Spite
My point was that the rich are spiteful–that they enjoy the envy of the poor.
Putting aside whether the poor are more spiteful toward each other (which is in fact my view), at the relevant margin the spiteful rich mainly enjoy the envy of the other rich, not the envy of the poor. A rich person who sought or enjoyed the envy of the poor would be considered a loser by the other rich. And having that reputation is a terrible fate. The rich have a strong incentive to train themselves out of such "low level" forms of spite, which are viewed as no better than naming your kid "Jed" or buying a velvet painting of Elvis.
Brad follows up:
Surely public policy should weigh the spite-generated utility the rich
gain from their conspicuous consumption as worth less than nothing,
shouldn’t it?
In my view the "spite game" of the rich is not so grim. It is mostly positive-sum, if only because in the rich-on-rich competition, each rich person self-deceives, defines a new dimension of quality, and calls himself the winner. This process is sometimes sad, but I don’t see an ethical reason to downgrade those pleasures. Am I in fact so different? I enjoy being part of (what I think is) the best "struggling to redefine libertarianism, economics survey, scattered cultural recommendations, occasional dating advice" blog out there. It doesn’t much bother me that Leibniz or for that matter Joe Stiglitz was/is much smarter than I am.
I view status competition as closer to a Tiebout hypothesis of quasi-efficient sorting; perhaps Brad views it as a long and potent hammer, deliberately wielded so as to crash into the front door of homes in Camden.
Many of the poor resent the successful Korean grocer more than they resent Paris Hilton. Yet I wouldn’t want to tax the grocer for that reason, even if he does sometimes gloat. Those "formerly poor who are making it" are often the people I least want to tax (in fact both Brad and I wish to subsidize them through EITC), yet they are often the most envied.
The bottom line: I’m not denying the standard efficiency-combined-with-Willie-Sutton reasons for taxing the rich, but I would not add spiteful preferences to those rationales.
Addendum: Here is Greg Mankiw’s response to Brad.