STATUS AND INTERTEMPORAL CHOICE

The idea that utility or happiness depends on the comparison of one’s own con-sumption to that of others can be traced back, at the very least, to Veblen (1899). Nevertheless, neoclassical economic theory has typically assumed that an agent’s util-ity depends solely on the absolute level of consumption. This stance has been harder to maintain in the face of a large body of empirical evidence on an individual’s ten-dency to evaluate her consumption in comparison with consumption of others, and there is now a growing literature that includes this relative concern, or status, as an additional argument in the utility function. This note considers a preference for status as fundamental. It takes the extreme view that the individual does not care about the consumption of particular goods per se, but only how she ranks in the dis-tribution of consumption. This view makes it possible to straightforwardly reconcile an evolutionary basis for preferences with the obvious fact that absolute consumption levels now vastly exceed any plausible level in hunter-gatherer societies. Despite this apparently fundamentally distinct basis for choice, this paper establishes a startling behavioral equivalence between the relative concern model and an absolute concern model of intertemporal consumption choice. That is, the equilibrium consumption time path followed by individuals with a pure preference for status is the same as that followed by individuals with a logarithm utility function in absolute consump-tion. This result holds for a large class of preferences for status. There may then be no observable difference at all between a model with a pure concern for status and a conventional model. 2 “Now here, you see, it takes all the running you can do to keep in the same place.