There is a fixed amount of status in any group, and the total amount is a function of the number of people in the group. One's status only rises at the expense of others. So money spent raising one's status is a classic example of negative sum rent seeking behavior. Society would be collectively better off if less money were spent on status seeking.
Yet Tyler Cowen of the blog Marginal Revolution doesn't quite get it. He creatively argues that status games are positive-sum because "status games encourage people to earn more income."
Status may well be a negative-sum game, but there is no logical conflict with the production of beneficial side effects, such as increased prosperity. The "invisible hand" provides just such salutary economic effects when enlightened self-interest is the motivation. Thus, the sum is positive if the box is drawn around something larger that the "game" per se, though formally the game itself is zero-sum.
Posted by: John M | January 09, 2006 at 05:42 PM