Keeping up with the Joneses: Thoughts About Income Inequality, Status Competition and Psychological Ownership

Like many of the members of this blog, I am interested in theories that attempt to capture the cognitive and affective components of psychological ownership. I believe that an important avenue for future research is investigation of the role of our possessions in the dynamically evolving socio-economic context. I would therefore like to use this opportunity to highlight a potentially interesting new angle in studying the role our belongings play in our lives. A growing body of empirical evidence shows that there is a strong negative relationship between income inequality and various indices of societal well-being. Income inequality is seen in distributions of income if a large proportion of income is received by a small percentage of the population, leading in turn to even greater wealth inequalities. For example, in a highly unequal country such as USA, the wealthiest 1% possess approximately 40% of all the wealth. Contrary to the predictions of economists, the money does not flow from the richest to the poorest, and income inequality worsens with time. Why is this an important issue? A great deal of evidence now shows that when large gaps in income and wealth exist between the richest and the poorest, society suffers from a range of socio-economic maladies. Income inequality is positively associated with the number of teenage pregnancies, homicides, imprisonment rates and obesity. At the same time, it is negatively correlated with social mobility and general level of trust in a society. For a great review I would recommend an excellent book by Wilkinson and Pickett (2009 – reference at the bottom).

In my research, I have been particularly interested in the psychological mechanisms that may explain the impact of inequality. One account is based on status-seeking tendencies. Some theories, such as the social rank hypothesis (Brown, G. D. A., Boyce, C. J., & Wood, 2014; Walasek & Brown, 2015), argue that when income distribution is more unequal, income becomes a better signal of our social status. What follows is that inequality will promote positional consumption, whereby people spend more time and effort to seek high-status goods. In order to “keep up with the Joneses” people become more materialistic, surrounding themselves with fancy cars (Bricker et al., 2014), bigger houses (Cynamon & Fazzari, 2013), luxurious brands (Chao & Schor, 1996). In fact, evidence from economics shows that in order to afford these goods, people work longer hours (Bowles & Park, 2005). Nonetheless, they are still more likely to take on debt (Perugini, Jens, & Collie, 2015) or declare bankruptcy (Alvarez-Cuadrado & Attar, 2012). According to the social rank hypothesis, focus on status consumption takes away from other important aspects of life, such as efforts to promote a healthy social relationships or looking after one’s own health. In one of our recent studies, together with Gordon Brown (2015), we have shown that when income inequality is high, people search Google for luxury brands and products, such as Prada, Gucci, Chanel, fur vests, jewellery etc. Thus, when distribution of income in a society is unequal, people become more interested in status competition, which is reflected in their interest in positional goods.

How this is all related to psychological ownership? As income inequality becomes recognized as a serious challenge to the well-being in our society, the role our possessions play in our lives may be changing. Many theories of psychological ownership maintain that belongings play an important role for our self-identity, satisfying many critical psychological needs (Pierce & Jussila, 2011). What happens when the utility of our belongings comes from the role they play in status competition? If we spend our money to show off our new watch or fur coat, are we unavoidably less attached to these goods? Or, perhaps, do we develop feelings of ownership towards objects while they allow us to signal our status, with these feelings dissipating when we realize that the good is owned by everyone else? Since these goods are quickly dispensable, being replaced by newer and swankier models and brands, it seems that there is little space for psychological ownership to develop. I should note that this issue is not just related to materialistic consumption but to positional consumption. For the former, owning material goods presents value in itself. For the latter, utility from owning a good comes from the fact that few others own such possession.

These and many other questions make me wonder about the ever-changing meaning of ownership in our society. It reminds me of an excellent talk by Russell Belk at the Vienna Ownership Workshop, who presented compelling evidence that the sense of owning changes (if not depreciates) with the growing popularity of shared goods and services (Belk, 2010). I think that more work needs to be done in order to explore how the concept of psychological ownership changes along with the values in a society that are determined by the socio-economic circumstances.

Perhaps this research has been already done and I am just not aware of it. Just let me know if this is the case.

Editor’s note:

That’s MY Beer: Locale, Ownership and a Little Story about the German Beer Market

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Location, location, and location. That’s the mantra of marketers all across the world. However, we might not always appreciate the importance of location for business. In particular, we often ignore the social and psychological aspects of locality. Yet, locality is about much more than just geographic distance. Locale refers to social dimensions such as the role of space in our everyday activities. It suggests that the closer something is to our everyday activities, the more likely it is that we will form a connection to that something. The idea of a sense of place on the other hand suggests that we experience some things as psychologically closer to us than others. That is, these things have more emotional value to us. Importantly, both locale and the sense of place are key to understanding how consumers come to pay attention to products, services and brands.

A recent intellectual discovery is that locale and a sense place are also important for feelings of ownership a consumer may develop for different products and services. By feelings of ownership we mean the psychological state in which an individual feels a material or immaterial target is “mine” and part of “me.” The connection of proximity and “mine” may be that things located on and “growing from” a territory we know and understand both in terms of geography and culture may more easily fall with the realm of our psychological ownership.

Take for example the German beer market, which is well known to rely on the concept of regionalization as evidenced in the popularity of local craft breweries. When the production of beer is located in the consumer’s own territory, there is more readily the possibility that the consumer will experience a closer connection to the products of that brewery. This is even truer for beer brands that emphasize their regional character and corresponding values. Consider, for example, the meanings the inhabitants of picturesque Potsdam associate with Potsdamer Stange – a regional specialty of the area. The producing company strongly emphasizes the 200 year history of this light wheat malt that has a very special balanced taste to it, as evidenced in a recent field study by the authors. It is possible that for many Postdamer the Stange is familiar and provides a sense of home – it is “their” beer. In may well be that as part of the equation these people experience their impact and effort in their neighborhood as extending to the local brewery through various community processes – thereby contributing to the sense of ownership for the local beer.

This trend of regionalization can in fact be seen on other markets. Even globally operating brands capitalize on these effects by offering the sense of home in an increasingly globalized world. For example, why is it that US consumers tend to rather often select home brands when traveling abroad? We believe that selecting a brand they feel is “theirs” provides them with a sense of home and security. In other words, such brands serve as a psychological risk management strategy in the global context. There are spaces to dock your self to every once and while when exploring the unknown territories.

– Iiro Jussila (Lappeenranta University of Technology, Finland) and Marko Sarstedt (Otto-von-Guericke-University Magdeburg, Germany)