How Envy Dominates Greed

Fantastic article.

Very big implications for economics and for how we try to get the economy back on track. Classic economists argue most people make decisions based upon wealth-maximization (ie greed), but this explanation does not explain many actual human choices. A more accurate reasoning for human choices involves envy and attempts to maximize status within certain subgroups. They hold that all government policy, in effect, boils down to redistributive functions to make people feel more equal.

Some important points:

In Helmut Schoeck's Envy, he discusses the dysfunctional cultures all have an excess of undisguised envy. An extreme example are the Navaho, who reportedly have no concept of luck or of personal achievement, and believe that one person's success can only come at another's expense. This kind of attitude effectively discourages people in such a society from adopting a better way of growing crops, etc. This may explain why James Madison insisted that no democracy has not committed suicide, is that there is a constant push to greater taxation until the productivity created by these elites evaporates, because nothing hits as directly at envy as progressive tax increases. Functional cultures are not so defensive, and so adopt better ways even if not invented there, allowing countries like Japan to move quickly into modernity with all the advantages that wealth brings, by emulating a superior western technology, thus acknowledging their backwardness. What is so remarkable is how rare the Japanese strategy has been.

Pretty interesting. And then this:

We should not be so naïve to believe most government policy is about making institutions safer, efficient, or more fair, as these are incidental means to an end, and that end is an envy-based redistribution. In some cases, base motives can lead to good outcomes, as when our efforts to maximize our status lead a business owner to treat customers well. However, government policies enacted out of envy have no beneficial results because it merely rearranges status based on political power, and not the productivity that leads to so much progress in science, leisure, art, and health. If our base assumption that self-interest is not simply maximizing wealth, but rather, status, the future is a far less rosey place. An economists' current view of human nature implies that societal and self-interest are in sync via the invisible hand (with varying amounts of regulation), and is the source of much libertarian optimism. Would that it were true. We will be much better off navigating the future with a more accurate concept of human nature.