Public policy that discourages conspicuous consumption of luxury goods and services can help to fight poverty and also has health implications for people who are struggling to keep up with their neighbors.
Individuals who are unable to maintain the same standard of living as their peers experience relative deprivation, a condition that can reduce feelings of happiness and impact health, a recently published study by Yale School of Public Health Assistant Professor Xi Chen, has found. The paper was published in the IZA World of Labor of Germany’s Institute of the Study of Labor, of which Chen is a fellow.
“Poverty is not just an absolute concept,” said Chen. “It is also relative, dependent on the cost of maintaining social life in a specific society.”
Relative deprivation is particularly prevalent in countries with high socio-economic inequality and rigid social structures. People who feel their social status to be lower than that of their peers tend to address the relative shortage they experience or perceive by spending more money on status-seeking goods, including costly funerals in Ghana, elaborate tombs in China and new-built houses in India, Chen said. In doing so, people are less able to afford basic necessities, thereby increasing their poverty and diminishing their physical and mental well-being.
More fundamentally, Chen explained, humankind’s evolutionary history started with the equal sharing of food in the earliest hunger-gatherer societies. People become discontent when they live in conditions of inequality and relative deprivation. Persistent relative deprivation undermines the protective role of the biochemical system of stress response against a wide range of human diseases. These are the key channels that shape what we observe today.
Chen noted that while levels of absolute poverty have been declining sharply worldwide, measured levels of happiness have remained the same. This observation, known as the Easterlin Paradox, can be explained in part by an increase in relative deprivation, which highlights worsening relative poverty and inequality within social groups.
Chen said that policymakers must address both relative deprivation and absolute poverty in order to significantly decrease poverty levels. He suggested measures to curb spending among the poor, and a consumption tax on status-seeking goods as possible approaches.
“Any potentially effective measures should take the persistent social norms into consideration and try to influence individual social behavior through social interactions,” he said. A ban in Tajikistan on lavish parties, for example, has alleviated the local need to spend money on extravagances, and has thereby increased investments in more productive endeavors. Chen also suggested developing psychological services aimed at alleviating the effects of relative deprivation.
Going forth, Chen wants to develop and compare statistical measures of relative deprivation, and more closely examine the factors that contribute to declining happiness in China and other countries. He also intends to examine how factors such as worsening air pollution can contribute to feelings of happiness and mental well-being.