positional goods

Positional goods are products and services whose value is mostly, if not exclusively, a function of their ranking in desirability in comparison to substitutes. The extent to which a good's value depends on such a ranking is referred to as its positionality.

Like land, positional goods often earn economic rents or quasi-rents. Examples of positional goods include high social status, exclusive real estate, a spot in the freshman class of a prestigious university, a reservation at the "hottest" new restaurant, and fame. The measure of satisfaction derived from a positional good depends on how much one has in relation to everyone else. A society that devotes more resources to positional goods is arguably wasting effort, since a gain for one must come at a loss for another.

Competitions for positional goods are zero-sum games because such goods are inherently scarce, at least in the short run. Attempts to acquire them can only benefit one player at the expense of others. By definition, not everyone can be the most popular, cool, or elite, and in the same sense not everyone can be a star athlete because all those terms imply a separation or superiority over other people. Georgists consider real estate a positional good because the value of your land primarily depends not upon anything inherent to that land or the buildings which are affixed to it, but on its ranking in desirability against other plots.^{[citation needed]}

In general positional goods cannot be created, only redistributed, while material goods can be created with time and effort. Most goods have a positional and a material component, however. Fast cars may be considered to be inherently scarce because your perception of the car's speed depends on its relation to other vehicles, but there is still an absolute value attached to satisfaction gained from the speed at which the car can travel, so it can be considered as having a positional aspect in that only some cars can be the fastest. Since a car is a complex product made of many other materials, some of which are limited in supply (steel) and some which are renewable (leather), they may instead be Veblen goods.

The term was coined by Fred Hirsch in 1976 (in: Fred Hirsch, The Social Limits to Growth, Routledge & Kegan Paul, London, 1976 ISBN 0-674-81365-0). It is used to describe economic goods which are considered to possess a relative or social value rather than an absolute one.

Another example is that not everyone in a country can acquire the benefits of a Rolls Royce because even if everyone could acquire one, it would not longer show status. Of course, the costs of manufacture are substantial, mainly due to use of rare materials and lack of economies of scale due to limited output, but the consumer is 'paying for the name' and the company is not necessarily making a higher profit because they are not just charging more for a perfectly normal car.

See also

• Conspicuous consumption
• Georgism

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