The purpose of this paper is to develop an economic measure of relative deprivation and explore its relationship to envy and economic inequality. Although the Gini coefficient has been interpreted as an index of relative deprivation, it will be shown that its magnitude fails to satisfy the most important property required of an index of relative deprivation. Though inequality gives rise to discontent, a common index of inequality is unable to reflect the actual degree of discontent in the society whereas a properly constructed measure of relative deprivation should be capable of doing so. Frequent attempts to demonstrate that the Gini coefficient is a measure of relative deprivation may be due to the much quoted statement by one of the famous exponents of relative deprivation, Runciman (1966), who wrote, 'The magnitude of a relative deprivation is the extent of the difference between the desired situation and that of the person desiring it.' This is a clear indication that Runciman conceives relative deprivation as a linear function of the difference between two situations. On the other hand Runciman talks about the curvilinear relationship between inequality and grievance in connection with the main finding of Stouffer et a]. (1949) which seems to have been completely ignored in economic literature.The plan of this paper is as follows. In the introductory section we discuss the concepts of relative deprivation, envy and fairness and their relationship to economic inequality. In Section I1 the importance of the concept of the reference group as the context of relative deprivation is briefly discussed. In the third