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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.
Posted by Tyler Cowen on September 3, 2006 at 06:45 PM in Economics | Permalink
Comments
Absolutely correct.
This, by the way, explains much about the poor quality of the debate, such as it is, over illegal immigration.
Status competition in the upper reaches of American life still largely consists of whites trying to claw their way to the top over other whites, who make up, for example, 99 percent of the Fortune 500 CEOs and 94% of the Hollywood screenwriters.
The articulate and affluent who profit from illegal immigration look down their noses at anyone who wants to reduce it. They don’t debate dissenters; they dismiss them. Their most effective ploy has been to insinuate that only shallow people think deeply about immigration. The more profound sort of intellect, the fashionable imply, displays an insouciant heedlessness about the long-term impact of immigration.
Yet the well-educated and well-to-do aren’t expected to subject their own children to the realities of living among the diverse. They search out homes removed by distance or doormen from concentrations of illegal aliens—although not so far that the immigrants can’t come and clean their houses tax-free. As our Ascendancy of the Sensitive sees it, that their views are utterly contradicted by how they order their daily lives is proof not of their hypocrisy but of how elevated their thinking is.
This doesn’t mean that the white elites view minorities as their equals. Far from it. Instead, they can’t conceive of them as competition. Nobody from Chiapas is going to take my job.
http://www.amconmag.com/2006/2006_02_13/article.html
Posted by: Steve Sailers at Sep 3, 2006 7:21:52 PM
Can I just say that I knew a Korean grocer couple who won 1/4 million in a lottery?
I'm sure there's a lesson there somewhere, I just don't know what it is.
Posted by: tom s. at Sep 3, 2006 7:55:13 PM
The real problem is not spite, it's socially inefficient conspicuous consumption. Research shows that conspicuous consumption is a luxury good, while charitable contributions are not.
Pigouvean taxes on conspicuous consumption make good economic sense. They are not an endorsement of envy or spite any more than taxes on cigarettes are an endorsement of smoking.
Posted by: guest at Sep 3, 2006 8:08:57 PM
So what's wrong with velvet paintings of Elvis? Those of us in the Philistine Liberation Organization love them!
For more on the Philistine Liberation Organization, see this:
http://www.eclectecon.com/posts/1101379680.shtml
Posted by: EclectEcon at Sep 3, 2006 9:40:11 PM
Good comments from both Steve Sailer and guest.
As much as I disagree with Tyler some of the time, this blog does have some pretty good conversation.
Posted by: Dirk at Sep 3, 2006 10:10:09 PM
Great blog! Blog is pretty good for debates. Could there be really a bottom line between the rich and poor? It is only man alone who would make some issues. WE are all created equally and that't just what I need to believe at.
Posted by: tin6 at Sep 3, 2006 10:13:56 PM
Guest, that study is awful. It uses the percentage of investment assets. Of course people who make 50K-100K donate a larger percent of their investment assets than people who make $10M. The people who make 50K-100K have exponentially smaller investment assets! If you look at donations as a percent of income, I'm pretty sure the rich people will take the lead.
Actually, the crappy study was a good trick to try to get the rich to engage in even more conspicuous consumption through philanthropy. Perhaps I am their unwitting lackey of the wealthy for pointing out the obvious flaws in the study.
Posted by: Keith at Sep 3, 2006 11:14:43 PM
Spite is preaching that the estate tax is good and then giving billions to a charitable foundation to avoid estate taxes. Spite is setting up a foundation worth billions for charity work in Africa, sending the money as far from the people who made that fortune possible as you can get and still be on the same planet.
In both cases, a spiteful game of keep away.
Posted by: Tia at Sep 4, 2006 12:32:59 AM
Not to be rude, but unless you have a definition of "rich" and "poor" we can all agree on, and unless you know at least, oh, 10,000 poor and 10,000 rich people, AND unless you have the ability to read all of their minds, shut up. Again, not to be rude. But seriously, shut up.
I mean that in a nice, sock-you-in-the-arm sort of way. Unless you're DeLong. In that case, shut up.
