The Economics of Envy

Sound Contrarian Views

“A house may be large or small; as long as the neighbouring houses are equally small, it satisfies all social demands for a dwelling. But if a palace rises beside the little house, the little house shrinks into a hut.”
— Karl Marx, Critique of the Gotha Programme (1875)

Envy is often dismissed as a personal failing, a moral defect to be conquered by individuals through better character or spiritual practice.

But what if envy isn’t merely an individual affliction, but a macro-level signal ? An emergent consequence of how we structure economies, design cities, and define success?

Mainstream economic theory tends to downplay envy. Standard models assume individuals make decisions based on absolute utility — how much stuff they have, not how it compares to others.

But real-world behaviour suggests otherwise: people care deeply about relative status. What we experience as envy is often a rational (if painful) reaction to information about our standing in a perceived social hierarchy.

Can we design societies in such a way that envy is minimised? And its most corrosive effects subdued?

A Tax on Inequality

Traditionally, inequality is justified as the necessary price for dynamism: reward talent, effort, and innovation, and the rising tide lifts all boats. But envy acts as a kind of “social tax” off inequality.