In Money Can Buy Happiness, Kling argued that Layard’s theory that people prefer relative higher incomes to relative absolute incomes was wrong. He stated that if this were the case, rich people would move to poor areas to enjoy their relative higher income.
I believe that Layard is on to something and people do prefer higher relative incomes versus absolute incomes. Just because rich people chose to live in upscale neighborhoods does not mean that they only compare themselves to people in this neighborhood. When considering how you measure up to others, you consider more people than just your neighbors. People who live in nice neighborhoods such as Birmingham or Northville are still aware of the people who live in the slums of Detroit and do feel superior relative to these people.
Someone who disagrees with this position might argue in order to feel superior to others you must live right beside them so that you can feel better about yourself everyday.
However, this......
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