Economic Theory

The economics of political correctness

Over the past few years, spiked online magazine has consistently and robustly defended the principle of free speech against the censorship demands of the politically correct, whatever quarter they may come from. It is great, of course, that there is at least one magazine in which the phrase ‘I believe in free speech’ is unlikely to be followed by a ‘but…’, and more likely to be followed by an ‘even for…’. But while I fully support the spiked line, I also think the spiked authors sometimes misinterpret the intentions of the ‘PC brigade’, and would like to offer an alternative interpretation rooted in boring, old-fashioned textbook economics.

Spiked authors believe that PC is driven by a loathing for ordinary people. According to spiked, PC brigadiers view ordinary folks as extremely impressionable, easily excitable, and full of latent resentment. Exposure to the wrong opinions, even isolated words, could immediately awaken the lynch mob. PC, then, is about protecting ‘the vulnerable’ from the nasty tendencies of the majority population.

But if PC was not really about protecting anyone, and really all about expressing one’s own moral superiority,  PC credentials would be akin to what economists call a ‘positional good’.

A positional good is a good that people acquire to signalise where they stand in a social hierarchy; it is acquired in order to set oneself apart from others. Positional goods therefore have a peculiar property: the utility their consumers derive from them is inversely related to the number of people who can access them.

Positionality is not a property of the good itself, it is a matter of the consumer’s motivations. I may buy an exquisite variety of wine because I genuinely enjoy the taste, or acquire a degree from a reputable university because I genuinely appreciate what that university has to offer. But my motivation could also be to set myself apart from others, to present myself as more sophisticated or smarter. From merely observing that I consume the product, you could not tell my motivation. But you could tell it by observing how I respond once other people start drinking the same wine, or attending the same university.

If I value those goods for their intrinsic qualities, their increasing popularity will not trouble me at all. After all, the enjoyment derived from wine or learning is not fixed, so your enjoyment does not subtract from my enjoyment. I may even invite others to join me – we can all have more of it.

But if you see me moaning that the winemakers/the university have ‘sold out’, if you see me whinging about those ignoramuses who do not deserve the product because they (unlike me, of course) do not really appreciate it, you can safely conclude that for me, this good is a positional good. (Or was, before everybody else discovered it.) We can all become more sophisticated wine consumers, and we can all become better educated. But we can never all be above the national average, or in the top group, in terms of wine-connoisseurship, education, income, or anything else. We can all improve in absolute terms, but we cannot all simultaneously improve in relative terms. And that is what positional goods are all about – signalising a high position in a ranking, that is, a relation to others.  This leads to a problem. Positional goods are used to signalise something that is by definition scarce, and yet the product which does the signalling is not scarce, or at least not inherently. You can increase the number of goods which signal a position in the Top 20 (of whatever), but the number of places in that Top 20 will only ever be, er, twenty. Increasing the number of signalling products will simply destroy their signalling function. Which is why the early owners of such a signalling product can get really mad at you if you acquire one too.

We have all seen this phenomenon. Those of my age (1980 vintage) have probably witnessed it for the first time in their early teens, when an increasing number of their schoolmates tried to look like Nirvana singer Kurt Cobain, and being a fan of that band lost its ‘edginess’. ‘Being alternative’ is a positional good. We cannot all be alternative [1]. Literally not.

Now remember how the ‘early adopters’ responded when Nirvana fandom went mainstream, and their social status was threatened, because there are clear parallels with PC: some of them went on to more extreme styles; others tried to repair the broken signal by giving endless sermons about the differences between ‘those who are in the know’ and ‘the poseurs’.

PC-brigadiers behave exactly like owners of a positional good who panic because wider availability of that good threatens their social status. The PC brigade has been highly successful in creating new social taboos, but their success is their very problem. Moral superiority is a prime example of a positional good, because we cannot all be morally superior to each other. Once you have successfully exorcised a word or an opinion, how do you differentiate yourself from others now? You need new things to be outraged about, new ways of asserting your imagined moral superiority.

