Status-driven spending keeps people chained to their work
Almost a century ago, in 1930, the great economist John Maynard Keynes predicted that by the 21st century, we would grow so wealthy that we would need to work only 15 hours a week.
Keynes was right. We did grow wealthy—even wealthier than he predicted. GDP per capita is four times what it was in his time. But he was also wrong. We aren’t working 15-hour weeks. Weekly work hours in the United States have hardly budged from the average of 48 in Keynes’ day.
What’s more, the rich—who should have the most time for leisure—are working harder than ever. What happened? Why did Keynes’ prediction fail? Why aren’t we all, at least in the Western world, working 15-hour weeks?
These are hotly debated questions, and I don’t have a complete answer. But they also reveal something interesting about human nature, the good life, and the ways we relate to money.
Beyond the Horizon
Robert Skidelsky, the celebrated biographer of Keynes, asks these same questions in his book How Much Is Enough? Money and the Good Life. Skidelsky wrote the book with his son Edward, a professional philosopher.
The Skidelskys argue that Keynes made the mistake of thinking that human wants are finite:
[Keynes] failed to distinguish wants from needs; in fact, he used the two terms interchangeably throughout his essay. … Needs—the objective requirements of a good and comfortable life—are finite in quantity, but wants, being purely psychic, are infinitely expandable, as to both quantity and quality.
Keynes thought that as we got richer, each additional unit of money would be less and less valuable to us, until we reached a point where it wouldn’t make sense to pursue more.
[Keynes] believed that [we] would one day be fully satisfied, leaving us free for “higher things.” We now know better. Experience has taught us that material wants know no natural bounds, that they will expand without end unless we consciously restrain them. Capitalism rests precisely on this endless expansion of wants. … It has given us wealth beyond measure, but has taken away the chief benefit of wealth: the consciousness of having enough.
It is unfair, I think, to blame capitalism for destroying “the consciousness of having enough.” Evolutionary theory has taught us that all living creatures have a natural drive to survive and reproduce. The endless pursuit of more is part of human nature, not the result of a capitalist society.
Still, it does seem possible that life in a hyper-capitalist society could increase our natural desires. How might capitalism lead to an “endless expansion of wants”?
I Want What You Want
Well, one explanation is that there are simply more things to want. A supermarket today has thousands of options, and there will always be more things than we can afford.
Advertising—which appears on billboards, in trains and trams, on our smartphone screens, or cleverly disguised as a blog post—is now impossible to escape from, and it exposes us to a never-ending stream of products we didn’t know we needed.
These are well-known complaints. However, there’s another important and poorly understood reason for want expansion. Keynes thought that once our needs were fulfilled, it wouldn’t make sense to work more. However, it turns out that there is a certain need that requires an infinite supply of money to satisfy: the need for social status.
The Value of Ripped Jeans
As a teenager, I desperately tried to convince my mother to buy me a pair of ripped jeans.
“Why?” she asked. “It’s December and it’s cold. Why do you want pants with holes? They cost $40! It makes no sense.”
My mother didn’t understand something I couldn’t put into words. What matters to a teenager is not how functional or warm a pair of pants is. What matters is whether you’re in or out.
Once our ordinary needs are met, most of our money goes toward inflating our status.
For me, ripped jeans were the dividing line that separated the worthy from the unworthy, the cool kids from the losers. Having ripped jeans was a status symbol, and teenagers instinctively know how important status is for getting through school without being bullied.
Although we rarely admit it, status is just as important for adults. In fact, status-driven spending, say the Skidelskys, is precisely what Keynes failed to consider. Once our ordinary needs are met, most of our money goes toward inflating our status:
Above a certain economic level, the bulk of income is spent on items that are not needed in any absolute sense but rather serve to mark out their possessors as superior, or at least not inferior, to others.
The Short Skirt Problem
Although it’s not too hard to understand how status competition leads to some increase in spending, it might not be clear why it can lead to an endless increase. One explanation is what I call the short skirt problem.
I live in Japan, next to a high school. Japanese students wear uniforms. Here is something that puzzles me: It’s December and very cold, but all the students wear short skirts.
The uniform skirts are supposed to be worn past the knees, but the girls purposely roll up their skirts to shorten them. Why? Probably because short skirts are to them what ripped jeans were to me.
To roll down your skirt during winter, no matter how cold it is, is to announce, “I’m a loser,” which, of course, means saying sayonara to your friends and hello to a world of ostracism. As they say in Japan, “The nail that sticks out gets hammered down.”
