Conspicuous corruption: Evidence at a country level

People can exhibit their status by the consumption of particular goods or experiential purchases; this is known as “conspicuous consumption”; the practice is widespread and explains the market characteristics of a whole class of goods, Veblen goods, demand for which increase in tandem with their price. The value of such positional goods lies in their distribution among the population—the rarer they are, the more desirable they become. At the same time, higher income, often associated with higher status, has been studied in its relation to unethical behavior. Here we present research that shows how a particular Veblen good, illicit behavior, and wealth, combine to produce the display of illegality as a status symbol. We gathered evidence at a large, country-level, scale of a particular form of consumption of an illictly acquired good for status purposes. We show that in Greece, a developed middle-income country, where authorities cannot issue custom vanity license plates, people acquire distinguishing plate numbers that act as vanity plate surrogates. We found that such license plates are more common in cars with bigger engines and in luxury brands, and are therefore associated with higher value vehicles. This cannot be explained under the lawful procedures for allocating license plates and must therefore be the result of illegal activities, such as graft. This suggests a pattern of “conspicuous corruption”, where individuals break the law and use their gains as status symbols, knowing that the symbols hint at rule-breaking, as long as the unlawful practice cannot be incontestably established.

Consumer expenditure when positional concerns matter

PurposeThe purpose of this paper is to study which factors affect consumer expenditure and how, when positional concerns matter. It also investigates how consumers finance and reallocate their expenditure, and modify their consumer baskets when members of their reference groups spend more on positional goods, and they do not want to lag behind.Design/methodology/approachA literature review is presented, and then a new model is developed from a behavioural economic perspective. It describes how consumers with various risk attitudes reallocate their consumer expenditure and modify their consumer baskets when consumption externalities influence their relative consumption due to a positional game, but they want to “keep up with the Joneses”.FindingsConsumers with different risk attitudes finance and reallocate their consumption expenditures variously to sustain their relative positions. Risk-neutral, slightly and intermediately risk-seeking consumers achieve a lower utility level than others. They do not realise a utility-maximising consumer basket, as it includes a relatively low number of nonpositional goods, but this choice can be considered the best response in a positional game in order to sustain their relative position.Originality/valueThe relationship between positional and nonpositional goods is explicitly described. The model assumes that consumers can be classified based on their risk attitudes when positional concerns matter. It also describes how consumers with various risk attitudes reallocate their consumer expenditure when they want to sustain or improve their relative consumption in a positional game.

Competition

This chapter discusses the unavoidability of competition, even among those who renounce the more common forms of competitions for honor, wealth, and so forth. It starts with a discussion of the Garden of Eden and conditions of zero scarcity therein, with but one scarce item: the forbidden fruit. Then the chapter goes on to positional goods, rank-ordering people, which leads to a discussion of seating arrangements, musical chairs, and the failure of King Arthur to resolve the matter with a round table. It then provides a treatment of Christian attempts to avoid honor competitions by elevating humility to the status of one of the chief virtues. But that ends in humility contests and we are back to square one. The chapter ends with a sublime text from Gregory of Tours about a truly humble miracle-working young monk and the efforts to keep him humble despite his miracle-working powers.

Keeping Up with the Joneses (and the Kardashians)

This chapter identifies and examines problems posed by positional goods. These are goods that confer relative or “competitive” advantage, and whose supply is therefore limited as a matter of logic. Early theoretical work on positional goods by Fred Hirsch in the 20th century led to some very general worries about the long-term prospects for capitalism. This contrasts with the optimism of figures like Hayek and Smith. Having discussed this general perspective, the chapter then looks at some important specific cases, such as education, before ending with a discussion about some proposals for taking the heat out of current positional competition.