The Economics of Envy

Abstract Equity theory in psychology, observed responses to reform in socialist countries, and studies in the field of organizational behaviour all suggests that envy can play an important role in economic behaviour. This paper incorporates envy into the standard economic choice framework. The model provides a natural extension of the theory of equity in psychology. It is used to analyze how agents' innovating, retaliating, sabotaging, and sharing behaviour are jointly determined by legal institutions and agents' propensities for envy. Implications for the economics of organization and the reform of socialist economies are discussed.

[1]  Thorstein Veblen,et al.  The theory of the leisure class : an economic study of institutions , 1953 .

[2]  Paul Milgrom,et al.  Bargaining and Influence Costs and the Organization of Economic Activity , 1987 .

[3]  Geoffrey Brennan,et al.  Pareto desirable redistribution: the case of malice and envy , 1973 .

[4]  J. Tirole.  Hierarchies and Bureaucracies: On the Role of Collusion in Organizations , 1986 .

[5]  C. Garner.  Equity in economic relationships: Towards a positive theory , 1986 .

[6]  Helmut Schoeck,et al.  Envy: a theory of social behaviour , 1969 .

[7]  Economic theory and policy : essays in honour of Dipak Banerjee , 1990 .

[8]  Hedrick Smith,et al.  The new Russians , 1977 .

[9]  H. Varian.  Equity, Envy and Efficiency , 1974 .

[10]  David I. Levine,et al.  Cohesiveness, Productivity, and Wage Dispersion , 1991 .

[11]  D. Foley.  Resource allocation and the public sector , 1967 .

[12]  G. Becker.  A Treatise on the Family , 1982 .

[13]  G. L. S. Shackle,et al.  Income, Saving, and the Theory of Consumer Behavior , 1950 .

[14]  E. Lazear.  Pay Equality and Industrial Politics , 1989, Journal of Political Economy.

[15]  J. Duesenberry,et al.  Income, Saving, and the Theory of Consumer Behavior , 1950 .

[16]  G. C. Homans,et al.  Social Behavior: Its Elementary Forms. , 1975 .

[17]  T. Schelling.  The Strategy of Conflict , 1963 .

[18]  Adams Js.  Towards an understanding of inequity , 1963 .

[19]  William Foote Whyte,et al.  Street Corner Society , 1943 .

[20]  Richard J. Zeckhauser,et al.  Strategy and Choice. , 1992 .

[21]  O. Williamson.  Credible Commitments: Using Hostages to Support Exchange , 1983 .

[22]  R. Thaler,et al.  An Economic Theory of Self-Control , 1977, Journal of Political Economy.

[23]  Janet L. Yellen,et al.  The Fair Wage-Effort Hypothesis and Unemployment , 1990 .

[24]  Gary E. Bolton.  A Comparative Model of Bargaining: Theory and Evidence , 1991 .

[25]  Georg Kirchsteiger,et al.  The role of envy in ultimatum games , 1994 .

[26]  R. Frank.  Passions Within Reason: The Strategic Role of the Emotions , 1990 .

[27]  David Stark,et al.  Remaking the economic institutions of socialism : China and Eastern Europe , 1989 .

[28]  G. Foster,et al.  Tzintzuntzan: Mexican Peasants in a Changing World , 1967 .

[29]  F. Bailey.  Gifts and poisons: The politics of reputation; , 1971 .

[30]  Paul R. Milgrom,et al.  Multitask Principal–Agent Analyses: Incentive Contracts, Asset Ownership, and Job Design , 1991 .