Of course, skirts can get only so short. But when it comes to spending, there’s no natural limit. If my peers are earning $100,000 a year, then I want to earn $200,000. If they’re earning several million, then I want to go for a billion. No matter how rich you get, there’s room to spend and consume more.
Put in economic language, status signaling through consumption is a positional good. It doesn’t matter that we’re richer than we were in 1930. What matters is where we stand on the economic hierarchy, and that means spending more and more to stay there.
Here’s the (hilarious) advertising legend Rory Sutherland writing about the same idea, in the context of cheese:
Don’t know if you’ve noticed, but middle-class rules now require that every dinner party cheeseboard must contain at least two cheeses which aren’t very nice. … I was baffled by this for a long time, until I realised that these cheeses are not bought to be eaten, but to signal the sophistication of the occasion. There are many forms of consumption today where—dress it up all you like—it is obvious the main value lies not in the intrinsic value of the thing itself but in signalling the refinement of your taste. This increasingly creates a kind of feedback loop where people are driven to absurd lengths to gain competitive bragging rights.
There are all sorts of examples of how status competition makes things uglier and more wasteful than they could be: Political elections, modernist architecture, and ridiculously long wineglass stems come to mind.
Add in globalization and things get even worse. Now, instead of being a moderately handsome member of your mountain village, you’re uglier than every single K-Pop idol who appears on the TV screen. None of the village ladies will even look at you.
The Crux of Culture
Culture is another interesting factor to consider. Work hours vary quite a bit, even among countries that have similar levels of wealth. For example, Americans work an average of 400 more hours a year than Germans do. The Skidelskys suggest that culture is a big part of this disparity:
In an immigrant society like America, money-making was seen as the royal road to success; in Europe, the legacy of a hierarchical culture that limited opportunities for money-making both at the top and the bottom led to the adoption of ways of life that downgraded money-making as a goal.
This makes me wonder if the American dream ideology of “you can achieve whatever you want as long as you try” has the side effect of making Americans work a lot harder.
This certainly happened to me. At one point, I was so obsessed with becoming a millionaire before 30 that I refused to do anything but work all day, every day. If you asked why I wanted to be rich, I would mumble something about not having to work for the rest of my life. In retrospect, that wasn’t the real reason. The real reason, I think, was ripped-jeans syndrome.
The Skidelskys argue that, in the past, cultural norms, traditions, and religious beliefs limited this endless expansion of wants. In Edo Japan, for example, merchants were considered the lowliest class. Religions almost universally criticized the endless pursuit of wealth. Morality and tradition served as a counterbalance to the pursuit of self-interest.
Modern life has removed this counterbalance. In fact, modern economic and political theory—in an attempt to remain neutral—tries to avoid talking about morality at all. If “How much spending is too much?” is a moral question, we have shot ourselves in the foot. Ethical debate has been ejected from both economics and politics and replaced a new ethic of “anything goes.” (If you want to read more about this, see Harvard philosopher Michael Sandel’s What Money Can’t Buy.)
If it’s true that most of our disposable income goes toward competitive consumption and status signaling, then consider this question: Is it possible to give up the status game and work less than 15 hours a week?
I’m self-employed, so I decided to test this out. For the past two months, I’ve tried to do so-called real work for only one or two days each week. The rest of my time I spend reading dystopian novels (J. G. Ballard lately), thinking about political philosophy, listening to podcasts, and losing to my wife at Mario Kart.
It’s worth asking yourself the following question: How much of what I do is done because I care about status?
So far, neither my (small) business nor my financial affairs have fallen apart. I realized a lot of my work was fake. I accomplished nothing and simply sat at the computer because I thought I should be working.
Since becoming aware of how much of energy goes into playing and winning the status game, I’ve decided that life is a lot more enjoyable when I choose not to play. These days, I live quietly, read books, and avoid people who talk about things like getting rich, becoming successful, or leaving a legacy.
Of course, I’m not suggesting that everyone work only two days a week. Most bosses would never accept it. But I do think that many people don’t realize how much of their time (and, therefore, their lives) is driven by status considerations.
It’s worth asking yourself the following question: How much of what I do is done because I care about status? And how could my life be different if I cared a little bit less?
Ifyou want to read more on the subject, some books that influenced me are philosopher Alain de Botton’s Status Anxiety, evolutionary biologist Geoffrey Miller’s Spent: Sex, Evolution, and Consumer Behavior, and playwright Keith Johnstone’s Impro: Improvisation and the Theater. These bookstaught me what a big role status relationships play in the decisions we make. Johnstone goes as far as to assert that understanding status relationships is the most important thing for good acting and good comedy.1.3K claps