Which situation would you prefer:

  1. You and your neighbour get one chocolate each; or
  2. You get two chocolates but your neighbour gets three?

In situation two, everybody is better off, but person one is relatively worse off compared to his or her neighbour.

Applying this type of choice in a research study reveals that we think relativities matter at least as much as absolutes:

“A survey asked US respondents whether they would prefer:

a world in which they had an annual income of $50,000 and others earned $25,000; or,

a world in which they had twice as much ($100,000) but others had four times as much ($200,000).

Half of those surveyed preferred to be poorer (situation 1) so long as it meant being at the top of the heap rather than the bottom”

Source: Andrew Leigh, Battlers and Billionaires

These laboratory-style experiments have limited applicability in the real world. But at the least, they do hint that it is human nature to benchmark ourselves against others.

When we make decisions based on how we fare against others, we may make irrational and socially wasteful choices.

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