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.
*construed as envy
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/ne...
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.