We could never completely eliminate the drive for status since it is hard wired into our biology,
as studies of male monkeys show: when a monkey is moved between groups so that his status rises,
there is an increase in his serotonin (a neurotransmitter associated with happiness).
The reverse happens when his status falls (cp. game theory, e.g. www.iew.unizh.ch)...
[This conclusion completely ignores] the impact of one person’s pay rise on the welfare of his colleagues.
Such interdependencies are a basic part of human experience, and a theory which ignores them is deeply misleading...
Whether we like it or not, human beings are rivalrous, and it is time for mainstream economics
to incorporate this key fact of human nature.
There is a second key fact – habituation. Many forms of consumption give more pleasure at first than they do over the long haul. And people do not fully foresee this when they embark on a more expensive life-style. Both these phenomena lead to serious market failures, which public policy needs to offset. Envy means that any income gain is a source of major negative externality – perhaps the biggest negative externality in modern society.
Habituation involves major informational errors, which again lead to major inefficiency.