ABSTRACT
This chapter discusses the interactions in the special case where changes in the quality of the environment have a small impact on consumption. Increasing aversion to inequality suppresses such differences until, at infinite aversion, optimal utility is constant over the city. Suppose that individuals are characterised according to ability and tastes. Individuals are "equal" if they have the same ability and tastes. Otherwise they are "unequal". At zero aversion, optimal utility differences should precisely equal the value of the corresponding environmental differences. A bias toward inequality exaggerates such differences. Increasing aversion to inequality suppresses such differences until, at infinite aversion to inequality, utility is constant over the city. For individuals of the same tastes, equal treatment of unequals expresses a principle of social justice according to need whereas unequal treatment of unequals reflects a principle according to merit—hence one that may avoid exploitation altogether.
