Positional good

Positional goods are a subset of economic goods whose consumption (and subsequent utility), also conditioned by Giffen-like pricing, depends negatively on consumption of those same goods by others. In particular, for these goods the value is at least in part (if not exclusively) a function of its ranking in desirability by others, in comparison to substitutes. The extent to which a good's value depends on such a ranking is referred to as its positionality.

Although Thorstein Veblen emphasized the importance of one’s relative position in society with reference to the concept of conspicuous leisure and consumption, it was Fred Hirsch who coined the concept of the “positional good,” in Social Limits to Growth. He explained that the positional economy is composed of "all aspects of goods, services, work positions and other social relationships that are either (1) scarce in some absolute or socially imposed sense or (2) subject to congestion and crowding through more extensive use" (Hirsch, 1977: 27).

Hence, Hirsch distinguished categories of positional goods. Some depend, essentially, on their relative positions (pride of superiority, status and power); others, such as land for leisure activities or land for suburban housing, are positional merely because their total amount is fixed. However, land is valued at least in part for its absolute contribution to productivity, which does not derive from its relative ranking. Thus, some economists (such as Robert H. Frank and Ugo Pagano) only include goods (like status and power) which are valued specifically because of their relative quality.

Hirsch’s main contribution is his assertion that positional goods are inextricably linked to social scarcity - social scarcity relates to the relative standings of different individuals and arises not from physical or natural limitations, but from social factors; for instance, the land in Inter-Provincial Montioni Park is physically scarce, while political leadership positions are socially scarce.

The broad theme of Hirsch's book was, he told The New York Times, that material growth can "no longer deliver what has long been promised for it—to make everyone middle-class". The concept of positional good explains why, as economic growth improves overall quality of life at any particular level, doing "better" than how your grandparents lived does not translate automatically into doing "well", if there are as many or more people ahead of you in the economic hierarchy. For example, if you are the first in your family to get a college degree, you are doing better. But if you were at the bottom of your class at a weak school, you may find yourself less eligible for a job than your grandfather, who was only a high school graduate. That is, competition for positional goods is a zero-sum game: Attempts to acquire them can only benefit one player at the expense of others.

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