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The Status Game: Why Your Neighbour’s Car and Harvard's Reputation Matter

Updated: Dec 20, 2023

The Illusion of Superiority: It's Not What You Have, It's What They Don't

Have you ever noticed how a new sports car feels better when the neighbour drives an older model? This isn't just petty one-upmanship; it's a deep-rooted part of our psyche. Adam Smith was onto something when he talked about our relentless pursuit of betterment. But it turns out, we're less interested in how far we've come than how much further we are compared to others. This is the essence of 'positional goods' – items valued not for their inherent worth but for the status they confer relative to others. In a world where winners win, and losers lose, your shiny car isn't just a vehicle; it's a trophy.

The Educational Arms Race: When More Becomes Less

Nowhere is the scramble for positional goods more evident than in education. Consider this: You’re hiring and have two MBA candidates, one from Harvard and another from a lesser-known institution. All else being equal, who do you choose? It's not just about education but the prestige that comes with the name.

But there's a twist in the tale. When everyone starts chasing the same prestigious degrees, their value diminishes. Suddenly, a job that needed a high school diploma now demands a degree, and what required a degree now needs a Master's. It’s educational inflation where more education for everyone leaves everyone in the same place.

The Princeton Effect and the Mirage of Quality

The observation that quality in education is often a perception game rather than a reality is enlightening. In a survey in the USA, respondents ranked Princeton as one of the top 10 law schools in the country. This is a remarkable achievement given that the law school at Princeton commenced in 1846, graduated seven students and ceased operating in 1855. Despite this short-lived status, in the respondents' minds, Princeton Law was a top-ten institution!

The Prestige Paradox: Why Elite Universities Don't Want to Grow

In the prestige market, scarcity is king. Harvard could fill its classrooms ten times over, but doing so would dilute its exclusivity. The goal isn't to educate more; it's to remain a symbol of elite status. This selectivity perpetuates a cycle where elite universities attract top students and researchers, further cementing their status. It's a positional goods heaven where the prestige of the university and the students reinforce each other.

The Selectivity Sweepstakes: A Zero-Sum Game

In this game, universities and students are both players and prizes. The universities compete for the best students to enhance their prestige, and students vie for spots in these institutions to boost their status. It's an arms race where opting out means falling behind.

What Does This All Mean?

So, what's the takeaway from this prestige-driven marketplace? For one, emphasising status over substance can lead to a skewed understanding of quality and value. It suggests a need for a more nuanced approach to evaluating education and success that recognises the role of perception in these assessments.

As we navigate this landscape of positional goods and status symbols, it's worth pondering whether we're chasing genuine value or just the illusion of superiority. After all, in the end, isn't it all about how we see ourselves and how we want others to see us?

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