Envy and Relative Deprivation:

Some conceptual issues and practical applications*

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Binh Tran-Nam, UNSW Sydney

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* Paper prepared for the Vietnam Economists Annual Mting (VEAM), Thai Nguyen University, 8-10 December 2025.

Outline

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1. Introduction and context
2. Brief literature review
3. Envy and relative deprivation
4. Relative deprivation and economic inequality
5. Lessons for Vietnam
6. Summary conclusions

1. Introduction and context

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• Motivation: mainstream economic theory tends to ignore insights from sociology when consider people wellbeing
• Aim: to provide a critical and comprehensive review of envy and relative deprivation from a socio-economic perspective
• Objectives:
• Identify shortcomings in mainstream welfare economics
• Discuss the concepts of envy and relative deprivation
• Examine the relationship between relative deprivation and income inequality

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1. Contd.

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• Research methodology:
• Research framework: positivist assuming causal relationship between variables under study
• Research method: qualitative and mathematical method based on deductive reasoning
• Data: occasional use secondary data

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2. Brief literature review

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• Important concepts in normative/welfare economics: Pareto efficiency (or optimality), Pareto improving
• Main limitation: welfare of any person does not depend on the welfare of any other person
• Thus, a change that makes a rich person better off while keeping all others the same is Pareto improving
• Relative positions between individuals are a familiar concept in sociology, People are concerned about their relative position in a well-defined group or in the whole society
• Vietnamese proverb: Thua trời một vạn không bằng thua bạn một ly

2. Contd.

• Rainwater (1974, p. 22) argued that that relative deprivation originated formally at least from Marx who stated

Our desires and pleasures spring from society, we measure them, therefore, by society and not by the objects which serve for their satisfaction. Because they are of a social nature they are of a relative nature

• The term relative deprivation first appeared in Stouffer et al. (1949, p.52)
• Davis (1959) first formalised the concept of relative deprivation, distinguished between relative deprivation and economic inequality, emphasising social polarisation (haves vs. have-nots)
• Runciman (1966) formulated relative deprivation and related concepts
• Podder (96) clarified the relationship between relative deprivation and economic inequality

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3. Envy and relative deprivation

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• We focus on economic dimensions of envy and deprivation such as income and consumption
• A person i with disposable income yi is envious of person j with disposable income yj iff yi < yj
• If yi ≥ yj, person i does not pleased in relation to person j
• A person i with consumption bundle ci feels deprived relative to person j with consumption bundle cj iff person i prefers cj over ci
• If person i does not prefer cj over ci he/she does not not sympathy for person j
• When envy is recognised, a change that makes a rich person better off while keeping all others the same is not necessary welfare improving

3. Contd.

• If person i envies person j ↔ yi < yj ↔ person i cannot afford cj ↔ person i feels deprived relative to person j
• Let RDij (yj −yi) stand for the deprivation of person i relative to person j where
• RDij > 0 if yi < yj and Rdij = 0 if yi ≥ yj
• RDij is differentiable, strictly increasing and concave in yj, and strictly decreasing and convex in yi
• Suppose yj (> yi) increases while yi remains unchanged
• It represents a Pareto improvement
• It may or may not be welfare improving because RDij has increased
• It can be welfare improving between persons i and j if person j shares half of his/her income increase with person i

3. Contd.

• Let Ci denote the set of all persons that a person i wishes to compare with
• RDi ≡ ∑RDij for all j ∈ Ci (Runciman, 1966, pp. 10 & 19)
• RD ≡ ∑RDi for all i
• Runciman (1966) distinguished between
• Comparative reference group
• Normative reference group
• Membership group
• If the membership group and comparative reference group are the same or almost identical, a person compares with members of his/her own group
• Examples: US Air Force vs. US Army Police (Stouffer; 1949) or the well-of vs. the poor in the UK (Ruciman, 1966)

3. Contd.

• If the membership group and comparative reference group are distinct, a person compares with members of the other group
• the Chinese ethnic group in Malaysia is likely to compare with the Malay group in terms of access to quality education, employment opportunities and political r
• If society is polarised into two groups and each group compares against the other, Davis (1959) showed that RD is at a max when these two groups have the same number of members
• p ≡ Number of members of Group 1 (relatively deprived)/Total population
• q ≡ Number of members of Group 2 (relatively not deprived)/Total population ≡ 1 − p
• The probab of selecting two persons in which one belongs to Group 1 and one belongs to Group 2 is pq ≡ p(1 − p)
• RD = Bpq (where B > 0) is at a max when p = q = 0.5

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3. Contd.