You can do that by insisting that the no real progress has been made, that your issue is as real as ever, and just manifests itself in more subtle ways. Many people may imitate your rhetoric, but they do not really mean it, they are faking it, they are poseurs (here’s a nice example). You can also hugely inflate the definition of an existing offense (plenty of nice examples here.) Or you can move on to discover new things to label ‘offensive’, new victim groups, new patterns of dominance and oppression.

If I am right, then Political Correctness is really just a special form of conspicuous consumption, leading to a zero-sum status race. The fact that PC fans are still constantly outraged, despite the fact that PC has never been so pervasive, would then just be a special form of the Easterlin Paradox.

Keep up the good work, spiked team. But bear in mind that you are up against a powerful economic force.

Follow @K_Niemietz on Twitter.

[1] Book recommendation on this subject: Heath, J. and Potter, A. (2005): The rebel sell. How the counterculture became consumer culture, Chichester: Capstone Publishing.

Head of Political Economy

Dr Kristian Niemietz is the IEA's Head of Political Economy. Kristian studied Economics at the Humboldt Universität zu Berlin and the Universidad de Salamanca, graduating in 2007 as Diplom-Volkswirt (≈MSc in Economics). During his studies, he interned at the Central Bank of Bolivia (2004), the National Statistics Office of Paraguay (2005), and at the IEA (2006). He also studied Political Economy at King's College London, graduating in 2013 with a PhD. Kristian previously worked as a Research Fellow at the Berlin-based Institute for Free Enterprise (IUF), and taught Economics at King's College London. He is the author of the books "Socialism: The Failed Idea That Never Dies" (2019), "Universal Healthcare Without The NHS" (2016), "Redefining The Poverty Debate" (2012) and "A New Understanding of Poverty" (2011).

24 thoughts on “The economics of political correctness”

  1. Posted 30/04/2014 at 14:12 | Permalink

    Ah, too bad this article here wasn’t out yet while I was writing:
    Such a great illustration.

  2. Posted 30/04/2014 at 19:54 | Permalink

    You must — if you haven’t already — read Michael Silverstein on positioning in discourse (“’Cultural’ Concepts
    and the Language-Culture Nexus”, Current Anthropology Volume 45, Number 5, December 2004). Basically, much of ordinary discourse involves trying to one-up one another and to postion oneself favorably vis-a-vis all relevant knowledge.

  3. Posted 30/04/2014 at 22:55 | Permalink

    Steve Sailer got there way before you (here’s /a/ link, but he’s spelled it out more explicitly elsewhere, I just can’t find it, sorry). Basically says the same thing as you, that people use PC-er-than-thou to gain social status via moral superiority.

  4. Posted 30/04/2014 at 23:04 | Permalink

    Ok, here’s one, talking about Orwell’s concept of Crimestop:

    “Instead, you watch your TV—and learn from it what kind of thoughts raise your status and what kind lower your status.

    It’s a system of Status Climbing through Stupidity.”


  5. Posted 01/05/2014 at 12:10 | Permalink

    ‘Being alternative’ is a positional good. We cannot all be alternative.”

    At least one artist made this point in 2001. Try listening to Momus’s song Robocowboys from his album Folktronic. It’s a strange album but worth getting into over several listens.


    There’s so many insiders on the outside
    I think it’s beginning to be the inside
    And fire regulations have disallowed
    Another lonely cowboy
    From joining the lonely crowd

    There’s so many mavericks right off the map
    We’ve redrawn the map to bring them all back

    And breaking the rules has become the new rule
    They’re teaching it now at business school
    They’re all wild and crazy and one of a kind
    Anarchists to a man
    Everybody does it like no-one else can

  6. Posted 01/05/2014 at 14:58 | Permalink

    As it happens, I remember when i was in the sixth form, people saying how when you asked whether somebody liked a particular band a certain type of person would respond “I used to like their early stuff” (i.e. before they became popular). Though that was sometimes true of me too (e.g. Spandau Ballet and Chris de Burgh).

  7. Posted 01/05/2014 at 15:34 | Permalink

    “I had a choice. I could be an insider or I could be an outsider. Outsiders can say whatever they want. But people on the inside don’t listen to them. Insiders, however, get lots of access and a chance to push their ideas. People — powerful people — listen to what they have to say. But insiders also understand one unbreakable rule: They don’t criticize other insiders.”

