The implications of economic inequality for social welfare and social conflict

In this article, first, we show how equity considerations, in the guise of inequality of income, enters into a social welfare function. In this connection the important properties of a social welfare function are also discussed. Second, contrary to the popular belief, we contend that the degree of inequality is not an appropriate indicator of the degree of social discontent. Third, the appropriate indicator of social discontent is shown to be the level of social envy which is a non‐monotonic function of inequality. It is also demonstrated that the sociological term “relative deprivation” is equivalent to the economic definition of envy.