Relative Deprivation

Definition

Relative deprivation refers to the perception of individuals or groups that they are worse off compared to others, leading to feelings of dissatisfaction and discontent. This concept emphasizes the importance of social comparison in economic decision-making, as people often evaluate their own circumstances in relation to those around them, rather than in absolute terms. It can significantly impact behaviors like saving and spending, influencing how individuals prioritize their financial goals.

5 Must Know Facts For Your Next Test

1. Relative deprivation can lead to feelings of frustration, anger, and even depression, as individuals feel they deserve more than what they have compared to others.
2. This perception can negatively affect savings behavior, as people might feel pressure to spend more to keep up with perceived peers.
3. Research shows that high levels of relative deprivation within a society can lead to increased consumer debt and lower savings rates.
4. Individuals experiencing relative deprivation may engage in behaviors aimed at compensating for their perceived shortcomings, such as excessive consumption or impulsive spending.
5. Policies aimed at reducing economic inequality may help mitigate the feelings of relative deprivation and its negative impacts on saving behavior.

Review Questions

• How does relative deprivation influence individual financial behaviors like saving and spending?
  • Relative deprivation significantly affects financial behaviors by fostering a sense of inadequacy in comparison to others. When individuals perceive themselves as having less than their peers, they may feel compelled to spend more to match that perceived status, often at the expense of saving. This can lead to increased consumer debt and a cycle of financial instability, as the need for social validation overshadows long-term financial planning.
• Discuss the role of social comparison in contributing to feelings of relative deprivation among different socioeconomic groups.
  • Social comparison plays a crucial role in shaping feelings of relative deprivation among socioeconomic groups. Individuals evaluate their financial situations against those of their peers or reference groups, leading to dissatisfaction if they perceive themselves as worse off. This dynamic can create a cycle where lower-income groups feel increasingly marginalized when they compare themselves to wealthier individuals, resulting in heightened feelings of inadequacy and a desire for increased consumption as a compensatory mechanism.
• Evaluate the implications of relative deprivation on economic policy and societal well-being.
  • The implications of relative deprivation on economic policy and societal well-being are profound. When a significant portion of the population feels deprived in relation to others, it can lead to social unrest and demand for policy changes aimed at addressing inequality. By recognizing the psychological impacts of relative deprivation, policymakers can implement strategies that reduce economic disparities and improve societal cohesion. Addressing these feelings through inclusive policies not only enhances individual well-being but also fosters a more stable and productive economy.

Related terms

Social Comparison: The process of evaluating oneself against others to determine one's own social value and status.

Framing Effect: A cognitive bias where people react differently depending on how information is presented, impacting decision-making.

Economic Inequality: The unequal distribution of wealth and resources within a population, often leading to perceptions of relative deprivation among disadvantaged groups.