    “Political correctness is about blackmail. It is used to control insiders and aspiring insiders by creating an inevitable tension between private behavior — which soon enough becomes secret behavior — and an unreachable and sanctimonious standard. PC creates an institutional hypocrisy through which the nomenklatura can be policed. The price of being an “insider” is consenting to have the Sword of Damocles dangle over your head.

    Do you wonder why the elite stick together? They have to.”

  8. Posted 01/05/2014 at 16:01 | Permalink

    Too-too cheeky.
    Your whimsical intellectual wheeze is amusant but completely glosses over the real objection to PC: that it is a concerted effort to control what is said and hence what is thought.
    The vital importance of free speech is not that a person may wax eloquent and express his inner muse but that the exchange of ideas, crucial to the progress of Man, be allowed its fullest freedom. The PC brigades aren’t mere dilettantes reserving some exclusive plum for themselves against the lumpenproletariat but inexorable ideologues hell-bent on being the sole definers of what is true and good. They are the contemporary aspirants to the office of the enforcers of ideological purity whose policing of ideas in the Soviet Union – declaring and propagating the Party consensus on what constitutes correct ideas and viciously punishing any dissent, branding it “counterrevolutionary and unpatriotic” – made that sad nation a death camp not only of human beings but of ideas and progress.

    The PC brigades are not irritating – they are dangerous.

  9. Posted 01/05/2014 at 16:14 | Permalink

    Is it just me or do the people who whine about “political correctness” tend to be much more politically correct and offended than the very people they claim are P.C.?

  10. Posted 02/05/2014 at 14:23 | Permalink

    @Philip, that’s an ambiguous one. In the mid-1990s, “I used to like their early stuff” was the obligatory answer one had to give when asked about the band Metallica. They, however, really did change their product as they became more famous. (Causation or just correlation? Or reverse-causation?) So, not a controlled experiment.

  11. Posted 02/05/2014 at 14:49 | Permalink

    The ultimate positional good is Fine Art that is so preposterously silly that normal everyday people don’t even *want* it and would throw it away if they found it tossed in their yard minus a famous signature.

    Here is a multimillion dollar Guggenheim museum “painting” that is famous in art history due to No.1 all time art critic Clement Greenberg’s bizarre fetish with “the flat picture plane” (detailed in Tom Wolfe’s book The Painted Word), and how this one doesn’t even use thick paint, but merely staining of the canvas itself:

    She was married to Robert Motherwell who made less “revolutionary” million dollar stuff, like this:

  12. Posted 02/05/2014 at 17:20 | Permalink

    Could this article have had the same impact with “signalise” replaced by plain old “signal” everywhere?

    >>>A positional good is a good that people acquire to signalise where they stand in a social hierarchy

    or rather

    A positional good is a good that people acquire to signal where they stand in a social hierarchy

    See. Cleaner, less jargony.

  13. Posted 02/05/2014 at 17:28 | Permalink

    Anonymous, but ‘signalise’ just sounds so much more active that ‘signal’. It makes me imagine someone hysterically waving with both arms, whereas with ‘signal’, I just think of someone holding up a hand.

  14. Posted 02/05/2014 at 18:01 | Permalink

    I think there’s some merit to looking at this as a ‘status’ thing, but I don’t believe that all people adopting these attitudes are actually trying to achieve ‘status’; some of them are trying to achieve ‘virtue’. Which is a somewhat different thing, but is also positional.

    You can purchase an awful lot of virtue very cheaply by just saying the right things. And if everybody is doing the same ‘good’ thing, then your superior virtue is lost.

    This might be splitting hairs. The ‘status’ positioning is more concerned with the opinion of others, and ‘virtue’ category is more concerned with the person’s opinion of themselves. But they otherwise seem to work very similarly. But it still feels to me that it’s a distinction worth noting.

  15. Posted 02/05/2014 at 18:46 | Permalink

    I agree with Kris above– the ur-example of a social “positional good” isn’t Nirvana, it’s Metallica.