• A real word example: the separation of Pakistan and Bangladesh (Hirschman, 1973)
• East and West Pakistan became independent in 1947
• They had similar population sizes (East Pakistan more populous)
• The admin of both countries was managed by West Pakistan, leading to economic development in West Pakistan while East Pakistan was largely ignore
• In 1970, the Awami League from East Pakistan won the majority in the National Assembly, but West Pakistan was reluctant to transfer power to East Pakistan
• In 1971, East Pakistan became Bangladesh
• Why did the separation not occur earlier? Hirschman explained rather convincingly by the tunnel effect

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4. Relative deprivation and economic inequality

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• Some preliminaries:
• Income inequity = Income inequality − Income inequality due to productivity differential
• Income inequality is typically measured by the Gini index G which varies from 0 (perfect equality) to 1 (perfect inequality)
• G is closely related to the Lorenz curve of income distribution
• Question: What is the relationship between relative deprivation and income inequality? Is RD monotonically increasing in G?
• There are two schools of thought in response to the above question.

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G = 1 – 2B

4. Contd.

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• Sen (1973) proposed to interpret G as a measure of aggregate relative deprivation in the society, i.e., G and RD are positively related
• Sen assumed that the comparative reference group of any person is the whole society
• Yitzhaki (1979) demonstrated that mG (where is m is average income) corresponds to a proposal about relative deprivation by Runciman (1966)
• Hey and Lambert (1980) showed that a number of Lorenz curve’s characteristics can be clarified naturally in the framework of relative deprivation
• Berribi and Silber (1985) suggested that any measure of income inequality can be interpreted as a measure of relative deprivation

4. Contd.

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• More recently, some economists have applied the axiomatic method to determine a measure for relative deprivation from a sociological perspective (Estaban and Ray, 1994; Podder, 1996) ally in the framework of relative deprivation

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• Point 1: The Pigou−Dalton principle asserts that if a rich person transfers some income to a poor person, income inequality necessarily decreases. However, such a transfer may increase aggregate relative deprivation.

4. Contd.

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• Point 2: When G = 0, RDi = 0 for all i → RD = 0. But when G ≅ 1 (one person possesses almost all aggregate income in the society), if the remaining members of the society do not compare with that person, RD also almost vanishes.
• Point 3: RD is strictly increasing in G when G < 0.5 and RD is decreasing in G when G > 0.5. RD is at its max when G = 0.5
• Point 4: A possible measure of aggregate relative deprivation in terms of G is
• RD = 2G if G ≤ 0.5
• RD = 2(1−G) if G > 0.5
• I personally support the above approach as it is consistent with conflict theory in sociology and historical events.

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5. Some lessons for Vietnam?

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• Hunter−gatherer period: consumption likely distributed according to capacity and needs → consumption inequality and relative deprivation likely to be low
• Feudal period: polarised society with a minority of haves and a majority of have nots coupled with a community spirit of caring and sharing → high G and low RD → socially stable for a long time
• Colonial period: distinction between rural and urban people became more pronounced

5. Contd.

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• August 1954 Revolution: subsequent land reform severely damaged the village community spirit
• War time: stable society with low G and low RD
• Transition economy:
• More widespread corruption at different levels
• Uneven distribution of opportunities to become rich (between well connected vs. not connected and innovators vs, followers) with many negative observed outcomes
• Expropriating private land for public purposes without adequate compensation.

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5. Contd.

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• Observed negative outcomes:
• Thief, sabotage and no cooperation (reduce relative deprivation but hamper economic development)
• Trying to make money at all costs: death in 2019 of 39 young Vietnamese nationals (mostly from Nghe An) who attempted to immigrate to the UK to work on cannabis farms
• Most seriously, the possibility of poverty being transmitted from one generation to the next due to
• Both G and RD have been increasing

5. Contd.

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• Some policy recommendations (nothing new):
• Improving the progressivity of the tax−transfer system
• Providing adequate compensation to owners of land being expropriated
• Making credits more accessible to low-income farmers
• Making education more accessible (DONE) especially at the university level (through loan programs)

6. Summary conclusions

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• This paper discusses envy, relative deprivation and income inequality from a socio-economic perspective
• It is shown that envy and relative deprivation are two equivalent concepts
• A critical element in the study of relative deprivation is the comparative reference group: who is a typical person compares with?
• If a person compares with people in his/her own group, RD is increasing (decreasing) in G if G ≤ (>) 0.5
• Some policies are proposed to reduce the negative impacts of growing RD in Vietnam, particularly the possibility of intergenerational poverty.

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