Posted by: HarmoniousJosh at Sep 4, 2006 12:46:03 AM
Well, reading Tuchman on the 14th century. I could quote some the descriptions of wedding feasts and tournaments or the mad acquisitiveness of the Duc de Berry but there is at least the appearance that conspicuous competition can get really out of hand. Good jobs were created, but they may not have been that great, since various levels of workers were taxed into starvation in order to pay for the ever escalating displays of wealth. This, to a greater or lesser degree , was repeated in Veblen's Gilded Age.
An argument against extreme inequality might be to spare the ultra-rich this stress and pressure of status demonstration and competition. We must have some pity here.
Posted by: bob mcmanus at Sep 4, 2006 1:38:34 AM
Keith:
Philanthropy does not really qualify as conspicuous consumption. Sure, it exerts a status externality, but that's more than balanced out by the positive externality on the charity recipient.
Posted by: guest at Sep 4, 2006 5:21:55 AM
When ever I see the word externality my eyes glaze over. To see it twice in one post drives me to suicide...
Posted by: Stuart at Sep 4, 2006 6:40:25 AM
Aren't there positive externalities when a rich guy buys a sailboat?
Posted by: Hei Lun Chan at Sep 4, 2006 7:57:41 AM
"When ever I see the word externality my eyes glaze over." - Sounds like an externality to me: no one makes you read it :-)
Posted by: tom s. at Sep 4, 2006 9:16:50 AM
What's astonishing to me is how exercised Brad is about the "moneyed" rich.
Yet surely, those who are more talented, more intelligent, or more beautiful are just as susceptible to this sort of spitefulness (if not more so) than the moneyed rich? And unlike money, these differences are less amenable to competition without getting into Harrison Bergeron style handicapping.
Most of all, I am constantly astonished at how liberals want to legislate secular morality when it comes to wealth and envy while banning all moral legislation that comes from tradition or history (such as those laws based upon Biblical antecedents or colonial history).
Posted by: Hal 9000 at Sep 4, 2006 10:13:46 AM
It is pathologically interesting that commentators on the "spiteful" rich don't notice that their own policy recommendations are nothing but linguistically tricked-out variants on a playground mob muttering, "That kid has a nicer lunchbox than us -- let's take it away from him." When enfranchised mobs can deprive designated victims of the right to peaceably enjoy their legally obtained property, then none of us is safe.
Posted by: Axel Kassel at Sep 4, 2006 11:23:42 AM
Axel:
Actually, that's closer to Brad's argument - "That kid has more money than us - let's take it away from him before he buys a nice lunchbox and makes us look bad".
My argument is more like: "That kid has a nicer lunchbox thanb us, and that makes us look bad. Let's ask him for compensation. If he doesn't compensate us, let's all go out and buy a nice lunchbox - that'll teach him a lesson."
Posted by: guest at Sep 4, 2006 1:00:59 PM
"A fanatic is one who can't change his mind and won't change the subject." - Winston Churchill
Steve, buddy, that's you.
Interestingly enough, my parents were old-fashioned and out-of-date. You see, I was taught that envy and covetousness were wrong. I'm glad to see public policy has moved beyond such outdated notions.
- Josh
Posted by: Wild Pegasus at Sep 4, 2006 2:11:07 PM
My only complaint with the rich is they bought the federal government and won't give it back.
And then they gave us Bush vs. Gore as some kind of joke.
And then they gave us Bush again just to rub it in.
Posted by: save the rustbelt at Sep 4, 2006 2:33:19 PM
Axel - [smacks forehead] I see now. You're right of course. All my adult life the politics I've been supporting, and which I thought I had good reason to believe in, is in fact just playground jealousy. I just didn't see it until you explained it so convincingly. Your eloquence has persuaded me - I'll become a libertarian.
On the other hand, maybe that would be the politics of "neener neener neener"?
Posted by: tom s. at Sep 4, 2006 2:57:47 PM
I can't believe so many libertarians are giving this idea the time of day. Shouldn't we be free to feel however we want about whatever we want, rationally or otherwise?
