Economists tend to judge in absolute terms. If my real income doubles that's a big win for me—even if yours triples. We find it odd and annoying that other people often prefer to look at relative measures. If the income of poor people doubles and the income of rich people triples, many will see that as the poor losing out, or at least falling behind. In Choosing the Right Pond
Robert Frank, an original and interesting economist, explored the implication for economics of the fact that people care about relative as well as absolute outcomes. That fact suggests an obvious question: Why do we care about relative outcomes? To explain why humans are as they are, the obvious tool is evolutionary biology.
Humans, like other living creatures, are "as if designed" for reproductive success. Reproduction requires two sorts of inputs—resources and a mate. If you are a better hunter than I am you will get more resources than I will, making you better able to feed your offspring. But that doesn't make me any less able to feed mine. From our standpoint as members of a hunter/gatherer tribe, the environment in which humans spent almost all of their evolutionary history, game is out there to be hunted in effectively unlimited supply.
If you are a better hunter than I am, more generally if you have more resources, status, whatever matters in our society than I do, you will also be better able to attract a mate. Mates, unlike game, are in strictly limited—for practical purposes, perfectly inelastic—supply. The better you are at attracting one or more, the worse my chances of doing so are. That is a good reason for me to be concerned about relative as well as absolute results, to wish not only that I should succeed in the hunt but that you should fail. It might even be a reason for me to put some efforts into increasing the chance of your failing if suitable opportunities arise.
The late George Stigler taught me an important lesson when he rejected the original version of what was to become my first published journal article
in economics. He told me that in order to be publishable, the article required not only a theory—in my case of the size and shape of nations—but also some way of testing that theory. In revising to meet that requirement I not only found evidence in support of my theory, I also, and perhaps more important, was forced to think through more carefully and precisely what the theory said.
I have done no testing of my theory of why we care about relative status, but I do have predictions. The first is that males should be mainly concerned about their status vis a vis other males, females about theirs vis a vis other females, since males are competing with males for mates, females with females.
The second is that males should be more concerned with relative outcomes than females. Reproductively speaking, wombs are a scarce resource, sperm is not. Even a not very successful female can expect to reproduce, although her success in mate search may determine how much help she gets raising her children. An unsuccessful male is likely to have no children at all, a successful one many. From the standpoint of reproduction, being male is a high risk gamble.
The third prediction is that people should be most concerned about relative outcomes in a range near their own level. If Bill Gates increases his wealth from twenty billion dollars to thirty billion, that has no effect on his ability to compete with me for mates; insofar as wealth is the relevant criterion, at twenty billion I've already lost, although that would be less true in a polygynous society, where his extra wealth might result in his bidding a few more potential wives away from me. If a homeless man finds a job at MacDonalds, that has no effect on his ability to compete with me for mates either. The people I ought to worry about—supposing that I am a male in the mate market, as most males were for most of their adult lives in the environment where we evolved—are the men at about my level, the ones who might beat me out in courtship if they were a little richer, or a little handsomer, or ... .
This is a blog post not a journal article; I haven't actually done the research to test these predictions, although I wouldn't be surprised if someone else has. If any readers know of such ... .(It has been many years since I read Robert Frank's book and I don't have a copy ready at hand to check; it's possible that he came up with some or all of my explanation first.)