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The “prisoner dilemma” is distinguished for its characterization of the interaction engaged in by parties whose “fates are interdependent,” but whose “self‐interests are not perfectly consonant,” to use the phrasing of Stevel Salop (1986). Economists have devoted an extensive literature to situations that are in essence prisoner's dilemmas, such as competition in oligopolies. However, what is striking about the prisoner's dilemma is not so much its relevance to particular market structures as its pervasiveness in many areas of life. As economists have broadened the scope of their studies to include interactions beyond the marketplace, they have frequently alluded to the existence of the prisoner's dilemma. Nonetheless, scholars have not yet fully explored the connections between the prisoner's dilemma, the standard microeconomic model of utility maximization, and the social institutions that attempt to secure Pareto efficient outcomes. Using marriage as its primary example, this paper examines the conditions and institutions that made relationships work to facilitate cooperation, avoiding the typical outcome of a situation characterized by the prisoner's dilemma.

Let there be two individuals: “rich,” and “poor.” Due to inefficiency of the income redistribution policy, if a social planner were to tax the rich in order to transfer to the poor, only a fraction of the taxed income would be given to the poor. Under such inefficiency and a standard utility specification, a Rawlsian social planner who seeks to maximize the utility of the worst-off individual will select a different allocation of incomes than a utilitarian social planner who seeks to maximize the sum of the individuals’ utilities. However, when individuals prefer not only to have more income but also not to have low status conceptualized as low relative income, and when this distaste is incorporated in the individuals’ utility functions with a weight that is greater than a specified critical level, then a utilitarian social planner will select the very same income distribution as a Rawlsian social planner.

We show that a social planner who seeks to allocate a given sum in order to reduce efficiently the social stress of a population, as measured by the aggregate relative deprivation of the population, pursues a disbursement procedure that is identical to the procedure adhered to by a Rawlsian social planner who seeks to allocate the same sum in order to maximize the Rawlsian maximin-based social welfare function. Thus, the constrained minimization of aggregate relative deprivation constitutes an economics-based rationale for the philosophy-based constrained maximization of the Rawlsian social welfare function.

A transfer from a richer individual to a poorer one seems to be the most intuitive and straightforward way of reducing income inequality in a society. However, can such a transfer reduce the welfare of the society? We show that a rich-to-poor transfer can induce a response in the individuals’ behaviors which actually exacerbates, rather than reduces, income inequality as measured by the Gini index. We use this result as an input in assessing the social welfare consequence of the transfer. Measuring social welfare by Sen’s social welfare function, we show that the transfer reduces social welfare. These two results are possible even for individuals whose utility functions are relatively simple (namely, at most quadratic in all terms) and incorporate a distaste for low relative income. We first present the two results for a population of two individuals. We subsequently provide several generalizations. We show that our argument holds for a population of any size, and that the choice of utility functions which trigger this response is not singular – the results obtain for an open set of the space of admissible utility functions. In addition, we show that a rich-to-poor transfer can exacerbate inequality when we employ Lorenz-domination, and that it can decrease social welfare when we draw on any increasing, Schur-concave welfare function.

The basis of human creation lays the foundation for altruism. Babies, be they human or animal are born helpless. Their very survival depends on the love and affection that are already embedded in the hearts of mothers. No amount of selfish attitude of mothers, not at least from short life span, can help in the growth of their off‐springs. One can argue that it is the self‐interested motive of the parents and most particularly the mothers of getting supports in their old days that drives them to be altruistic rather than selfish. Being altruistic means undertaking a lot of sacrifice in terms of personal pleasure and happiness merely for seeing pleasure and happiness in others regardless of any human bondage. An egoistic person, on the other hand, would never care for others. Personal level satisfaction only dominates the mind of an extremely egoistic or self‐centered man.

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.