On the Equilibrium and Welfare Consequences of Getting Ahead of the Smiths

Frédéric Gavrel and Therese Rebiere

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Abstract: This paper provides an analysis of the social consequences of people seeking to get ahead of the Smiths. All individuals attempt to reach a higher rank than the Smiths, including the Smiths themselves. This attitude gives rise to an equilibrium in which all individuals have equal utilities but unequal (gross) incomes. Due to a rat-race effect, individuals devote too much energy to climbing the social scale.However, laissez-faire equilibrium is an equal-utility constrained social optimum. Conversely, a utilitarian social planner would not choose utility equality. Unexpectedly, this social ambition theory fairly wellaccounts for empirical intermediate wage inequality.

Keywords: Inequalities; Efficiency; Social interactions; Getting ahead of the Smiths; Well-being (search for similar items in EconPapers)
Date: 2018
New Economics Papers: this item is included in nep-hap, nep-mic and nep-upt
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-01242504
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Citations: View citations in EconPapers (2)

Published in Journal of Public Economic Theory, 2018, 20 (2), pp.257-270. ⟨10.1111/jpet.12261⟩

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Journal Article: On the equilibrium and welfare consequences of getting ahead of the Smiths (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-01242504

DOI: 10.1111/jpet.12261

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