Journal of Economic Growth

, Volume 19, Issue 4, pp 407–438 | Cite as

The two sides of envy

Article

Abstract

The two sides of envy, destructive and constructive, give rise to qualitatively different equilibria, depending on the economic, institutional, and cultural environment. If investment opportunities are scarce, inequality is high, property rights are not secure, and social comparisons are strong, society is likely to be in the “fear equilibrium,” in which better endowed agents underinvest in order to avoid destructive envy of the relatively poor. Otherwise, the standard “keeping up with the Joneses” competition arises, and envy is satisfied through suboptimally high efforts. Economic growth expands the production possibilities frontier and triggers an endogenous transition from one equilibrium to the other causing a qualitative shift in the relationship between envy and economic performance: envy-avoidance behavior with its adverse effect on investment paves the way to creative emulation. From a welfare perspective, better institutions and wealth redistribution that move the society away from the low-output fear equilibrium need not be Pareto improving in the short run, as they unleash the negative consumption externality. In the long run, such policies contribute to an increase in social welfare due to enhanced productivity growth.

Keywords

Culture Economic growth Envy Inequality Institutions Redistribution 

JEL Classification

D31 D62 D74 O15 O43 Z13 

Notes

Acknowledgments

I am grateful to the Editor, Oded Galor, and two anonymous referees for their advice. Quamrul Ashraf, Pedro Dal Bó, Carl-Johan Dalgaard, Geoffroy de Clippel, Peter Howitt, Mark Koyama, Nippe Lagerlöf, Ross Levine, Glenn Loury, Stelios Michalopoulos, Michael Ostrovsky, Jean-Philippe Platteau, Louis Putterman, Eytan Sheshinski, Enrico Spolaore, Ilya Strebulaev, Holger Strulik, David Weil, and Peyton Young provided valuable comments. I also thank seminar and conference participants at American University, Brown University, George Mason University, Gettysburg College, Higher School of Economics, Fall 2011 Midwest economic theory meetings at Vanderbilt University, Moscow State University, 2011 NEUDC conference at Yale University, 2013 ASREC conference in Arlington, 2013 EEA-ESEM congress in Gothenburg, New Economic School, SEA 80th annual conference in Atlanta, University of Copenhagen, University of Namur, University of Oxford, University of South Carolina, and Williams College.

Supplementary material

10887_2014_9106_MOESM1_ESM.pdf (281 kb)
Supplementary material 1 (pdf 280 KB)
10887_2014_9106_MOESM2_ESM.pdf (275 kb)
Supplementary material 2 (pdf 274 KB)