Posted by: Jeff Brown at Sep 4, 2006 3:07:03 PM
Steve Sailor says.... "As our Ascendancy of the Sensitive sees it, that their views are utterly contradicted by how they order their daily lives is proof not of their hypocrisy but of how elevated their thinking is."
I think you're missing one element here. A substantial portion of the rich realize that immigration is good for them but bad for a lot of their fellow citizens. Remember there's a lot of intelligence in those country clubs, and a lot of them know privately what they won't say publicly.
So then it's just a matter of playing partisan politics to their own advantage, which is different than hypocrisy, and something everyone can appreciate.
I'm on my way to country club membership, and as such I'm ambivalent towards immigration.
Posted by: BillWallace at Sep 4, 2006 4:24:39 PM
Brad De Long censored my comments, but that was my fault. I was spiting him by being more insightful and creative than he was.
Posted by: Keith at Sep 4, 2006 5:35:23 PM
Most spite and envy is between peers and competitors and it is not laudable. This may or may not have to do with money.
The real reason for the generalized hatred of the rich expressed by some people is their sense of entitlement.
They think that the rich have power and control that they are equally entitled to. In our country this has resulted in a growing economy. If the rich are in control evidently they are doing a pretty good job. Why turn things over to the malcontents?
Another reason is that critics believe that the poor are entitled to the wealth of the rich because they are poor. Again the growing economy has enabled many of the needs of the poor to be ameliorated. For one thing, who is the best person to get a job from? Answer, a rich person or profitable company. Secondly, the rich can afford to pay a lot of taxes, some of which can be used to ameliorate poverty. Again, the rich are doing a relatively good job of feeding and employing the poor, so why hate them. What are the malcontents doing to help the poor?
Posted by: Dave at Sep 4, 2006 9:52:48 PM
spite is a giffen good?
Posted by: rdg at Sep 5, 2006 9:57:16 AM
Note on "conspicuous consumption" -- what is it? I know people who own sailboats who enjoy sailing greatly, and then I know people who buy (used, esoteric) books they never intend to read for the purpose of impressing guests. The first group have a very expensive hobby they enjoy, and the second group have a very cheap method of trying to impress houseguests). I don't think either of these activities is particularly destructive. Also, I don't think there's necessarily anything wrong with trying to impress other people.
What's amusing is that I've gotten to see this in action on the Actuarial Outpost, a bulletin board for actuaries and actuarial types (i.e., those of us who haven't finished taking exams).
In a recent thread on advice over how many exams to take in one sitting (most people take only one exam per sitting, but some manage two or more), it's gotten to be a boasting content over quality of one's university, how one did in the Putnam exam, how one has done on non-actuarial exams, how smart one's father was, how many exams one has passed at one time, how many exams one has scored 10 on, how many exams were passed when having small children or about to give birth (that was me), the scores of physics exams, etc.
Yes, this is definitely a status competition, and I've played it before at the Actuarial Outpost. However, very few of these boasting games involved money (we do that when the actuarial salary surveys come out, but that doesn't last as long and is nearly not as entertaining as the academic boasting.)
Even if there were "perfect distribution" of money/income/wealth, there would still be "favored people". It seems to me that those who use envy to back up their policies have got to realize that envy doesn't end... and that there's a reason that envy is considered one of the 7 Deadly Sins.
Posted by: meep at Sep 5, 2006 10:12:46 AM
"He misses the import of the phrase "conspicuous consumption." It's not the hard work and entrepreneurship that is to be discouraged. Make inventions, build enterprises, donate money for hospitals and libraries--that is all extremely meritorious and praiseworthy. It's the conspicuous consumption that is the problem."
I thought I would include another quote from Brad to liven up the discussion.
And this:
"Surely spite is at least as offensive an other-regarding preference as envy, isn't it?"
I mean, why would anyone buy a hummer unless there was a significant spite component to this purchase? It can't be for the looks! There are other better SUVs. There is only one reason - you want some groups people to not like you and some other groups to envy you. :)
Posted by: mickslam at Sep 5, 2006 10:54:44 AM
Isn't Mr. Delong in CA?
Maybe he should get out of there to some place less superficial and showy.
