Putting Peer Pressure to Work: A Q&A with Robert Frank

Robert Frank used to believe that any individual action a person takes to reduce their carbon footprint—eating less meat, driving a hybrid car, walking instead of driving to work—would have a tiny, negligible impact on the planet. As an economist, that was the prevailing wisdom. Not anymore. In his newest book, Under the Influence: Putting Peer Pressure to Work, Frank examines the ways individual decisions wield tremendous influence. I spoke with Frank find out what changed his mind. Along the way, I learned more about the effects of smokers, billionaires, and Prius drivers on the people around them, including you.

Antonia Violante: When did you know that you wanted to write this book?

Robert Frank: The decision to write it came from the strong response to a New York Times column that I published in January of 2018. There is a smoking example that runs throughout the book. The column was about that example. We offered secondhand smoke injury as the reason for taxing cigarettes and banning smoking in restaurants, bars, and other places. In fact, there is real damage from secondhand smoke but compared to the damage of actually being a smoker, it’s trivial. In relation to that damage, it’s not nearly enough to justify stern measures like the ones we’ve adopted. The real harm smokers cause is they make other people more likely to smoke.

Nobody looks back and says, “What a terrible error we made by causing the smoking rate to go from 70 percent to 15 percent.” Every parent wants to raise kids in an environment where their kids will be less likely to smoke. And that’s exactly the result we achieved by the policies we adopted. We adopted them for the for the wrong reasons, but there was a perfectly legitimate reason to have adopted those policies. I saw lots of other analogous cases. This was a book just crying out to be written.

Your argument hinges on the idea of social contagion. What do you mean by social contagion?

It’s the notion that ideas and behaviors can spread from person to person in ways quite similar to how an infectious disease might spread. We’re creatures who are essentially ignorant about most things. What’s true, though, is that other people collectively know a great deal about a lot of things. So if you see other people acting with the appearance of confidence, that it’s what they ought to be doing, that’s a good reason for you to ask yourself whether you ought to be doing the same thing.

What’s an example of a decision, action, or lifestyle that people would be surprised to learn is socially contagious?

Sexual harassment is contagious. We know that from the studies of the virality of the #MeToo movement. Bullying is contagious. That’s been shown experimentally. The tendency to become obese is contagious. That surprised me. When the military would send a family to a new post, if it was a county that had an obesity rate 1 percent higher than where they’d been, the adult members of the family were 5 percent more likely to become obese in the new post. It’s a huge effect.

Smoking is contagious. We know that problem drinking has a strong contagion component. Freshmen who are assigned a roommate who was a heavier drinker in high school are much more likely to have significant grade point deficits in their sophomore year, with no other difference in the picture to attribute that to.

The real harm smokers cause is they make other people more likely to smoke.

The thing that would surprise most people—but doesn’t surprise me at all because I’ve been working on it for so long—is that what others spend shapes what we spend. When I was young, nobody thought about having a destination wedding. That was not on the menu at that time. My kids, they’ve all felt at least some pressure to incur the expense of traveling long distances to get to weddings, and now they’re invited to destination bachelor parties. It’s a thing that people do because other people are doing it. It’s not something that anyone would have invited somebody to do when I was graduating from college. We do that now, not because it’s cheaper or makes more sense but because other people are doing it.

Something I was surprised to learn was that my personal spending might be influenced by not only what my friends are buying but also what billionaires are buying too. Could you explain how billionaires are influencing my spending?

It’s not that you see what billionaires are spending and you go out and try to mimic that. Of course you couldn’t mimic it, or even be directly influenced by it in any significant way. But it does affect you. And the way it does is through a chain of indirect effects. What’s been happening in the economy writ large is that most of the income gains have been going to people at the top of the ladder. The higher up you go, the bigger the gains are. The people in the middle are about the same as they were 40 years ago in terms of hourly wages. But the people at the top, because they have more money, are spending more. That’s not a moral indictment of them. That’s just what people do. And every level when they get more money, they build bigger and buy more expensive things. The people like us don’t seem to get angry about that. On the contrary, we like to see pictures of the mansions and the yachts and helicopters. That’s entertainment, wealth porn.

