The text under consideration has caused much debate among translators and bible students. Does God desire to envy? Does the Spirit desire to envy? or Does the spirit desire to envy? The text is a difficult one but upon some study and analysis of the text it should be understood that one can arrive at the correct conclusion, or at the very least the most plausible.
The Greek is as follows “η δοκειτε οτι κενως η γραφη λεγει προς φθονον επιποθει το πνευμα ο κατωκισεν εν ημιν.” The text does have some difficulties. The text could be translated, “Or do you think that the scripture says in vain, “The spirit which he made to dwell in us desires to envy/ The Spirit which he made to dwell in us desires to envy/ He strongly desires/yearns jealously the spirit which he made to dwells in us/ He strongly desires/yearns jealously the Spirit which he made to dwell in us.” There are a few difficulties in translating this verse. 1. How is one to understand the prepositional phrase προς φθονον translated “toward jealously– If “the spirit/Spirit” το πνευμα is the subject or object of επιποθει “desires” 2. Is το πνευμα referring to the human spirit or the Holy Spirit. 3. What scripture or scriptures contains this teaching?
1. προς φθονον is a prepositional phrase that modifies either the implied subject of επιποθει “he desires” or the nominal phrase το πνευμα ο κατωκισεν εν ημιν “the spirit/Spirit which he caused to dwell in us.” The key to determine to what the prepositional phrase modifies is φθονον. The masculine noun, φθονον, according to a shorter lexicon of the Greek New Testament (an abridgement of BAGD), means “envy or jealousy.” The word is used in the following verses (Matthew 27:18; Romans 1:29; Gal 5:21; 1 Tim 6:14; Titus 3:3; James 4:5). In all the verses listed, the word never has a positive connotation, in fact it is listed as a work of the flesh. With that understanding in mind, it can hardly be applied to God–God being the implied subject; seeing as God does not have an evil yearning for our spirit/Spirit. The only other possibility is to understand the nominal phrase “the spirit/Spirit which he caused to dwell in us” to be the subject.
2. Our conclusion above leads us to our next problem, how to understand το πνευμα. If the conclusion above is correct then the Spirit would have to be immedietly dismissed as a possibility. If God cannot have an evil desire for something then neither can the Holy Spirit since he is God (Acts 5:2-3). Thus, the text should be rendered as followed, “the spirit which he made to dwell in us desires to envy.” In my judgment this rendering better fits the grammar and the context of the chapter. The entirety of the context so far has been about worldliness. James encourages them to follow wisdom from above and not wisdom from below (James 3:13-18). He further explains that the source of their fighting and greed and war was their reliance on worldly wisdom. They were lusting for things, fighting over things, and praying with selfish desires. Having this background, it makes perfect sense to understand that James is reminding them that their problem of envy is not a new thing–even the scriptures teach that our own spirits desire to envy. The divided mind (James 1:6-7) and the forgetful man (James 1:23) shows the tendency of the human spirit, but thankfully man can be born again, by the engrafted word, and by the complete law which liberates (James 1:17-18; 21; 25).
3. Tracking down the exact text or texts that supplies this teaching is another difficulty. However, I believe the gist of the O.T clearly shows that man has an tendency do lust to envy and to live after the wisdom of below. I am not sure James has a specific passage in mind. An interesting thing that the passages teaches is the ability for a persons spirit to desire to have a evil yearning. If my understanding of the text is correct then those who wrongly teach the flesh causes man to sin and the spirit is wholly pure, need to reconsider.
The key to avoiding wordliness is found in verse 6-10. God gives more grace; how is that grace accessed? 1. Being humble (willingness), 2. By cleansing your hands (Washing/repentance), 3. By drawing near to God (wisdom and worship/accepting God’s wisdom and giving proper adoration). Therein is the key to having true religion and denying worldliness.
 Josh James in his analysis of the text states: “The translation of “katoikizo” is important. “Katoikeo” means “to dwell,” whereas “katoikizo” means “to cause to dwell,” much like the English “ize” in “real” and “realize.” So apart from textual difficulty, that translation is simple. Grammatically, “pros phthonon” must go with the verb “epipothei.” It is adverbial, as most prepositional phrases are in Greek. This is underscored by its proximity to epipothei. Interestingly, the AdverbialPhrase-Verb-Subject construction is very Hebraic (Gen. 1:1; Jn 1:1; Jn 3:16). In this light, I see “The spirit that he made to dwell in you” as the subject of “desires to the point of envy. As for the textual problem, it is likely that “katoikesen” (He dwelled) and “katoikisen” (He caused to dwell) were pronounced very similarly at that time period. It is called “iotacism,” and is the tendency of long Greek vowels (mainly eta, upsilon, iota, and the diphthongs ei and oi) to be pronounced “ee” like the “i” in machine. Katoikizo never appears in the Scripture other than this passage, so it is more likely that some misheard “katoikeo” in its place, as transcription was often done by one person reading the original aloud as others listening copied the message onto another papyrus or parchment. This is not to mention that the manuscript evidence is in favor of “katoikizo” as the correct reading. It is thus given the second highest certainty of a reading that textual variances have (B).