Posted by: Sandy P at Sep 5, 2006 11:34:54 AM
Isn't this essentially an argument in favor of sales taxes over income taxes? Taxing income is essentially a tax on productivity; the sales tax targets the conspicuous consumption that DeLong objects to. Throw in a base tax credit to compensate for consumption by low income earners, and we maintain progressivity.
Rich people who save & invest get taxed a moderate amount. Rich people who drive diamond-studded Humvees with gold rims get taxed a lot (and if their intent is to display their wealth, the sales tax even becomes an incentive for them to spend). Poor people don't get taxed at all, or might even get a negative tax rate.
Posted by: Independent George at Sep 5, 2006 11:50:31 AM
Meep: "Conspicuous Consumption" is anyone having anything you think is unnecessarily showy and ostentatious. It doesn't matter what the owner actually thinks about it. :)
I think the problem with any kind of "inequality of wealth is inherently bad and will lead to bad things" is that there's an "outrage minimum." I may indeed "suffer" from Bob having a nicer car, but the effect is swamped by the happiness I derive from being able to feed my kids and afford my home. Even if "the gap" increases, as long as more and more on the bottom are doing well, there's not going to be any major issues. Where the problem could occur would be in say, late 18th Century France, where the elites enjoyed lavish parties and fancy carriages while the massive majority were on the brink of starvation.
Perhaps in this extreme case of "we're going to riot and burn down the city unless the rich people suddenly get poorer" we could justify de-richifying them, but even then, unless the poor benefit, you still have problems.
I don't think people like DeLong genuinely believe that envy (justified or not) is a major facet of the happiness quotient of humanity. I think that's just scientific-ish rationalization. I think it's just some minor corner of their minds that still believes in the "fixed pie" theory that rich people can't get that way unless they take it from the poor people.
Posted by: Brian Moore at Sep 5, 2006 3:21:56 PM
Yet surely, those who are more talented, more intelligent, or more beautiful are just as susceptible to this sort of spitefulness (if not more so) than the moneyed rich?
No.
Posted by: Kiril at Sep 5, 2006 3:23:47 PM
BillWallace: "A substantial portion of the rich realize that immigration is good for them but bad for a lot of their fellow citizens."
Are you sure that's what they realize? I thought most corporate leaders and entrepreneurs believe immigration is good for the economy - and thus for all Americans. I've talked with both, and that's what they've told me. They've also told me that temporary workers from Mexico will be good for Mexico in the long run. Even if only 5 percent of such workers return home and start small businesses, that's still enough to impact the Mexican economy. We should want Mexico's economy to grow alongside ours.
Did the rich tell you something different? Were these the rich that actually grow the economy, or the ones who live off of inherited wealth?
Posted by: JohnDewey at Sep 6, 2006 7:22:13 AM
Hi meep--good to see a fellow RO'er.
I don't think that spite toward the poor is a significant portion of the motivation; it's much more about spite toward the "wannabe's"
Posted by: SamChevre at Sep 6, 2006 3:40:55 PM
Why is it that everyone finds the need to sum up class in one word? If you are rich, it can be for several different reasons. You earned it. You inherit it. Or-you take it dishonestly. If you are poor, it can be for several different reasons. You spent all your money. It was stolen. Or-you never possessed much money in the first place. Yes-people who are of lower standards than the wealthy DO suffer. Not only do they suffer by seeing the rich people enjoy themselves and their money, they get to relive the reason why they themselves are not wealthy.
Here is my take on prosperity.
If you are rich in this current day and age, it is most likely because you have earned it. Not many people find acceptable jobs unless they have college educations. If you work for it and want it bad enough, you shall receive.
Here is my take on less wealthy people.
I see people standing on the sides of the road or in medians with signs that say "Will work for food." My take on this is that if they have enough time to be standing on the side of the road, waiting for someone who will actually give them money, they have enough time to get a job at McDonald's. Working at McDonald's might not be THE most classy job-but I guarantee that check WILL PAY YOUR BILLS. That isn't to say that I don't feel sorry for those people who truly make an effort to get a job but can't or who aren't able to work.
Everyone has the opportunity to attain some kind of wealth no matter who they are.
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