Now the people in the rung just below the top, they feel they need a ballroom too. They build bigger. There’s a group below them that they socialize with who now feels a dining room for 12 isn’t quite big enough. They need a dining room that will comfortably sit 18. They build bigger. And it cascades all the way down the income ladder. The person in the middle is buying a house that’s now about 50 percent larger than it was in 1980. It’s much more than 50 percent more expensive. The income levels of people at that point in the income distribution haven’t grown much in the interim. They’re really stressed out financially to have to meet the mortgage payment on a house like that. Why are they doing it? It’s because other people like them are doing it. And why do other people like them do it? Because people just above them are building bigger, so they’re building bigger, too. The ultimate cause is the extra spending at the top.

When we take an individual action, the effect of it is small, but the direct effect of what we do is not the end of the story.

You could say to these people, “If you can’t afford the house you’re buying then you should buy a less expensive one.” But that’s not a good option either, because parents in most cases will do everything within reach to send their kids to the best schools they can. And the best schools are in the more expensive neighborhoods. If your aim as the median earner parent is just to send your kid to a school of average quality, you must somehow gain access to the median price house in your area, and that’s a way bigger burden for you economically now than it was 40 years ago because other people are spending differently.

You have another big idea about billionaires. People tend to think that if taxes were raised, particularly on people who are very wealthy, it would be harder for them to buy what they want. But you argue that’s not the case.

There’s a huge literature on the determinants of human well-being. It’s a contentious literature, but one of the few completely robust findings in that big literature is that if you get past a certain point, on many dimensions of private consumption, further increases don’t have any measurable impact on well-being.

If we imagine that all the houses that are 10,000 square feet suddenly grew to be 15,000 square feet, we would expect absolutely no increase in health, longevity, satisfaction, mood. The move from 10,000 to 15,000 square feet is a colossal waste of money. Those are real dollars that could have been used to buy things that we know would have made a material difference to people’s well-being and health.

If we imagine that all the houses that are 10,000 square feet suddenly grew to be 15,000 square feet, we would expect absolutely no increase in health, longevity, satisfaction, mood. The move from 10,000 to 15,000 square feet is a colossal waste of money.

In particular, the planet is burning up. We need to spend trillions of dollars in order to build the green energy infrastructure that’s going to prevent that from happening. The stroke of good luck is that there are just enough dollars being wasted under current arrangements and just the right instruments in the policy space to rechannel those dollars into the investments we need to make. All of that could happen without demanding any painful sacrifices from anyone.

[Read an excerpt from Frank’s book on the illusion that higher taxes make us less able to buy what we want, “The Mother of All Cognitive Illusions.”]

You mentioned to me in an earlier conversation that you used to think differently about conscious consumption. Can you talk about how your views changed?

The standard economist’s view is that with externalities like CO2 emissions, each individual’s share of the problem is minuscule. If you want to make any difference, you have to have policies that will induce people to take those steps. You need to fine them for emitting CO2 into the air, you need tax them and spend money to filter it out of the air. That was the conventional view and it was one I held for most of my career. What changed my mind about it was two things.

The first one is less important than the second one, but it got me thinking about the issue. When we take an individual action, the effect of it is small, but the direct effect of what we do is not the end of the story. The step we take is often influential in calling similar steps to the attention of others. We really saw the effect of contagion in the adoption of hybrid cars, for example.

In the early days, there was the Honda Civic hybrid and there was the same size, same price Toyota Prius hybrid. The Prius sold like hotcakes, and the Honda Civic hybrid barely sold at all. The reason for the difference is that the Prius looked dramatically different from other cars. Its body shape was distinctive. If somebody saw it they knew you were driving a hybrid, so it was an effective way to engage in virtue signaling. But even if you didn’t care about that, others could see at a glance that you were driving a hybrid and that might make them think: maybe it’s a smart idea to drive one, maybe it’s cheaper to drive one, or maybe it’s environmentally responsible to drive one. So the indirect effects of the individual actions you take to conserve energy are larger in many cases, many multiples larger, than just the direct effects. You might set off a cascade that would have a huge impact.

The more important reason why I changed my mind is that we don’t come into the world being a certain kind of person, we become the kind of people that we end up being, often by virtue of what we do along the way. This was one of Aristotle’s emphases, “We are what we repeatedly do.” He was very big on the importance of habit. By taking these individual steps, what happens is that we develop or reinforce a sense of identity as a climate advocate. If we didn’t have that identity to begin with, we’ll quickly develop it. If we did have it, we’ll strengthen it.