Semi-Daily Journal Archive

The Blogspot archive of the weblog of J. Bradford DeLong, Professor of Economics and Chair of the PEIS major at U.C. Berkeley, a Research Associate of the National Bureau of Economic Research, and former Deputy Assistant Secretary of the U.S. Treasury.

Sunday, September 03, 2006

Making 'em Feel Small...

I wrote that one reason that America's rich today live the expensive and ostentatious lifestyles they do (rather than spending much more money on charity, or philanthropy) is that it is a way of making other people feel small and unhappy:

Brad DeLong's Semi-Daily Journal: Lyndon Johnson, Yes. William Jennings Bryan, No.: I'm enough of a touchy-feely sociology-lover to believe that a good chunk of the utility the rich derive from their conspicuous consumption is transferred to them from the poor...

and that as a result:

...the happiness America's working poor and middle class derive from the compensation distribution--given their compensation, the compensation of the rich, and the lifestyles of the rich and famous--seems to me to be certainly less than that of their counterparts back in 1973.

Greg Mankiw translates this into:

Greg Mankiw's Blog: [T]he answer is less obvious if, as Brad suggests, people derive utility from comparisons with others. In this case, making the rich poorer raises others' welfare, even if their material standard of living is unchanged. In Brad's world, a rich person conveys a type of negative externality, like pollution. High taxes on the rich can be seen as Pigovian. Economists like me complain that high tax rates on high earners discourage their hard work and entrepreneurship. The Veblenesque Pigovian economist replies, "Precisely!" I must confess that I do not have a good retort to the argument.... But I am uncomfortable making envy a basis for public policy...

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.

Surely spite is at least as offensive an other-regarding preference as envy, isn't it? Surely public policy should weigh the spite-generated utility the rich gain from their conspicuous consumption as worth less than nothing, shouldn't it?

And Jane Galt talks about how:

Asymmetrical Information: Should we cut down the tall poppies to give the shorter ones more light?: it is repulsive to make people suffer just because others enjoy it.... The quest for autonomy, the thirst for knowlege, the desire to live a cleaner, healthier, richer life, free of hunger and want... these are the sorts of values we want our government to express and empower. Envy is not.

thus missing my point. My point was that the rich are spiteful--that they enjoy the envy of the poor.

Perhaps some sociologist or psychologist or social psychologist can explain why the reaction is one of jumping to condemn the poor whom the displays by the rich make feel small, rather than to condemn the rich for making the displays in order to feel large...


Blissex takes on the role of Apostle to the Gentiles, and tries to shed light on the issues. He returns depressed:

http://delong.typepad.com/sdj/2006/09/lyndon_johnson_.html#comment-21888738: Hi I have been very depressed to see that Greg Mankiw first and then ''Jane Galt'' in an even worse fashion have twisted DeLong's comments in this post in a way that I think is thoroughly vile: http://JaneGalt.net/archives/009434.html

(Mankiw): But the answer is less obvious if, as Brad suggests, people derive utility from comparisons with others. In this case, making the rich poorer raises others' welfare, even if their material standard of living is unchanged.

(''Jane Galt'') No, I think the reason that we recoil is that it is repulsive to make people suffer just because others enjoy it. And it is horifying to give free reign to our worst impulses through the power of the state.

I have tried to explain what I think DeLong actually meant, quite clearly, and I hope that I haven't misinterpreted it myself: http://JaneGalt.net/cgi-bin/MT/mt-comments.cgi?entry_id=9434#110374 http://JaneGalt.net/cgi-bin/MT/mt-comments.cgi?entry_id=9434#110379.

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