What the data actually shows
The economist Thorstein Veblen described conspicuous consumption over a century ago — spending intended to signal status — and the core idea has held up: some consumption is driven by display and relative standing rather than the use-value of the thing bought. Modern research has put numbers to a related mechanism.
Bertrand and Morse documented what they called 'trickle-down consumption': in areas where the richest households increased their spending, households further down the distribution also spent more, and saved less, than otherwise similar households elsewhere. The visible consumption of those at the top appeared to pull up the consumption of those below them, plausibly because it shifted what looked like a normal standard of living.
This fits a wider literature on reference groups and relative spending. People judge their consumption not in absolute terms but against a comparison set — neighbours, colleagues, social circles — so the same income can feel adequate or inadequate depending on whom you are surrounded by. Because reference points move with what others do, rising consumption around you can raise your own spending even with no change in your needs or income.
Why this feels different from how it actually is
It feels different because the spending almost never registers as competition. You experience it as a new normal — this is just what a family car costs now, this is what people do for a birthday — rather than as matching anyone. The reference point shifts beneath you, so the upgraded baseline feels like your own preference rather than a response to others.
It is also amplified by visibility. You can see what people drive, wear and post, but not what they earn, owe, or have saved. So the cues that reset your sense of normal are skewed toward the most visible, often debt-financed consumption, which makes the apparent standard higher than the financial reality behind it.
And the comparison is local and upward. Reference groups tend to cluster around people at or above your own level, and modern feeds surface the most impressive fraction of what peers do. The result is that 'what everyone seems to have' is drawn from an unrepresentative top slice, so keeping pace with it requires spending beyond what the true middle actually spends.
The reference point shifts beneath you, so the upgraded baseline feels like your own preference rather than a response to others.
What the research says to do about it
The most direct implication of the reference-group research is that changing what is visible to you changes the pull. Reducing exposure to the most consumption-heavy inputs — feeds and environments where display spending is constant — lowers the perceived norm you are measuring against, and with it the upward pressure on your own spending.
Anchoring decisions to your own stable numbers rather than to ambient cues is the other documented counterweight. Pre-committing to spending and saving rules — automating savings before discretionary spending, deciding purchases against a plan rather than against what peers just bought — removes the moment-by-moment comparison that the trickle-down effect works through.
Choosing comparison sets deliberately also helps, because relative standing is partly a matter of whom you stand next to. Spending on less visible, comparison-resistant goods — experiences, time, and uses of money that do not invite display — tends to deliver more durable satisfaction than spending aimed at matching what others have, according to the broader wellbeing literature.
What the research says does not help
Earning more in order to comfortably keep up rarely settles the feeling, because the reference point rises with you. As your income and surroundings move up, so does the visible spending around you, so the gap between what you have and what looks normal tends to persist at the new level rather than close.
Willpower alone — resolving to simply ignore what others spend — is a weak tool against an effect that works through perceived norms rather than conscious choice. Because the pull operates by quietly resetting what looks ordinary, it is better countered by changing your inputs and rules than by trying to out-discipline a shifting baseline.
Reading visible consumption as a reliable signal of wealth is actively misleading. Display spending is frequently debt-financed and is a poor proxy for net worth, so matching the people who look the most successful often means matching their spending, not their security — which is the opposite of what most people intend.
Matching the people who look the most successful often means matching their spending, not their security.
What this looks like in real life
"This is just what a family car costs now"
The upgraded baseline arrives without ever feeling like competition. Bigger cars, newer kitchens, and pricier holidays become visible in your circle, and your sense of what an ordinary life costs quietly moves up with them. The new normal feels like your own preference rather than a response to anyone — which is exactly why the pull is so easy to miss.
The raise that didn't close the gap
Someone earns more expecting to comfortably keep pace, but their surroundings move up too — the visible spending around them rises with their income. So the gap between what they have and what looks normal persists at the new level rather than closing. Relative standing is a moving target, which is why earning more rarely settles the feeling.
Real numbers in context
Bertrand and Morse's work is best understood as a direction rather than a single headline figure: where top-end spending rose, lower- and middle-income households nearby spent more and saved less than comparable households elsewhere. The estimated magnitudes are specific to their data and methods, so the durable takeaway is the existence and sign of the effect, not a precise percentage.
It is worth pairing this with how spending is distributed. Visible categories — vehicles, housing, recreation — make up a large share of household budgets, and visible consumption is easier to observe than saving, so the cues that reset 'normal' are skewed toward spending. Background context like the relatively low personal saving rate in recent years (often around 4–5% of disposable income in the U.S.) is consistent with a world where consumption norms run ahead of saving, though no single statistic proves the keeping-up mechanism on its own.