An interesting example from Jon Elster and John Roemer: Suppose that A is doing much better than B, in economic terms, and that B doesn’t even know of A‘s existence, much less A‘s level of welfare. Then, B learns about A, and learns that A is much better off. In one sense, B is no worse off than before; the knowledge costs B nothing. But in another sense B‘s welfare may decline, for B now feels envious, less successful, less self-satisfied, and so on. B would like to be as successful as A, and now becomes aware that that desire is unsatisfied, making B feel even worse. In that latter sense, then, the inequality between A and B increases when B becomes aware of it. The same thing happens when A becomes aware of it, for A may now feel superior, more successful, more self-satisfied, and so on.
This points to a recipe for increasing inequality: not economic inequality, for, in the above example, no money changes hands, but hedonic inequality—the happy get happier, and the sad get sadder. Of course, the argument applies just as well if we start with hedonic inequality rather than economic inequality to begin with. Knowledge of each other’s conditions increases inequality.
That, it seems to me, gives rise to a dilemma for politicians who practice the politics of envy, speaking of inequality, “Two Americas,” class divisions, etc. If the economic inequality to which they point isn’t matched by an inequality in levels of happiness—and its correlation to such inequality is probably weak—then why should we care about it? And if it is, doesn’t drawing attention to the inequality make it worse? Couldn’t they produce greater hedonic equality just by shutting up?
Why, moreover, does Hollywood consistently make TV shows and movies about people who are far more affluent than average, who live in much larger houses, etc.? It hasn’t always been that way—think of The Honeymooners, I Love Lucy, The Andy Griffith Show, The Wonder Years, and other icons of the 1950s, 1960s, and 1970s—but increasingly we seem to see mostly the top 1%. Doesn’t that increase inequality in a similar way?