Housing Envy

Envy is real, but people claim to care more than they do about the size of their neighbor’s houses:

Unlike much of the stated preference literature, the results of this paper indicate that a increase in absolute house size is valued more than an increase in relative house size, suggesting that individuals value their absolute well-being more than their relative status if all parties are handed an equal increase. More specically, for the case of Columbus, the willingness to pay for an increase in own house size by 100 square feet from the mean is found to be $1,103 while the willingness to pay for a decrease in neighbor house size by 100 square feet from the mean is $400. (more)

Since envy looks ugly, why do people do out of their way to appear more envious than they are? Most likely because opposing wealth inequality is an ancient forager norm.

Note that this level of envy could justify taxing house size relative to some other category of consumption where envy is weaker, if such categories could be identified.

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  • Wonks Anonymous
  • http://un-thought.blogspot.com/ Floccina

    People want the cheapest home in their neighborhood to not be too cheap, it keeps the riffraff out.

  • John Thacker

    Grist for Bryan Caplan? Sounds like people are more rational when they act (economically) than when they vote or are interviewed.

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  • KPres

    A lot of “envy” is just friendly gamesmanship. Often I compete with my peers because we know that our competition can provide purpose and bring out the best in us, so long as it takes place within the boundaries of the friendship. The envy is real, but at the same time compartmentalized and controlled.

    Just a thought.

  • http://ourdinnertable.wordpress.com Seth

    People are willing to pay to shrink their neighbor’s house? Or is it that people will pay a little more for a house next to smaller house?

    If the latter, I can understand that and I don’t think it’s envy. Rather marketability. It’s easier to sell the slightly better stock. It’s hard to sell the best.

  • Michael Wengler

    Note that this level of envy could justify taxing house size relative to some other category of consumption where envy is weaker, if such categories could be identified.

    I highly recommend reading The Darwin Economy by Robert Frank. He discusses extensively the evidence for what he calls positional goods and makes coherent arguments about how these might be taxed to produce a high amount of revenue per utility lost to the taxed.

    The columbus data you cite seems averaged over all house sales? I would be very interested to see what it shows as a function of house size. Perhaps small houses are valued absolutely, large houses are valued relatively, and the “average” loses the information that once you are above the threshold for buying “status” homes that this is what you pay for.

    Its a bummer these papers you link to can’t be seen by civilians!

  • http://juridicalcoherence.blogspot.com/ Stephen R. Diamond

    If you pay to have a smaller neighboring house, it becomes a constant reminder of your willingness to pay that amount, thus reminding you of your envy to that degree. That subtracts from the utility of a smaller neighboring house.

  • http://disputedissues.blogspot.com Stephen R Diamond

    Note that this level of envy could justify taxing house size relative to some other category of consumption where envy is weaker, if such categories could be identified.

    But what kind of economic argument would this justification comprise? I take it from a recent discussion that you would resist calling the excessive instigation of envy a case of market failure (to the extent it isn’t compensated by benefits). What keeps the excessive instigation of envy from constituting a potential net market failure.

  • Randall

    Robert Frank is a totalitarian. He thinks he gets to decide what goods we really need and which are frivolous, and he and his progressive Gestapo sit in judgment. Get your jackboot off our neck Frank, and your sad fans on this site. Let free people “position” themselves all they want. Thug.

    • anon

      Robert Frank is not arguing that some goods are “frivolous”. He’s arguing (not without evidence) that some kinds of consumption constitute a nuisance to one’s neighbors and peers, due to positional considerations. That’s no more “totalitarian” than someone complaining about loud music or objectionable odors coming from a neighbor’s house.

      • http://disputedissues.blogspot.com Stephen R Diamond

        That’s no more “totalitarian” than someone complaining about loud music or objectionable odors coming from a neighbor’s house.

        “Positional considerations” differ from physical nuisances in being purely symbolic in manifestation, and distinctive norms usually apply to the purely symbolic on grounds of free expression.

    • http://disputedissues.blogspot.com Stephen R Diamond

      Let free people “position” themselves all they want.

      Level wealth, not purchases!

  • A Country Farmer

    Can you please expand on, “Most likely because opposing wealth inequality is an ancient forager norm.”

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  • http://blog.lib.umn.edu/denis036/thisweekinevolution/ Ford

    It’s not mainly a matter of envy, and the relevant comparison isn’t to the house next door. You may not want to take care of a large house, but buying a larger-than-average house gets you into a better school district. If your neighbor’s house is bigger, too, that’s great. If it’s about the same size as yours, maybe they have similar income and so they may have somewhat more-similar values than a random person would.

    Actually leveling wealth would be more radical than anything Robert Wright has suggested.

  • http://montclairsoci.blogspot.com Jay Livingston

    What I gathered from this abstract and Tabarrok’s post is that people will pay more to be in a better neighborhood. Or did I miss something? (Tabarrok’s post mentions only house variables, not other things about the neighborhood, e.g., quality of schools, but I’m assuming that places with more expensive houses are also more desirable on other variables.)

    Asking people about what they would do or feel is always iffy, and you can’t trust the responses in a survey like R. Frank’s to be accurate predictors of behavior or feeling. But we also don’t know how those actual house buyers eventually felt about their houses, their neighbors, and themselves.

  • Poelmo

    It’s this idea that everyone thinks like a hedgefund CEO that is so pervasive. Not everyone wants more and more and more. Most people are happy if they can lead decent lives, executives are a subset of the human race who are much more likely to think like pyschopats: http://www.bloomberg.com/news/2012-01-03/did-psychopaths-take-over-wall-street-asylum-commentary-by-william-cohan.html

    Average people don’t try to look more envious than they really are: the perception that they are envious is part projection by executives and people aspiring to be executives who write most of the economic lterature and part anger because people feel like they’re being cheated: “I don’t care if you have more stuff than me, mr. executive, as long as you didn’t indirectly steal the money from my paycheck”, which gets construed by pundits trying to shush their own conscience.

  • Poelmo

    *construed as envy