Choosing the Right Pond: Human Behavior and the Quest for Status

by Robert H. Frank

Is it better to be a big frog in a small pond or a small frog in a big pond? Here, economist Robert H. Frank argues that concerns about status permeate and profoundly alter a broad range of human behavior. He shows how status considerations affect the salaries people earn, the way they spend them, and even many of the laws, regulations, and cultural norms they adopt. Provocative and insightful, this book is sure to spark widespread and lively debate in classrooms and boardrooms alike.

Genres: Economics, Psychology, Nonfiction, Philosophy, Sociology

299 pages, Paperback

First published May 23, 1985

About the author

Robert H. Frank is the Henrietta Johnson Louis Professor of Management and a Professor of Economics at Cornell University's S.C. Johnson Graduate School of Management. He contributes to the "Economic View" column, which appears every fifth Sunday in The New York Times.

Reviews

[Tristan · Rating 3 out of 5]

Robert Frank provides brilliant insights into capitalism, taxation, the welfare state, and other topics, showing how our current mix of free market economies and welfare states makes sense, but not for the reasons given by most economists (whether on the right or the left). And the reason that we so often miss the point is because we don't factor relative standing into our analysis.

A common theme of the book is that low social standing imposes a real cost on those who suffer it (which is mostly psychological, but also material), and high status provides its bearers with a real benefit. Frank uses this lens to analyze all sorts of market/government effects. For example, when we look at income distributions in the workplace, we often see that the most productive workers are underpaid relative to their productivity, while the least productive workers are overpaid. Frank argues that the reason for this is because the most productive workers are implicitly paying for high status, while the least productive workers are implicitly receiving payment for being on the bottom rungs. If this sounds far-fetched, it's because I don't care to go into the details in a short review. Which brings up my main problem with the book...

Unfortunately, the reason that I only gave this book 3 stars is because in fleshing out his arguments, Frank often steers into dry economics that are borderline painful to read. If I were interested in knowing Absolute Truth, I might have loved the rigour. But since I'm more interested in a layman's assessment of economics that incorporates basic human drives into its calculus, I wish that Frank would have gone easier on me.

[Paolo Santini · Rating 4 out of 5]

Very interesting and provocative book. Despite the originality and strength of the proposed argument, sometimes it feels that its implications are pushed a little too far.

[Matthias · Rating 4 out of 5]

A classic of behavioral economics, originally published in 1985 but still provoking and insightful decades later.
It analyzes some seemingly economically "irrational" social choices to show how they can actually be explained rationally when one takes into consideration the inner human concerns for relative social standing.
It then advances some proposals (mainly a corrected version of Friedman's negative income tax, and a consumption tax on positional goods rather than on income) which would work better at increasing equality while at the same time preserving markets freedom and the power of economies of scale, since they take more into consideration these facts about human behavior when compared to the current most common policies - in short, giving us a more efficient system.
Thorstein Veblen and his considerations on conspicuous consumption are the declared starting point, but Frank expands quite a bit from there, and touches on political and moral philosophy as well.
One of the best aspects of Frank's books, and it can already be found here, is the fresh air of intellectual independence, as he critiques the ideas of many different groups (traditional economists, Austrians/libertarians, leftists, policymakers, etc.) on specific, well-defined points, while highlighting their being correct on others, and providing a framework that puts all such observations together coherently.

[Stan Parker · Rating 4 out of 5]

Mostly skimmed the book. Interesting hypothesis that people look for situations where they feel comfortable at the local level, and this can have profound effects on how much people are paid at different companies.

[Kate Hall · Rating 4 out of 5]

Interesting and New and Challenging Information.

"People come into the world equipped with an inner voice urging them to rank as high as possible in whatever social hierarchy they belong to."

"The process of determining what works best does NOT and can NOT take place in social isolation"

"Pre-commitment in Bargaining – negotiating parties do better if they commit themselves in advance to a particular negotiating position"

"Happiness levels are NOT very sensitive to comparisons across time"

[Anurag · Rating 5 out of 5]

An absolutely phenomenal book by an academic who refuses to see economics without its forays into behavioural psychology. Frank feels the need to come to terms with our deeply ingrained, probably evolutionary, tendencies of mutual competition at local levels. Taking data from academic job market and salaries of union members and surveying opinions from Mill to Marx, Frank criticises both left-wing and right-wing economists for misguided judgements about policy.

[Lily]

Note to self: was recommended by Will.