Development as Freedom (15 page)

As noted earlier, this difficulty is present even when everyone has the same demand function. It is intensified when the individual demand functions differ, in which case even comparisons of the commodity basis of utility are problematic. There is nothing in the methodology of demand analysis, including the theory of revealed preference, that permits any reading of interpersonal comparisons of utilities or welfares from observed choices of commodity holdings, and thus from real-income comparisons.

In fact, given interpersonal diversity, related to such factors as age, gender, inborn talents, disabilities and illnesses, the commodity holdings can actually tell us rather little about the nature of the lives that the respective people can lead. Real incomes can, thus, be rather poor indicators of important components of well-being and quality of life that people have reason to value. More generally, the need for
evaluative
judgments is inescapable in comparing individual well-being, or quality of life. Furthermore, anyone who values public scrutiny must be under some obligation to make clear that a judgment
is
being made in using real incomes for this purpose and that the weights implicitly used must be subjected to evaluative scrutiny. In this context, the fact that market-price-based evaluation of utility from commodity bundles gives the misleading impression—at least to some—that an already available “operational metric” has been
preselected for evaluative use
is a limitation rather than an asset. If informed scrutiny by the public is central to any such social evaluation (as I believe is the case), the implicit values have to be made more explicit, rather than being shielded from scrutiny on the spurious ground that they are part of an “already available” metric that the society can immediately use without further ado.

Since the preference for market-price-based evaluation is quite strong among many economists, it is also important to point out that all variables other than commodity holdings (important matters such as mortality, morbidity, education, liberties and recognized rights) get—implicitly—a zero direct weight in evaluations based exclusively on the real-income approach. They can get some
indirect
weight only if—and only to the extent that—they enlarge real incomes and commodity holdings. The confounding of welfare comparison with real-income comparison exacts a heavy price.

There is thus a strong methodological case for emphasizing the need to assign explicitly evaluative weights to different components of quality of life (or of well-being) and then to place the chosen weights for open public discussion and critical scrutiny. In any choice of criteria for evaluative purposes, there would not only be use of value judgments, but also, quite often, use of some judgments on which full agreement would not exist. This is inescapable in a social-choice exercise of this kind.
⁵⁵
The real issue is whether we can use some criteria that would have greater public support, for evaluative purposes, than the crude indicators often recommended on allegedly technological grounds, such as real-income measures. This is central for the evaluative basis of public policy.

The capability perspective can be used in rather distinct ways. The question as to which practical
strategy
to use for evaluating public policy has to be distinguished from the
foundational
issue as to how individual advantages are best judged and interpersonal comparisons most sensibly made. At the foundational level, the capability perspective has some obvious merits (for reasons already discussed) compared with concentrating on such instrumental variables as income. This does not, however, entail that the most fruitful focus of
practical
attention would invariably be measures of capabilities.

Some capabilities are harder to measure than others, and attempts at putting them on a “metric” may sometimes hide more than they reveal. Quite often income levels—with possible corrections for price differences and variations of individual or group circumstances—can be a very useful way of getting started in practical appraisal. The need for pragmatism is quite strong in using the motivation underlying the capability perspective for the use of available data for practical evaluation and policy analysis.

Three alternative practical approaches may be considered in giving practical shape to the foundational concern.
⁵⁶

Obviously, “total comparison” is the most ambitious of the three—often much too ambitious. We can go in that direction—maybe quite far—by not insisting on a complete ranking of all the alternatives. Examples of “distinguished capability comparison” can be seen in concentrated attention being paid to some particular capability variable, such as employment, or longevity, or literacy, or nutrition.

It is possible, of course, to go from a set of separate comparisons of distinguished capabilities to an aggregated ranking of the sets of capabilities. This is where the crucial role of weights would come in, bridging the gap between “distinguished capability comparisons” and “partial rankings” (or even “total comparisons”).
⁵⁷
But it is important to emphasize that despite the incomplete coverage that distinguished capability comparisons provide, such comparisons can be quite illuminating, even on their own, in evaluative exercises. There will be an opportunity to illustrate this issue in the
next chapter
.

2)
The supplementary approach:
A second approach is relatively nonradical, and involves continued use of traditional procedures of interpersonal comparisons in income spaces, but supplements them by capability considerations (often in rather informal ways). For practical purposes, some broadening of the informational base can be achieved through this route. The supplementation may focus either on direct comparisons of functionings themselves, or on instrumental variables other than income that are expected to influence the determination of capabilities. Such factors as the availability and reach of health care, evidence of gender bias in family allocation, and the prevalence and magnitude of joblessness can add to the partial
illumination provided by the traditional measures in the income space. Such extensions can enrich the overall understanding of problems of inequality and poverty by
adding to
what gets known through measures of income inequality and income poverty. Essentially, this involves using “distinguished capability comparison” as a supplementary device.
⁵⁸

3)
The indirect approach:
A third line of approach is more ambitious than the supplementary approach but remains focused on the familiar space of incomes, appropriately
adjusted
. Information on determinants of capabilities
other than income
can be used to calculate “adjusted incomes.” For example, family income levels may be adjusted downward by illiteracy and upward by high levels of education, and so on, to make them equivalent in terms of capability achievement. This procedure relates to the general literature on “equivalence scales.” It also connects with the research on analyzing family expenditure patterns for indirectly assessing causal influences that may not be observed directly (such as the presence or absence of certain types of sex bias within the family).
⁵⁹

The advantage of this approach lies in the fact that income is a familiar concept and often allows stricter measurement (than, say, overall “indices” of capabilities). This may permit more articulation and perhaps easier interpretation. The motivation for choosing the “metric” of income in this case is similar to A. B. Atkinson’s choice of the income space to measure the effects of income inequality (in his calculation of “equally distributed equivalent income”), rather than the utility space, as was originally proposed by Hugh Dalton.
⁶⁰
Inequality can be seen in Dalton’s approach in terms of utility loss from disparity, and the shift that Atkinson brought in involved assessing the loss from inequality in terms of “equivalent income.”