  16. Posted 02/05/2014 at 22:16 | Permalink

    The given examples of positional goods are quite faulty. If I inherently enjoy a good wine and that wine suddenly gains popularity, the price may increase or access may decrease. If a broader set of people attend a college, its academic offerings may change or the interaction between students and professors may become more limited or lower-quality professors may be brought on to meet demand, all of which damage the quality of the “product.” If my favorite band to watch in small venues blows up, they will tour amphitheaters and my interaction with their music will necessarily be changed.

    Of course PC-ness isn’t quite like that, but you’re also begging the question that all PC activity is for the sake of feeling morally superior, which is frankly absurd–the goal is more likely raising awareness of how previously accepted behaviors may damage members of the community. The fact that the “movement” (if it is one; hard to identify a cohesive set of actors) has moved from one group to another is simply the result of society coming to realize the harm inflicted by actions that were not seen as harmful. Abuse of and discrimination against transgenders is something that was simply accepted as normal for a long time. Now we know better, or at least some people do. A decrease in such abuse is a good thing; through this lens, increasing the popularity of the “PC movement” is the goal. A cynical bunch here, I guess, who think everything is all talk and no action. I guess it belies the underlying feelings of the crowd if not using abusive or pejorative language is simply wearing a “PC mask” while continuing to foster abusive behaviors and pejorative opinions.

  17. Posted 03/05/2014 at 03:55 | Permalink

    Concern trolling at its worst – the irony of course being Spiked was formerly known as “Living Marxism” – the political journal of the Revolutionary Communist Party of Great Britain – until the early 90s. Frank Furedi and his acolytes were a nasty bunch of sectarians who mainly attacked other Leftist fringe parties by infiltration and black propaganda. Their penchant propaganda finally got the best of them in the early 90s when they opposed Nato intervention in Bosnia and accused Channel Four of faking the existence of the Serbian concentration camps, which cost them several million pounds in a libel verdict. After bankruptcy, Living Marxism was reincarnated as “Spiked” funded by several corporate backers with a new Libertarian ideology. Did they sell out or engage in some long term marxist strategy to undermine capitalism from within (Meta-trolling?) Nah, most likely they are just corporate hacks like the AEI….:)

  18. Posted 03/05/2014 at 19:57 | Permalink

    Political Correct? Corporate money in politics, Large blocks of poor people, Billionaires and their advantages in the voting booth, Public financed colleges who ask $300 to $500 per credit hour. Fairness for all? Middle Americans striving for a job? Poor cities throughout America? Supreme Court decisions of late,advantage for who seems obvious.Group lobbyists that negate my vote doesn’t seem to be correct to me! Good times for the public, FDR, TR, JFK, HT, and a strong personality who succeeded JFK and got many laws passed that provided fairness for all, Lyndon Johnson,

  19. Posted 10/05/2014 at 19:43 | Permalink

    Excellent. Of course there’s also the fact that insisting a wrong continues to exist provides employment for those whose career it is to “address” such wrongs, a la Jessie Jackson and Al Sharpton in the US. To admit progress has been made is to risk ending the gravy train. So there’s a bit of self-preservation as well.

  20. Posted 20/07/2014 at 16:12 | Permalink
  21. Posted 29/07/2014 at 16:36 | Permalink

    “If I value those goods for their intrinsic qualities, their increasing popularity will not trouble me at all. After all, the enjoyment derived from wine or learning is not fixed, so your enjoyment does not subtract from my enjoyment. I may even invite others to join me – we can all have more of it.”

    You’re missing a third possibility: when the supply is limited. If you like fine Bordeaux, we cannot all have more of it. The quantity is fixed: it cannot be increased much by competition and entrepreneurship. Other people learning about it will simply push the price up for me.

  22. Posted 28/03/2015 at 15:38 | Permalink

    Stop using the word signalise. Use convey. Use mark. Use indicate. Anything but signalise which is a terrible choice. Signalise is a poor choice because there are other, better words to use to impart your meaning.

  23. Posted 28/03/2015 at 15:42 | Permalink

    This can also be seen in PCers by what they choose to avoid: “I’m gluten free. I’m building a tiny house.” And so on. Conspicuous avoidance is all the rage amongst the swells.

  24. Posted 27/09/2015 at 04:20 | Permalink

    Status signalling is covered very well in this book for (oddly enough) actors:

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