References

  1. Aghion, P., Caroli, E., & García-Peñalosa, C. (1999). Inequality and economic growth: The perspective of the new growth theories. Journal of Economic Literature, 37(4), 1615–1660.CrossRefGoogle Scholar
  2. Banerjee, A. (1990). Envy. In B. Dutta, S. Gangopadhyay, D. Ray, & D. Mookherjee (Eds.), Economic theory and policy: Essays in honour of Dipak Banerjee (pp. 91–111). New York: Oxford University Press.Google Scholar
  3. Barnett, R. C., Bhattacharya, J., & Bunzel, H. (2010). Choosing to keep up with the Joneses and income inequality. Economic Theory, 45(3), 469–496.CrossRefGoogle Scholar
  4. Belk, R. W. (1995). Collecting in a consumer society. London: Routledge.Google Scholar
  5. Benhabib, J., Bisin, A., & Jackson, M. (Eds.). (2011). Handbook of social economics (Vol. 1A). Amsterdam: Elsevier.Google Scholar
  6. Boskin, M. J., & Sheshinski, E. (1978). Optimal redistributive taxation when individual welfare depends upon relative income. Quarterly Journal of Economics, 92(4), 589–601.CrossRefGoogle Scholar
  7. Bowles, S., & Park, Y. (2005). Emulation, inequality, and work hours: Was Thorsten Veblen right? Economic Journal, 115(507), F397–F412.CrossRefGoogle Scholar
  8. Cancian, F. (1965). Economics and prestige in a Maya community. Stanford, CA: Stanford University Press.Google Scholar
  9. Card, D., Mas, A., Moretti, E., & Saez, E. (2012). Inequality at work: The effect of peer salaries on job satisfaction. American Economic Review, 102(6), 2981–3003.CrossRefGoogle Scholar
  10. Carroll, C. D., Overland, J. R., & Weil, D. N. (1997). Comparison utility in a growth model. Journal of Economic Growth, 2(4), 339–367.CrossRefGoogle Scholar
  11. Clanton, G. (2006). Jealousy and envy, Chapter 18. In J. E. Stets & J. H. Turner (Eds.), Handbook of the sociology of emotions (pp. 410–442). Berlin: Springer.Google Scholar
  12. Clark, A. E., & Senik, C. (2010). Who compares to whom? The anatomy of income comparisons in Europe. Economic Journal, 120(544), 573–594.Google Scholar
  13. Clark, A. E., Frijters, P., & Shields, M. (2008). Relative income, happiness and utility: An explanation for the Easterlin Paradox and other puzzles. Journal of Economic Literature, 46(1), 95–144.CrossRefGoogle Scholar
  14. Clark, A. E., & Oswald, A. J. (1998). Comparison-concave utility and following behaviour in social and economic settings. Journal of Public Economics, 70(1), 133–155.CrossRefGoogle Scholar
  15. Corneo, G., & Jeanne, O. (1998). Social organization, status, and savings behavior. Journal of Public Economics, 70(1), 37–51.CrossRefGoogle Scholar
  16. Cozzi, G. (2004). Rat race, redistribution, and growth. Review of Economic Dynamics, 7(4), 900–915.CrossRefGoogle Scholar
  17. D’Arms, J., & Kerr, A. D. (2008). Envy in the philosophical tradition, Chapter 3. In R. H. Smith (Ed.), Envy: Theory and research (pp. 39–59). Oxford: Oxford University Press.Google Scholar
  18. Demsetz, H. (1967). Toward a theory of property rights. American Economic Review, 57(2), 347–359.Google Scholar
  19. Doepke, M., & Zilibotti, F. (2008). Occupational choice and the spirit of capitalism. Quarterly Journal of Economics, 123(2), 747–793.CrossRefGoogle Scholar
  20. Dow, J. (1981). The image of limited production: Envy and the domestic mode of production in peasant society. Human Organization, 40(4), 360–363.Google Scholar
  21. Dupor, B., & Liu, W.-F. (2003). Jealousy and equilibrium overconsumption. American Economic Review, 93(1), 423–428.CrossRefGoogle Scholar
  22. Elster, J. (1991). Envy in social life, Chapter 3. In R. J. Zeckhauser (Ed.), Strategy and choice (pp. 49–82). Cambridge, MA: MIT Press.Google Scholar
  23. Falk, A., & Knell, M. (2004). Choosing the Joneses: Endogenous goals and reference standards. Scandinavian Journal of Economics, 106(3), 417–435.Google Scholar
  24. Fernández de la Mora, G. (1987). Egalitarian envy: The political foundations of social justice. New York: Paragon House Publishers.Google Scholar
  25. Fernández, R. (2011). Does culture matter?, Chapter 11. In J. Benhabib, A. Bisin, & M. Jackson (Eds.), Handbook of social economics (Vol. 1A, pp. 481–510). Amsterdam: Elsevier.Google Scholar
  26. Fliessbach, K., Weber, B., Trautner, P., Dohmen, T., Sunde, U., Elger, C. E., et al. (2007). Social comparison affects reward-related brain activity in the human ventral striatum. Science, 318(5854), 1305–1308.Google Scholar
  27. Foster, G. (1972). The anatomy of envy: A study in symbolic behavior. Current Anthropology, 13(2), 165–202.CrossRefGoogle Scholar
  28. Foster, G. (1979). Tzintzuntzan: Mexican peasants in a changing world. New York: Elsevier.Google Scholar
  29. Frank, R. H. (1985). The demand for unobservable and other nonpositional goods. American Economic Review, 75(1), 101–116.Google Scholar
  30. Frank, R. H. (2007). Falling behind: How rising inequality harms the middle class. Berkeley: University of California Press.Google Scholar
  31. Frank, R. H., & Heffetz, O. (2011). Preferences for status: Evidence and economic implications, Chapter 3. In J. Benhabib, A. Bisin, & M. Jackson (Eds.), Handbook of social economics (Vol. 1A, pp. 69–91). Amsterdam: Elsevier.Google Scholar
  32. Galor, O., & Michalopoulos, S. (2012). Evolution and the growth process: Natural selection of entrepreneurial traits. Journal of Economic Theory, 147(2), 759–780.Google Scholar
