James's observation represents an early statement of a fundamental principle of psychology: A person's objective achievements often matter less than how those accomplishments are subjectively construed. Being one of the best in the world can mean little if it is coded not as a triumph over many, but as a loss to one. Being second best may not be as gratifying as perhaps it should.

Since James's time, of course, this idea has been both theoretically enriched and extensively documented. Social psychologists have shown that people's satisfaction with their objective circumstances is greatly affected by how their own circumstances compare with those of relevant others (Festinger, 1954; Suls & Miller, 1977; Taylor & Lobel, 1989). A 5% merit raise can be quite exhilarating until one learns that the person down the hall received an 8% increase. Psychologists have also demonstrated that satisfaction with an outcome likewise depends on how it compares with a person's original expectations (Atkinson, 1964; Feather, 1967, 1969). Someone who receives a 5% raise might be happier than someone who receives an 8% increase if the former expected less than the latter.