The Price of Envy, or Crabs in a Bucket

An article on hedonic adaptation (sub. reqd.) in this week's Economist led me to some rather fascinating research by Andrew Oswald and Daniel Zizzo.

This paper studies utility interdependence in the laboratory. We design an experiment where subjects can reduce (“burn”) other subjects’ money. Those who burn the money of others have to give up some of their own cash to do so. Despite this cost, and contrary to the assumptions of economics textbooks, the majority of our subjects choose to destroy at least part of others’ money holdings. We vary experimentally the amount that subjects have to pay to reduce other people’s cash. The implied price elasticity of burning is calculated; it is mostly less than unity. There is a strong correlation between wealth, or rank, and the amounts by which subjects are burnt. In making their decisions, many burners, especially disadvantaged ones, seem to care about whether another person ‘deserves’ the money he has. Desert is not simply a matter of relative payoff.

In plain English, the "class envy" accusation levelled against many leftists is factually correct: a major - arguably the major - force behind redistributive politics isn't simply an interest in improving the lot of the poor, but an active desire to "punish" the envied rich, and this desire is one many left-leaning voters are quite willing to fulfill even if they're aware that they too will incur a substantial loss of income by so doing. Most people would prefer for everyone to suffer in equality than that everyone advance at the cost of some advancing faster than others, and this is why a universal unqualified franchise is everywhere linked with progressive expansion of the state.

NB: An article with interesting quotes from Andrew Oswald is available here.

Comments

[Chuckles]

What suprises me isnt this: But the neccesarily attendant implications for development economics that I havent seen very many economists making - save for persons of a libertarian disposition (I confirm that Bryan Caplan does indeed have posts up on this. A search on Google Scholar doesnt reveal much, neither does one on JSTOR or NBER). The phenomenon is "tribal envy" - and in many African States; not only does it lead to the deadening bureaucracies of the Civil service, where files are misplaced on purpose and scholarships denied because "how dare he think he can get ahead without "seeing" us" - it is one of the primary causes of corruption: The tax imposed by envy is widespread patronage - localized within ethnic kinship networks, it only further polarizes the "multicultural milieu" that many colonial African states are supposed to be administering. In order to placate the "tribe", the successful ruler must dole out "dash" and "roger" and see his "boys" every now and then - his cronies must be appointed to top positions. In his latest work, "You Must Set Forth at Dawn", Wole Soyinka recounts how a friend of his was assaulted by Policemen because he addressed them in grammatically correct English! Tribal envy penalizes surpassing competence - and for all the talk about the West poaching Doctors and Nurses from Africa, the truth is that these Professionals flee because they are being penalized for being good in many contemporary African state/cultural systems. When doctrinal socialism invaded Africa it just made things worse, because folks were now able to hide under the noble objective of "social justice" to mask the true animus at work. Crucial to this was the continued harping upon the "injustices of the past" as premise for redistribution; a nice veil, if there was ever one. It is this same tribal envy that penalizes academic success among African Americans - even though, all African Americans agree that "we need more black Doctors, we need more Black Lawyers, etc."

[Steve Edwards]

"...this is why a universal unqualified franchise is everywhere linked with progressive expansion of the state."

Too true. I would quite seriously like to do away with universal suffrage in favour of voting by net worth, or perhaps by shareholder subscription (buy as many shares as you like and receive that proportion of the vote!). There would probably be some abuses, but on the whole we'd have a far saner government in no time.

[Abiola]

"I would quite seriously like to do away with universal suffrage in favour of voting by net worth, or perhaps by shareholder subscription"

The problem with such suggestions - and it's one I've long wrestled with - is that there's always a strong temptation for some politician or other to look for a temporary electoral advantage by diluting any qualifications in favor of a "fairer" approach. Be the one to do so and it's likely that you'll be able to hold on to the votes of those you've tilted the field in favor of for at least a few election cycles, and maybe even for a generation; that's what Disraeli thought when he passed the Reform Act of 1867,

http://en.wikipedia.org/wiki/Reform_Act_1867

and for a while at least his calculation was correct, but this massive expansion of voting rights led in the end to the 20th century Labour Party governments which did so much to ruin Britain's economy.

[Steve Edwards]

So what's left then? Privatise the government vis-a-vis Hans-Hermann Hoppe?

[Frank McGahon]

No, what's left is to do as much as possible to limit the reach and proscribe the activities of any government elected under universal suffrage. Constitutions can be changed if there's sufficient popular pressure but it ought to be a lot harder to change a constitution than a government.

[gene berman]

I'm actually surprised, Abiola, that you would regard the exercise as "scientific" in any way. If you hadn't noticed it through the course of your life thus far, many, including myself, could have told you that there were many people to whom the opportunity to "bring down" their betters or even the better-off (especially when secretly effected) represents, continuously, a good for which they'd be willing to pay. And the prospect may present some level of appeal in some circumstances even to those less inclined to envy. It might even be said that, to varying degree, almost all can envision circumstances (arising from all the many forms of "unjust enrichment") in which they'd pay (taxes) to support the enforcement of laws to punish such behavior (including separating the malefactors from their ill-gotten gains). What's new?

[Anon]

I cannot read the main article (no pdf reader at the moment), but the interview with Oswald is interesting. But based on the interview I am confused at to why you don't also expect expansion of the state without universal suffrage. The interview points out that those at the top of the heap also chose to sacrifice a significant portion of their wealth to (in some way) protect their rank position -- suggesting that the rich put just as much value on rank as the poor. So I would assume that the wealthy voters in a limited suffrage state would also attempt to expand the state apparatus to "manage" the rank advancement of those below. And with few at the top and many below, wouldn't this also lead to an expansion of the state? It just wouldn't be the modern welfare state (though much of the infrastructure might look similar). Again, I realize the main article must provide clearer information on how (and maybe why) the wealthy game players acted the way they did.

Anon

[Abiola]

"almost all can envision circumstances (arising from all the many forms of "unjust enrichment") in which they'd pay (taxes) to support the enforcement of laws to punish such behavior (including separating the malefactors from their ill-gotten gains). What's new?"

If you'd bothered to actually read the paper or even the article with Oswald's comments, you'd know that the experiment wasn't set up to discover how people would react to "ill-gotten" gains, but what they'd do on learning that others were better favored by luck. As for your dismissal of this research, a great many "obvious" things in life aren't true, and what's truly unscientific is assuming that they clearly are.

"So I would assume that the wealthy voters in a limited suffrage state would also attempt to expand the state apparatus to "manage" the rank advancement of those below."

Why would they? This strikes me as a non-sequitur.

[Steve Edwards]

Abiola - I take it you have heard of George Galloway's latist antics?

http://news.independent.co.uk/uk/politics/article601356.ece

[Steve Edwards]

latest...

[Abiola]

Sure I've heard about it. George Galloway saying something outrageous is about unexpected as hearing a rabid dog bit someone, though, so I couldn't be bothered to mention it.

[Steve Edwards]

Fair enough. I just figured that his latest outburst went much, much further than anything he said before.