Yes, I think a similar objection applies. However, I would still expect more people to move to neighbourhoods with a lower mean income if people cared a lot about their income relative to their neighbours. I believe people’s behaviour is better explained by people caring much more about their income than their income relative to their neighbours.
Or: people care about relative income because: a) it entails more wealth (as capital gains accumulate faster than returns on work) which entails more power, like the possibility of funding intellectuals to say that inequality doesn’t matter; and b) it signals status, or it is used to buy status-goods, such as buying a nice house in a rich neighborhood without fearing your neighbors wanting to sack it (since they might care about relative income, even if you don’t)
Btw I just realized I can totally bite this bullet: I have lived in 4 cities in the last decade, and I prefer to live in the cheap one not only because of the low cost of living (like many online workers have been doing), but also because I never feel poor in relation to others...Which results in mixed feelings, though, as I don’t want to feel much wealthier than the surroundings—it makes me wonder of I should be paying more for services and taxes etc.
Yes, I think a similar objection applies. However, I would still expect more people to move to neighbourhoods with a lower mean income if people cared a lot about their income relative to their neighbours. I believe people’s behaviour is better explained by people caring much more about their income than their income relative to their neighbours.
Or: people care about relative income because: a) it entails more wealth (as capital gains accumulate faster than returns on work) which entails more power, like the possibility of funding intellectuals to say that inequality doesn’t matter; and b) it signals status, or it is used to buy status-goods, such as buying a nice house in a rich neighborhood without fearing your neighbors wanting to sack it (since they might care about relative income, even if you don’t)
Btw I just realized I can totally bite this bullet: I have lived in 4 cities in the last decade, and I prefer to live in the cheap one not only because of the low cost of living (like many online workers have been doing), but also because I never feel poor in relation to others...Which results in mixed feelings, though, as I don’t want to feel much wealthier than the surroundings—it makes me wonder of I should be paying more for services and taxes etc.