The intern working with us in the mornings this spring is an undergrad who doesn’t watch the Econ Extra Credit documentary,”Operation Varsity Blues ”, with us this month. “No,” Jarrett says, “it’s going to drive me too crazy. The college application process is just too new. This movie exploring the college admissions scandal that made the news in 2019 is enough to outrage viewers of all ages. It’s hard to forget the basics: how parents paid a shady consultant a large sum of money to play the system.
Many experts say the focus on super prestigious campuses can be costly, debilitating and unnecessary. All true. But we must remember that there is logic in the quest families and students to enter elite schools. Economics teaches us that prestige, in itself, has value.
I came across a study that attempted to quantifying the value of prestige by examining the relative status of players in an online virtual world. More on these findings in a moment. The introduction to the study recalls that the term ” conspicuous consumptionwas first described by the economist and sociologist Thorstein Veblen in his best-known book titled ” The leisure class theory. Veblen explained why some people are willing to spend a lot more on luxury goods when there are much cheaper alternatives that also do the job well. A $25 wristwatch could tell the time just as well or better than a $25,000 Rolex, so what about the Rolex? Part of it may be design, but it also has to be about prestige. Veblen examined the link between conspicuous consumption and increasing or maintaining social status.Since Veblen’s book dates from 1899, Veblen has not specifically investigated the value of putting a sticker on your Lexus signaling that your child is going to a fancy pants school, but you see the link.
We might wish that students and their parents ignored prestige in choosing colleges (and certainly insisted that they didn’t cheat their way in). However, back to the researchers who found that the prestige of evidence is worth something. It can be worth a lot. A team of economics and business professors presented a study at the 2010 ICIS Proceedings exploring prestige and status in an online virtual world. They used a popular multiplayer game in Europe called Habbo, where players pay real money to furnish virtual buildings with virtual goods. Among the results: Gamers who consumed (virtual) luxuries and showed them off had significantly more online friends than gamers who were otherwise similar but didn’t buy and show as much fancy stuff. This suggests that when you consume heavily and publicly, others are attracted to you. The conspicuous consumer had on average 8 more friends.
The quest for prestige may make economic sense, but all the benefits evaporate when the world knows you cheated. One could also consult studies on the economy of shame. The documentary reminded me of the public opinion polls Marketplace has commissioned from time to time that have repeatedly found a key point of agreement in an often polarized America: high percentages of people on the left and on the right are convinced that the economics “system” is rigged in favor of someone else. Watching this documentary about the admissions scandal will cement that view.
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