  33. Gershman, B. (2012). Economic development, institutions, and culture through the lens of envy. PhD dissertation, Brown University.Google Scholar
  34. Gershman, B. (2014). The economic origins of the evil eye belief. Working Paper, American University.Google Scholar
  35. Graham, C. (2010). Happiness around the world: The paradox of happy peasants and miserable millionaires. Oxford: Oxford University Press.Google Scholar
  36. Grossman, H. I., & Kim, M. (1995). Swords or plowshares? A theory of the security of claims to property. Journal of Political Economy, 103(6), 1275–1288.CrossRefGoogle Scholar
  37. Grossman, H. I., & Kim, M. (1996). Predation and production, Chapter 4. In M. R. Garfinkel & S. Skaperdas (Eds.), The political economy of conflict and appropriation (pp. 57–72). Cambridge, MA: Cambridge University Press.Google Scholar
  38. Hopkins, E. (2008). Inequality, happiness and relative concerns: What actually is their relationship? Journal of Economic Inequality, 6(4), 351–372.Google Scholar
  39. Hopkins, E., & Kornienko, T. (2004). Running to keep in the same place: Consumer choice as a game of status. American Economic Review, 94(4), 1085–1107.CrossRefGoogle Scholar
  40. Knell, M. (1999). Social comparisons, inequality, and growth. Journal of Institutional and Theoretical Economics, 155(4), 664–695.Google Scholar
  41. Ljungqvist, L., & Uhlig, H. (2000). Tax policy and aggregate demand management under catching up with the Joneses. American Economic Review, 90(3), 356–366.CrossRefGoogle Scholar
  42. Luttmer, E. F. (2005). Neighbors as negatives: Relative earnings and well-being. Quarterly Journal of Economics, 120(3), 963–1002.Google Scholar
  43. Matt, S. J. (2003). Keeping up with the Joneses: Envy in American consumer society, 1890–1930. Philadelphia: University of Pennsylvania Press.CrossRefGoogle Scholar
  44. Mitsopoulos, M. (2009). Envy, institutions and growth. Bulletin of Economic Research, 61(3), 201–222.CrossRefGoogle Scholar
  45. Moav, O., & Neeman, Z. (2012). Saving rates and poverty: The role of conspicuous consumption and human capital. Economic Journal, 122(563), 933–956.CrossRefGoogle Scholar
  46. Mui, V.-L. (1995). The economics of envy. Journal of Economic Behavior & Organization, 26(3), 311–336.CrossRefGoogle Scholar
  47. Nash, J. (1970). In the eyes of the ancestors: Belief and behavior in a Maya community. New Haven: Yale University Press.Google Scholar
  48. Neumark, D., & Postlewaite, A. (1998). Relative income concerns and the rise in married women’s employment. Journal of Public Economics, 70(1), 157–183.CrossRefGoogle Scholar
  49. Oswald, A. J. (1983). Altruism, jealousy and the theory of optimal non-linear taxation. Journal of Public Economics, 20(1), 77–87.CrossRefGoogle Scholar
  50. Park, Y. (2010). The second paycheck to keep up with the Joneses: Relative income concerns and labor market decisions of married women. Eastern Economic Journal, 36(2), 255–276.Google Scholar
  51. Pérez-Asenjo, E. (2011). If happiness is relative, against whom do we compare ourselves? Implications for labour supply. Journal of Population Economics, 24(4), 1411–1442.CrossRefGoogle Scholar
  52. Platteau, J.-P. (2000). Institutions, social norms, and economic development. Amsterdam: Harwood Academic Publishers.Google Scholar
  53. Robson, A. J., & Samuelson, L. (2011). The evolutionary foundations of preferences, Chapter 7. In J. Benhabib, A. Bisin, & M. Jackson (Eds.), Handbook of social economics (Vol. 1A, pp. 221–310). Amsterdam: Elsevier.Google Scholar
  54. Rustichini, A. (2008). Dominance and competition. Journal of the European Economic Association, 6(2–3), 647–656.CrossRefGoogle Scholar
  55. Schoeck, H. (1969). Envy: A theory of social behavior. New York: Harcourt, Brace, and World.Google Scholar
  56. Schor, J. B. (1991). The overworked American: The unexpected decline of leisure. New York: Basic Books.Google Scholar
  57. Scott, J. C. (1976). The moral economy of the peasant: Rebellion and subsistence in Southeast Asia. New Haven, CT: Yale University Press.Google Scholar
  58. Smith, R. H., & Kim, S. H. (2007). Comprehending envy. Psychological Bulletin, 133(1), 46–64.CrossRefGoogle Scholar
  59. Solnick, S. J., & Hemenway, D. (2005). Are positional concerns stronger in some domains than in others? American Economic Review Papers and Proceedings, 95(2), 147–151.CrossRefGoogle Scholar
  60. van de Ven, N., Zeelenberg, M., & Pieters, R. (2009). Leveling up and down: The experiences of benign and malicious envy. Emotion, 9(3), 419–429.Google Scholar
  61. Veblen, T. B. (1891). Some neglected points in the theory of socialism. Annals of the American Academy of Political and Social Science, 2(3), 57–74.CrossRefGoogle Scholar
  62. Wolf, E. R. (1955). Types of Latin American peasantry: A preliminary discussion. American Anthropologist, 57(3, Part 1), 452–471.CrossRefGoogle Scholar
  63. Zizzo, D. J. (2003). Money burning and rank egalitarianism with random dictators. Economics Letters, 81(2), 263–266.CrossRefGoogle Scholar
  64. Zizzo, D. J. (2008). The cognitive and behavioral economics of envy, Chapter 11. In R. H. Smith (Ed.), Envy: Theory and research (pp. 190–210). Oxford: Oxford University Press.Google Scholar

Copyright information

© Springer Science+Business Media New York 2014

Authors and Affiliations

  1. 1.Department of EconomicsAmerican UniversityWashingtonUSA

Personalised recommendations