the idea of the ‘positional good’

John Cassidy looks for meaning in the price of admission at Davos.

…Gillian Tett, who has a Ph.D. in social anthropology, quotes one Davos veteran to the effect that it is a self-help group for fearful and embattled C.E.O.s. The world is an increasingly “murky, complex, and unpredictable place,” Tett notes, wherein “hostility to elites is rising.” At Davos, it is true, the corporate bigwigs get to chinwag, socialize, and meet with clients in peace. Following violent protests a few years back, the Swiss police now erect roadblocks halfway up the mountain, and the nasties in black ski masks are largely limited to hurling snowballs at the attendees’ limousines as they whizz by. (Many people fly in by helicopter from Zurich, at a cost of $3,400 each way, thus sparing themselves any indignity.)

I wouldn’t push Tett’s argument too far, however. If C.E.O.s want to meet each other on the q.t., they can have breakfast at the Mayfair Regent or the Savoy. If they want some affirmation, they can agree to be profiled by Forbes or Fortune. The real key to Davos’s success, and reason why it has survived for forty years, is that it has turned into what economists refer to as “a positional good”—an item or service the value of which is mostly a function of its desirability to others.

The essence of positional goods, and the reason they cost so much, is their exclusivity. An apartment at 740 Park Avenue is a positional good, so is a painting by Andy Warhol, and so is a reservation at a trendy new restaurant. The fact that you can’t get in is the main reason you want to.

The same applies to Davos. If anybody (and by “anybody” I mean anybody who holds a senior job in a multinational corporation) could go—if you didn’t have to be “invited” and the entrance fee were, say, a mere $10,000—it wouldn’t attract the Sergey Brins, Rupert Murdochs, and Jamie Dimons of the world. The elaborate vetting procedures and stratospheric prices are ways of creating artificial scarcity. About the only people who can get in fairly easily and cheaply are journalists and heads of state, and that’s because they provide so much free publicity

via Rational Irrationality: Letter (not) from Davos : The New Yorker.

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