When we look at the real-world effects of status choices, though, it seems that the view of status as a zero-sum game (where losses of losers are balanced by gains of winners) is a very generous interpretation.
Losses of status, or having low status, seems to make people very miserable. Robin Hanson quotes the authors of Promises I Can Keep: Why Poor Women Put Motherhood Before Marriage on the harmful effects of status threats in maintaining poverty:
Conflicts over money do not usually erupt simply because the man cannot find a job or because he doesn’t earn as much as someone with better skills or education. Money usually becomes an issue because he seems unwilling to keep at a job for any length of time, usually because of issues related to respect. Some of the jobs he can get don’t pay enough to give him the self-respect he feels he needs, and others require him to get along with unpleasant customers and coworkers, and to maintain a submissive attitude toward the boss.
Clearly, a loss in status causes serious enough social pain that the affected person is willing to risk his job and family to avoid or repair it. But don't gains in status make the winners much happier, rendering status contests at least Kaldor-Hicks efficient?
Not so, suggests a study on the welfare effects of commuting (Stress That Doesn't Pay: The Commuting Paradox). From the abstract:
People spend a lot of time commuting and often find it a burden. According to economics, the burden of commuting is chosen when compensated either on the labor or on the housing market so that individuals’ utility is equalized. However, in a direct test of this strong notion of equilibrium, we find that people with longer commuting time report systematically lower subjective well-being. Additional empirical analyses do not find institutional explanations of the empirical results that commuters systematically incur losses.
Unfortunately, the status gains a person may derive from commuting to work (high-status job, high-status suburban house, etc.) are not made up for by greater happiness; people with longer commutes are consistently less happy than people with shorter commutes. This is true even where people longer commute time is associated with higher income.
We are used to seeing sad low-status people, but what's missing is the ecstatic high-status people. It seems that the best we can achieve is somewhat stable mediocre life satisfaction, but the worst we can achieve is very bad indeed.