In economics, a good is anything that “satisfies human wants and provides utility.” This includes not just tangible goods like gold, grain, and real estate, but also services (housecleaning, dentistry, etc.) as well as abstract goods like love, health, and social status.
As an economic good, social status is a lot like health. They’re both intangible and highly personal. In proper economic terms, they are private goods — rivalrous and mostly excludable. And the fact that they’re hard to measure doesn’t make them any less valuable — in fact we spend trillions of dollars a year in their pursuit (though they often elude us).
But status differs from health in one very important respect: It can be transacted — spent as well as earned. It’s not a terminal good, but rather an intermediate good that helps us acquire other things of value. For example, I can trade some of my status for money, favors, sex, or information — and vice versa.
Health, if it’s possible to spend at all (e.g. in pursuit of career success), is extremely illiquid. But as I will argue today, status is so liquid — so easy to transact, and in real time — that it plays a fundamental economic role in our day-to-day lives. (...)
Let’s start with transactions, since they form the basis of an economy. Status is part of our system for competing over scarce resources, so it should be no surprise that it participates in so many of our daily transactions. Some examples:
In addition to participating in direct, X-for-Y trades like the above, status also functions as collateral or “table stakes.” (We often call this type of status “reputation.”) In many ways, a favor is like a loan (of time, energy, or some other resource) collateralized by the status of the borrower. It’s a weird kind of collateral, since it can’t be transfered to the creditor if the borrower defaults. But the borrower’s status can be destroyed or ruined, which provides incentive enough for most purposes. The bigger the favor, of course, the more status needs to be put up as collateral. This explains why it’s hard for a low-status person to ask a high-status person for a favor, but easy for a high-status person to make the request.
“Bidding for status” is another activity with economic characteristics. The nature of a bid is that it sets a particular ‘price’ that can be accepted or rejected. Robin Hanson suspects that speaking in public is a way of bidding for status. The very act of standing in front of a group and speaking authoritatively represents a claim to relatively high status. If you speak on behalf of the group — i.e., making statements that summarize the group’s position or commit the group to a course of action — then you’re claiming even higher status. These bids can either be accepted by the group (if they show approval or rapt attention, and let you continue to speak) or rejected (if they show disapproval, interrupt you, ignore you, or boo you off stage).
Similarly, every request for a favor is a complex bidding process (i.e. negotiation) framed largely — and often implicitly — in terms of status. When a manager, for example, gives a task to a subordinate, many nuances are involved in negotiating the ‘price’ of the favor in terms of the subordinate’s status:
As an economic good, social status is a lot like health. They’re both intangible and highly personal. In proper economic terms, they are private goods — rivalrous and mostly excludable. And the fact that they’re hard to measure doesn’t make them any less valuable — in fact we spend trillions of dollars a year in their pursuit (though they often elude us).
But status differs from health in one very important respect: It can be transacted — spent as well as earned. It’s not a terminal good, but rather an intermediate good that helps us acquire other things of value. For example, I can trade some of my status for money, favors, sex, or information — and vice versa.
Health, if it’s possible to spend at all (e.g. in pursuit of career success), is extremely illiquid. But as I will argue today, status is so liquid — so easy to transact, and in real time — that it plays a fundamental economic role in our day-to-day lives. (...)
Let’s start with transactions, since they form the basis of an economy. Status is part of our system for competing over scarce resources, so it should be no surprise that it participates in so many of our daily transactions. Some examples:
- We trade status for favors (and vice versa). This is so common you might not even realize it, but even the simple act of saying “please” and “thank you” accords a nominal amount of status to the person doing the favor. The fact that status is at stake in these transactions becomes clear when the pleasantries are withheld, which we often interpret as an insult (i.e., a threat to our status).
- An apology is a ritual lowering of one’s status to compensate for a (real or perceived) affront. As with gratitude, withholding an apology is perceived as an insult.
- We trade status for information (and vice versa). This is one component of “powertalk,” as illustrated in the Gervais Principle series.
- We trade status for sex (and vice versa), which often goes by the name “seduction.” Sometimes even the institution of marriage functions as a sex-for-status transaction. Dowries illustrate this principle by working against it — they reinforce class/caste systems by making it harder for high-status men to marry low-status women.
- We reward employees in the form of institutionalized status (titles, promotions, parking spots), which trade off against salary as a form of compensation.
- We can turn money into status by means of conspicuous consumption, or status into money by means of endorsement (i.e., being paid to lend status to an endeavor).
In addition to participating in direct, X-for-Y trades like the above, status also functions as collateral or “table stakes.” (We often call this type of status “reputation.”) In many ways, a favor is like a loan (of time, energy, or some other resource) collateralized by the status of the borrower. It’s a weird kind of collateral, since it can’t be transfered to the creditor if the borrower defaults. But the borrower’s status can be destroyed or ruined, which provides incentive enough for most purposes. The bigger the favor, of course, the more status needs to be put up as collateral. This explains why it’s hard for a low-status person to ask a high-status person for a favor, but easy for a high-status person to make the request.
“Bidding for status” is another activity with economic characteristics. The nature of a bid is that it sets a particular ‘price’ that can be accepted or rejected. Robin Hanson suspects that speaking in public is a way of bidding for status. The very act of standing in front of a group and speaking authoritatively represents a claim to relatively high status. If you speak on behalf of the group — i.e., making statements that summarize the group’s position or commit the group to a course of action — then you’re claiming even higher status. These bids can either be accepted by the group (if they show approval or rapt attention, and let you continue to speak) or rejected (if they show disapproval, interrupt you, ignore you, or boo you off stage).
Similarly, every request for a favor is a complex bidding process (i.e. negotiation) framed largely — and often implicitly — in terms of status. When a manager, for example, gives a task to a subordinate, many nuances are involved in negotiating the ‘price’ of the favor in terms of the subordinate’s status:
by Kevin Simler, Ribbonfarm | Read more:
