Learning Objectives
By the end of this section, you will be able to:
- Explain the basic elements of Amartya Sen’s Capabilities approach
- Define capabilities and functionings
- Explain the Marxian Labor Theory of Value and its implications
Given the limitations and challenges associated with utilitarianism, many students of economics seek out alternative approaches for measuring economic well-being and interpreting the societal implications of economic outcomes. The following describes, two alternative, heterodox, approaches for interpreting economic conditions.
Two Normative Examples from Heterodox Economics
Abandoning Utility: The Capabilities Approach and the Ethical Considerations of Amartya Sen
Where do the seeds of discontent sprout? In 1998 Amartya Sen was awarded the Nobel Prize in economics. Sen is a fascinating case study as he provides an example of an economist who is not a utilitarian. Early in his career Sen had abandoned utilitarianism. What prompted Sen to abandon utility as a first principle? The answer to this question can be found at the beginning of Sen’s career when Sen encountered a utilitarian tradition in economics that had shed nearly all the conventional characteristics of ethical analysis. While the early 19th century utilitarian thinkers such as Bentham had identified and described some of the ethical issues surrounding the idea of diminishing marginal utility, by the late 20th century utilitarianism in economics had been reduced to revealed preference theory. For Sen, utilitarianism provides entirely too-narrow an assessment of what it means to be a person. The result is that there are far too many limits associated with utilitarianism for the utilitarian to be able to make effective, and informed, moral evaluations.
Taken further, Sen also recognizes the link between the moral vacuum produced by utilitarian philosophy and the neoclassical application of the Pareto criterion. For Sen, utilitarianism and the Pareto criterion are like a form of normative handcuffs. Neither the distribution of income nor initial utilities factor in to the choice making, exchange story, promoted by orthodox economics. By ignoring the initial endowments of income or utility, Sen argues that a condition of Pareto optimal may also be one of deep inequality and hardship. Those without property and with little income often times find themselves without property and little income even though they have engaged in market exchange.
Admittedly, a person’s actual freedom to exchange may provide a person with a degree of additional utility. Clearly being free to make choices is empowering and valuable to individuals. However, one’s freedom to act does not mean that a person is in a remotely decent position in the market. The fact is, a market outcome can be Pareto optimal and still be less than socially optimal. For example, instead of demanding change people in poor situations often simply adjust to their negative circumstances. The deprived find s