The two sides of envy

Gershman, Boris (2010): The two sides of envy.

Abstract

The two sides of envy, destructive and competitive, give rise to qualitatively different equilibria, depending on economic, institutional, and cultural environment. If inequality is high, property rights are poorly protected, and social comparisons are strong, the society is likely to settle in the "fear equilibrium," in which better endowed agents restrain their efforts to prevent destructive envy of the relatively poor. In the opposite case, the standard "keeping up with the Joneses" competition arises, and individuals satisfy their relative standing concerns through suboptimally high efforts. The different nature of these equilibria leads to starkingly contrasting effects of envy on economic performance. From welfare perspective, adoption of better institutions may not be Pareto improving, since positional externality is curbed in the low-output fear equilibrium. The theory is consistent with broad empirical facts from social sciences and bridges the gap between separate lines of research on envy.

• Item Type: MPRA Paper
• Language: English
• Keywords: Envy; Inequality; Positional Externalities; Property Rights
• Subjects: D - Microeconomics > D6 - Welfare Economics > D62 - Externalities; D - Microeconomics > D3 - Distribution > D31 - Personal Income, Wealth, and Their Distributions; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O10 - General; D - Microeconomics > D7 - Analysis of Collective Decision-Making > D74 - Conflict ; Conflict Resolution ; Alliances ; Revolutions; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O43 - Institutions and Growth; Z - Other Special Topics > Z1 - Cultural Economics ; Economic Sociology ; Economic Anthropology > Z13 - Economic Sociology ; Economic Anthropology ; Social and Economic Stratification; P - Economic Systems > P2 - Socialist Systems and Transitional Economies > P26 - Political Economy ; Property Rights

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