The “metric” issue is not negligible, and the indirect approach does have some advantages. It is, however, necessary to recognize that it is not any “simpler” than direct assessment. First, in assessing the values of equivalent income, we have to consider how income influences the relevant capabilities, since the conversion rates have to be parasitic on the underlying motivation of capability evaluation. Furthermore, all the issues of trade-offs between different capabilities (and those of relative weights) have to be faced in the indirect approach just as much as in the direct approach, since all that is essentially altered is the unit of expression. In this sense the indirect
approach is not basically different from the direct approach in terms of the judgments that have to be made to get appropriate measures in the space of equivalent incomes.

Second, it is important to distinguish between income as a
unit
in which to
measure
inequality and income as the
vehicle
of inequality reduction. Even if inequality in capabilities is well measured in terms of equivalent incomes, it does not follow that transferring income would be the best way to counteract the observed inequality. The policy question of compensation or redress raises other issues (effectiveness in altering capability disparities, the respective force of incentive effects and so on), and the easy “reading” of income gaps must not be taken as a suggestion that corresponding income transfers would remedy the disparities most effectually. There is, of course, no need to fall into this mistaken reading of equivalent incomes, but the clarity and immediacy of the income space may pose that temptation, which has to be explicitly resisted.

Third, even though the income space has greater measurability and articulation, the actual magnitudes can be very misleading in terms of the values involved. Consider, for example, the possibility that as the level of income is reduced and a person starts to starve, there may be a sharp drop at some point in the person’s chances of survival. Even though the “distance” in the space of incomes between two alternative values may be rather little (measured entirely in terms of income), if the consequence of such a shift is a dramatic change in the chances of survival, then the impact of that small income change can be very large in the space of what really matters (in this case the capability to survive). It may thus be deceptive to think of the difference as being really “little” because the income difference is small. Indeed, since income remains only instrumentally important, we cannot know how significant the income gaps are without actually considering the
consequences
of the income gaps in the space that is ultimately important. If a battle is lost for want of a nail (through a chain of causal connections that the old verse outlines), then that nail made a
big
difference, no matter how trivial it may be in the space of incomes or expenditures.

Each of these approaches has contingent merit that may vary depending on the nature of the exercise, the availability of information,
and the urgency of the decisions that have to be taken. Since the capability perspective is sometimes interpreted in terribly exacting terms (total comparisons under the direct approach), it is important to emphasize the catholicity that the approach has. The foundational affirmation of the importance of capabilities can go with various strategies of actual evaluation involving practical compromises. The pragmatic nature of practical reason demands this.

Euclid is supposed to have told Ptolemy: “There is no ‘royal road’ to geometry.” It is not clear that there is any royal road to evaluation of economic or social policies either. A variety of considerations that call for attention are involved, and evaluations have to be done with sensitivity to these concerns. Much of the debate on the alternative approaches to evaluation relates to the priorities in deciding on what should be at the core of our normative concern.

It has been argued here that the priorities that are accepted, often implicitly, in the different approaches to ethics, welfare economics, and political philosophy can be brought out and analyzed through identifying the information on which the evaluative judgments rely in the respective approaches. This chapter was concerned particularly with showing how these “informational bases” work, and how the different ethical and evaluative systems use quite different informational bases.

From that general issue, the analysis presented in this chapter moved to specific evaluative approaches, in particular utilitarianism, libertarianism and Rawlsian justice. In line with the view that there are indeed no royal roads to evaluation, it emerged that there are distinct merits in each of these well-established strategies, but that each also suffers from significant limitations.

The constructive part of this chapter proceeded to examine the implications of focusing directly on the substantive freedoms of the individuals involved, and identified a general approach that concentrates on the capabilities of people to do things—and the freedom to lead lives—that they have reason to value. I have discussed this approach elsewhere as well,
⁶¹
as have others, and its advantages and limitations are also reasonably clear. It does appear that not only is
this approach able to take direct note of the importance of freedom, it can also pay substantial attention to the underlying motivations that contribute to the relevance of the other approaches. In particular, the freedom-based perspective can take note of, inter alia, utilitarianism’s interest in human well-being, libertarianism’s involvement with processes of choice and the freedom to act and Rawlsian theory’s focus on individual liberty and on the resources needed for substantive freedoms. In this sense the capability approach has a breadth and sensitivity that give it a very extensive reach, allowing evaluative attention to be paid to a variety of important concerns, some of which are ignored, one way or another, in the alternative approaches. This extensive reach is possible because the freedoms of persons can be judged through explicit reference to outcomes and processes that they have reason to value and seek.
⁶²