If coming in second is a positional externality imposed on Anne, what is the value of the externality.

Are you confused yet?

I am.

I have also caused myself to wonder whether it might be possible to take money away from people under one description, and give it back to them under another, resulting in a net gain in hedons Could be! The issue wouldn't be the transfer per se, but the description under which the transfer takes place. (This has nothing obvious to do with the above.) Does support for the state depend on a kind of gratitude stemming from an (illusory for most people) sense that the value of public goods consumed is greater than taxes (direct and indirect) paid? It's like thinking somebody's your best friend since that gave you $4 bucks after they took $5 out of your wallet but gave you the $4 so warmly.


[Cross-posted to Happiness & Public Policy, which is back online.]

Author: Will Wilkinson

Vice President for Research at the Niskanen Center

8 thoughts

  1. My point is that for green technology, “incentives to innovate” (or, if you prefer, high oil prices) have gone south for the recession. I’m failing to see how Obama’s plans, as I understand them (and, since I don’t have adequate incentives to read budget proposals, I’m quite possibly misinformed), will affect these incentives one way or another because they are currently almost non-existent. Presumably, the idea is to maintain existing green tech capacity (such as it is) until such time as economic recovery raises oil prices and the incentives return from vacation to pick up where they have left off. A better idea, of course, would be to rejuvenate the incentives through a carbon tax, but I digress.
    Furthermore, the idea that government spending would crowd out private investment right now is laughable, as the chart I linked to amply demonstrates. Not exactly a textbook illustration of investors straining to get a foot in the door is it?

    1. I understand. If, in fact, Obama’s green energy proposals are technology neutral, then I think it’s safe to say that his proposals will not crowd out private investment in green technology. In fact, given state backing, it should encourage private investment.
      I think the concern (and the thrust of my prior comment) is that the government’s notion of green technologies may not be the most innovative technologies. That is, he’s already picked the winners, and now it’s all about doling out the cash (e.g., the Stimulus Bill significantly extended the Renewable Energy Grant Program — you build windmills and the government will pay you directly). This strikes me as something different than innovation.
      By way of example, it could be that some new form of nuclear energy (I don’t know shit about nukes) could be the most innovative and safe solution, but who’s going to invest in nuclear when the government is handing out cash to wind and solar developers?

  2. What we have is an example of failed ideology. The bottom line is that interventions will not work and the only policies that will help are those that reduce the size of government and remove arbitrary burdens placed on private economic activity.

  3. “…the loyal, powerful bloc of Democrats who make their living pouring valuable human capital into nineteen-year-olds by making them pretend to have read Plato and Beloved.”
    Well said. I know it’s apostasy these days, but I think far too many people are getting pushed into college, where their time is often spent learning things with zero applicability to their future careers. Unfortunately, the “everyone goes to college, no matter the cost” mentality seems to be only growing stronger.

    1. Wilkinson:
      > …promote the deep structural changes needed in primary education to actually improve the quantity and quality of American human capital…
      But the fact remains that when businesses hire, a person having gone to a private primary school or a charter primary school (as opposed to a public primary school) commands no higher wages. I hire; the issues affects me personally. If the private school or charter school had a document certifying modern workforce training to the student (with the ability to test to confirm, and retrain at no cost to the business if the skills are actually below what is certified), I would be pretty damn impressed. If such a thing exists for private or charter schools, it is well hidden and very scarce. Until then, why would a business pay a premium for a person who received primary school education at a private or charter school? And if public school is good enough, how can change be expected to happen?
      > …I think far too many people are getting pushed into college…
      Business do pay a premium for college educated students. Again, if there was a form of technical schooling (associate degree) that had some certifying/testing/retraining guarantees for work skills, businesses would be pretty damn impressed, and would hire those people above people with some college education. I would like to see such resumes.

      1. Manuelg, it’s true that a college education commands a premium, but that doesn’t mean the college is actually making the student more productive. I suspect most of the premium is attributable to signaling of pre-existing quality. The student who graduates proves that he is relatively persistent and does the busy work. But there are surely cheaper ways of performing the signaling function than encouraging everyone and his dog to go to college in order to see who pops out the other side.

  4. “Another thing it can do is to restructure intellectual property law to encourage rather than discourage invention.”
    Could you expand on this? This seems like a “liberaltarian” talking point. Liberals want to reduce prescription drug cost, Libertarians want less government intervention and a more rational approach to encouraging innovation.

  5. Matt thinks entrepreneurship is an empty business buzzword, but it is in fact the foundation of economic growth.
    This is the critical insight that is missing from the vast majority of the discussion of US economic problems in the media.

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