Keeping Up With Everybody

In 2001, the Norwegian government made its tax records publicly searchable online, so that every citizen could now look up what any other citizen earned. This was not entirely new—the country’s tax data had theoretically public for years—but the internet made it frictionless. Journalists could now scrub entire neighborhoods, neighbors could check each other out, and colleagues could compare their salaries with one another’s. Ricardo Perez-Truglia used this moment as a natural experiment. He tracked self-reported well-being before and after the records went online and found that the gap between higher- and lower-income Norwegians widened by 29%. Absolute incomes did not change; what did was knowing how you compared to other people. This is the central finding of research on social standing: what people care about is not how much they have in absolute terms, but where they stand relative to those around them. It explains a long list of behaviors that seem irrational under standard…