Positional good

Positional good

Positional goods are products and services whose value is mostly (if not exclusively) a function of their ranking in desirability, in comparison to substitutes. The extent to which a good's value depends on such a ranking is referred to as its positionality. The term was coined by Fred Hirsch in 1976. [Hirsch, Fred. "The Social Limits to Growth", Routledge & Kegan Paul, London, 1976 ISBN 0-674-81365-0]

Positional goods often earn economic rents or quasi-rents. Examples of positional goods include high social status, exclusive real estate, a spot in the freshman class of a prestigious university, a reservation at the "hottest" new restaurant, and fame. The measure of satisfaction derived from a positional good depends on how much one has in relation to everyone else.

Competitions for positional goods are zero-sum games because such goods are inherently scarce, at least in the short run. Attempts to acquire them can only benefit one player at the expense of others. By definition, every person cannot be the most popular, cool, or elite, in the same way that every person cannot be a star athlete – all of those terms imply a separation or superiority over other people. By the same token, land cannot be created, but land rents arise largely because of a parcel's ranking in desirability against other plots. [George, Henry. " [http://books.google.com/books?id=LUf_rwBdRBkC&dq=henry+george+%22science+of+political+economy%22&pg=PP1&ots=c335wkFYEs&sig=CHwIt1Lf3nSWlSPHe7oHWufJbkE&hl=en&prev=http://www.google.com/search?q=Henry+George+%22science+of+political+economy%22&ie=utf-8&oe=utf-8&rls=org.mozilla:en-US:official&client=firefox-a&sa=X&oi=print&ct=title&cad=one-book-with-thumbnail#PRA1-PA256,M1 The Science of Political Economy] ".]

In general, positional goods cannot be created, only redistributed, while material goods can be created with time and effort. However, most goods have both a positional and a material component. Fast cars may be considered to be inherently scarce because one's perception of a car's speed depends on its relation to other vehicles, but there is still an absolute value attached to satisfaction gained from the speed at which a car can travel; it can be considered as having a positional aspect in that only some cars can be the fastest. Because a car is a complex product made of many other materials, some of which (such as steel) are limited in supply and some which (such as leather) are renewable, they may instead be considered Veblen goods.

See also

* Conspicuous consumption


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