It's - sometimes - relative

A few weeks ago, I was somewhat scathing about any aims for the UK being the “fastest growing economy in the G7”.

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Because, honestly, who cares about how we’re doing relative to Canada or Italy or Japan?!

Economic growth is something in which most people care more about absolute results than relative ones.

But that’s not always true. Human psychology gets involved*.

So sometimes we might prefer a worse absolute outcome, if we personally get a better relative one.

The most famous example is with income.

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• World 1. You earn ￡100,000 per year; others earn ￡200,000
• World 2. You earn ￡80,000 per year; others earn ￡40,000

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More than half of people choose World 2. They’re winning in relative terms.

But there’s more! Because human psychology is STILL involved.

Ask slightly different questions, and you get different kinds of answers:

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Holidays, for example:

• World 1. You get 4 weeks of holiday per year; others get 8 weeks
• World 2. You get 2 weeks of holiday per year; others get 1 week

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People are back in the absolutes of World 1. Just give me as much holiday as possible, who cares about everyone else.

Flip it once more though and ask about intelligence**:

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• World 1. Your IQ is 130; others average 150
• World 2. Your IQ is 110; others average 90

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Annnnd people would prefer to be the smartest in a dumber room.

How about potholes:

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• World 1. There are 3 potholes a mile in your neighbourhood; 1 pothole per mile in others.
• World 2. There are 4 potholes a mile in your neighbourhood; 7 potholes per mile in others.

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Just generally less potholes please. Preach.

Final one, bringing us back to the start (and which is VERY interesting in the current world).

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• World 1. Your country spends 3% of GDP on national defence; other G7 countries spend 4%
• World 2. Your country spends 2% of GDP on national defence; other G7 countries spend 1%

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No one cares about GDP, but when it comes to defence? Suddenly, we’re Ron Swanson.

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Try the above questions on your friends/colleagues/whoever.

And you’ll see that for many people, choices are all about social context, just as much as the number in front of them.

￡80,000 or ￡100,000? Well, what’s everyone ELSE getting?

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* All questions/scenarios here extrapolated from Solnick, Sara & Hemenway, David. (2005). Are Positional Concerns Stronger in Some Domains than in Others?. American Economic Review. 95. 147-151. 10.1257/000282805774669925.

There's lots of newer research which digs deeper than this, and there's always nuance. But honestly, ask your mates the income one

**Assuming IQ is a good measure, which isn’t necessarily true … another day