The answer is that it is a simpler assumption than diminishing marginal utility
, and it allows the development of a richer theory.
For diminishing marginal utility
of income to justify an income transfer, assuming a short-run perspective, the short-run happiness loss to the person losing the income must be less than the short-run happiness gain to the person receiving it.
A]ll the intuitive feelings which lead to the assumption of diminishing marginal utility
are irrelevant, and we are free to assume that marginal utility is increasing so that the existence of gambling can be explained with the theory.
The same critical point of view can be found in the chapter dedicated to explaining why America might not be the land of equal opportunity, yet is the land of opportunity, and in the chapter dedicated to the discussion against the classical economic concept of diminishing marginal utility
considered as a criterion of justice.
Under diminishing marginal utility
of income, part of any exogenous change in one group's income should be shared with the other group.
Attempts to smooth over the conflicts generated by a commercial culture, or to crisis-manage the malignant side-effects or "externalities" generated by an unfettered economy, are afflicted with the problem of diminishing marginal utility
Beyond a certain point money can make something worse instead of better; one might say there can be a diminishing marginal utility
to an expanding pie.