Reversal of Envy

Studies of compensating discrimination (known in the U.S. as affirmative action) have not accounted for the role of envy. Yet envy affects utility. I consider the compensatingdiscrimination policies that individuals acknowledging envy would choose when behind a veil of ignorance. The institutional background for my study is India, where low castes have been provided with preferential access to public education and reserved public sector jobs. Although the Indian case is background, the conclusions apply more generally. I define envy as occurring when people with the same abilities have different incomes because of unequal education and employment opportunities. This is the case when, because of adverse discrimination, low-caste people are denied access to education and public-sector jobs, and also when, because of compensating discrimination, it is high-caste people who are correspondingly denied equal access. A benchmark case with neither adverse nor discriminatory discrimination is efficient and equitable (envy-free). Adverse and compensating discrimination both compromise efficiency and fairness. I derive the conditions that determine attitudes of a population behind the veil of ignorance to compensatingdiscrimination policies.