Social limits to growth
Hirsch (1976) argues growth cannot expand scarce positions; roots in Veblen (1899) and the Veblen effect.
Positional externalities
Frank (1985, 2005) shows overspending on positional goods and proposes progressive consumption taxes.
Evidence
Solnick and Hemenway (1998) and Alpizar et al. (2005); links to the Easterlin paradox (1974) and relative deprivation.
FAQ
- What is it in simple terms?
- Things valued for being ahead of others.
- Why is it a problem?
- Arms-race spending leaves no one better off.
Sources reviewed: 2026-10-26
References
- Hirsch, F. (1976). Social limits to growth. Harvard University Press. The founding book explaining why growth cannot satisfy everyone.
- Frank, R. H. (1985). The demand for unobservable and other nonpositional goods. American Economic Review, 75(1), 101–116. Models how spending tilts toward positional over nonpositional goods.
- Frank, R. H. (2005). Positional externalities cause large and preventable welfare losses. American Economic Review, 95(2), 137–141. On positional externalities and policy fixes such as consumption taxes.
- Solnick, S. J., & Hemenway, D. (1998). Is more always better? A survey on positional concerns. Journal of Economic Behavior & Organization, 37(3), 373–383. Survey evidence that many prefer higher relative over absolute income.
- Alpizar, F., Carlsson, F., & Johansson-Stenman, O. (2005). How much do we care about absolute versus relative income and consumption? Journal of Economic Behavior & Organization, 56(3), 405–421. Compares positional concern across goods.
- Veblen, T. (1899). The theory of the leisure class. Macmillan. The classic on conspicuous consumption, a root of the idea.
- Easterlin, R. A. (1974). Does economic growth improve the human lot? Some empirical evidence. In P. A. David & M. W. Reder (Eds.), Nations and households in economic growth (pp. 89–125). Academic Press. The paradox that rising income need not raise happiness.