I. Introduction The emphasis on the concept of ‘economic man’ for a long period of time has led to important outcomes each of which has serious welfare implications. First, there has been a relentless glorification of the principle of pursuit of self‐interest. It is only now that all the negative spillover effects of our wealth creating and consuming activities are being acknowledged and evaluated. Since most of these costs are costs to society rather than to a particular individual, these costs do not play any role in our production or consumption decisions. As a result, quality of life has not improved as much as the recent rise in per capita real income suggests. Second, for a long time welfare has been treated as a monotonically increasing function of the amounts of goods and services consumed. There has been a total disregard for the fact that at a given point in time an individual can afford only a fraction of the total amount of goods and services available in the society. This explains at least in part why even in the most affluent societies people are no happier today than they were in the past. And third, although the idea of interdependent welfare is not new in economics as evidenced by relative income hypothesis which shows that present consumption and hence welfare is also a function of one's past consumption and consumption of others in the society, economic analysis by and large has been carried out on the assumption of independence. Feelings like envy, jealousy, and avarice are real and powerful and play an important role in the way people perceive their welfare. Just because they cannot be conveniently incorporated in simple analytical model is a poor excuse for neglecting them.
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