Learning to Accept Envy

Economists are pretty comfortable with simple self-interest, where individuals maximize their own wealth. It's part of what makes them flint-eyed realists as opposed to naive social philosophers who think the world can be made better by convincing men to be selfless. That is, after being beaten up by utopians who envisaged a society ruled by thinking about society instead of themselves, most now see how selfishness is consistent with a growing economy (the invisible hand, Adam Smith), being nice (reciprocal altruism, see Robert Axelrod or Robert Trivers), and is an efficient way to incent people with relevant information to get them to do the right thing (Friedrich Hayek's work). Just consider that ants, who sacrifice themselves without pause for the group and work tirelessly for the tribe, are also genocidal maniacs. Our selfishness, paradoxically, makes us wealthy and nice.

Unfortunately, after having reconciled with greed, envy seems still outside acceptable behavior. Envy is one of the Seven Deadly Sins, and is rather prominent in the Ten Commandments (coveting neighbor's goods, God's envy of other gods). So, compared to simple greed, it has a similar pedigree, even if we think it worse than greed.

Several econ bloggers commented on Brad DeLong's remark that the rich gain utility from their relative consumption, and so the optimality of more progressive taxation. Alex Tabarrok remarked that we should not encourage envy by the lower-income people; Greg Mankiw sees envy as economically destructive, and arbitrary (stopping at our borders); Megan McArdle sees inequality in much more than income, which leads to absurdities if we tried to apply this to looks. All seem pretty intent on keeping envy out of their assumptions about human behavior, a vice more like pettiness than greed.

It's hard to avoid envy when a colleague gets a great new job, but that's not society's problem, just mine. Luck is a big part of life, and it's actually not pretty to envisage a world where payoffs are not so random. Consider that in competitive chess players have much less random outcomes than in other sports, and they are rather depressive bunch (see Tyler Cowen on this here, and he was a good young chess player). Randomness in life allows us all a little excessive optimism, and such optimism makes us happier and more successful.

Rober Frank's book on Social Darwinism, reviewed here in Slate, argues that because of conspicuous consumption driven by attempts to increase our relative status, we engage in lots of wasteful consumption analogous to elks with large antlers: we'd all be better off with smaller antlers (houses), but individually we all benefit from larger antlers (houses). He then thinks, why not tax consumption progressively, to the benefit of all? No fancy watches, cars, and grills, for anyone, will benefit everyone.

It's heartening to see so many taking up the envy paradigm--even if to say it's all wrong--because as I've argued, if we are primarily envious as opposed to greedy, that would explain the lack of a risk premium. I'm also OK with envy, in that we just started trying to figure out its implications, and it may turn out to be as innocuous, even beneficial, as with greed. For example, envy allows us to empathize with others who still don't need our money to survive, which describes virtually all of the poor in America; it's nice that we are charitable towards the poor today even though they are wealthy beyond anyone's dreams prior to the 20th century. As envy is rather hard-wired it would be odd if it were completely dysfunctional to our species, and so I suspect it is essential in moderate doses because every instinct we have has some base benefit (greed, lust, pride). In any case, it can still be important even if it makes us all worse off.

As to discouraging antler growth, the size of elephant seals, or Patek Phillipe watches, this seems to ignore the fact that almost all of the amenities of modern life are unanticipated benefits from someone who was probably partially driven by his desire to have the best car among his social circle. The great technology, art, and philosophy we enjoy is a by-product of selfish, and envious, individuals. Were we to prevent conspicuous consumption, how much less would we have? That's a hypothetical, but consider that many technologies started as baubles for the idle rich, and then became extremely useful for more mundane uses (no one anticipated computers or cars becoming essential household products).

Envy is ubiquitous, one of the Human Universals found in every culture at every time. It's not a societal problem, but a personal one, one that deserves moderation like so many of our instincts. Economists would do well to start taking seriously the implications of envy over greed, its effects show up in all sorts of unexpected, important places (eg, asset pricing theory).