Spite

by on September 3, 2006 at 6:45 pm in Economics | Permalink

Brad DeLong writes:

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.

1 Steve Sailers September 3, 2006 at 7:21 pm

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

2 guest September 3, 2006 at 8:08 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.

3 Dirk September 3, 2006 at 10:10 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.

4 Keith September 3, 2006 at 11:14 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.

5 HarmoniousJosh September 4, 2006 at 12:46 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.

6 guest September 4, 2006 at 5:21 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.

7 Hei Lun Chan September 4, 2006 at 7:57 am

Aren’t there positive externalities when a rich guy buys a sailboat?

8 Hal 9000 September 4, 2006 at 10:13 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).

9 guest September 4, 2006 at 1:00 pm

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.”

10 save the rustbelt September 4, 2006 at 2:33 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.

11 Jeff Brown September 4, 2006 at 3:07 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?

12 Keith September 4, 2006 at 5:35 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.

13 rdg September 5, 2006 at 9:57 am

spite is a giffen good?

14 mickslam September 5, 2006 at 10:54 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. 🙂

15 Independent George September 5, 2006 at 11:50 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.

16 Kiril September 5, 2006 at 3:23 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.

17 SamChevre September 6, 2006 at 3:40 pm

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”

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