Amartya Sen

My colleague Lawrence Hamilton has written a terrific summary of the work of Amartya Sen, in a book in Polity’s Key Contemporary Thinkers series, just called Amartya Sen. It’s a fantastic introduction to the oeuvre written in a very accessible manner. I’ve read Sen’s books most relevant to my own discipline, and his work on social choice is of course pretty technical; nevertheless, it is clearly explained here.

The deep interest all economists ought to have in Sen lies in his profound – and successful –  challenge to utilitarianism, the philosophical foundation on which economic theory has been constructed. Much of what I do now is motivated by the need to rethink the practicalities of economic policy given that the social welfare standard we think we use to compare different policy outcomes is so flawed. So for example, our Bennett Institute Wealth Economy project looking at people’s access to certain types of asset is one attempt to find a set of economic statistics to measure progress that speak to the idea of Sen’s capabilities and functionings – just as GDP growth speaks to utility.

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Having said that all economists ought to be interested, relatively few are. When I once wrote an op ed along these lines, a very distinguished senior economist emailed me to say if I wasn’t a utilitarian, I wasn’t an economist. Another very distinguished economist couldn’t see the disjuncture between Paretian welfare economics and the fact that policy economists make social welfare judgements all the time in cost benefit analysis, competition assessments, evaluations of tax policy etc. We are socialised so early and thoroughly into utility-thinking that it’s hard to step outside it.

Lawrence’s book introduces Sen’s key ideas in social choice and his concept of capabilities. I found very helpful the way it highlights the importance of incompleteness of information in turning Arrow’s work into a possibility rather than an impossibility theorem.  It also very elegantly critiques Sen’s work, largely its failure to address the practical political and institutional realities, and undue optimism about people – for instance, in Sen’s emphasis on deliberative processes. What is the role of expertise? How does political power as it is distributed in reality affect the process of deliberation? Very topical challenges, to which Sen’s work does not offer answers. As the book says, “Theories of social choice have tended to assume that people’s preferences are given, but it is a fact of life in democratic politics that on a lot of issues people do not have clear preferences.

This is an issue for economics too: the construction of the deflators used to turn nominal pound or dollar GDP into ‘real’ GDP, on which so much policy hangs, relies on a theory of constant, known preferences which determine the utility of consumption, and yet modern economic growth is all about creating wants for new goods and services for which preferences have to be created. So at a time of rapid innovation it is not at all clear what the deflators and ‘real’ GDP measures are measuring.

What is nevertheless compelling about Sen’s approach is its focus on human agency, which “Drives [Sen’s] major conceptual innovation or development but also for assessment of standards of living in all contexts: his capability approach.” It isn’t the goods that matter but what people can do with them.

In short, all economists ouht to read Sen’s major works, but if they haven’t definitely ought to read this introduction. Excellent for students too, and for people in the policy world who would like an overview.

Amartya Sen (Key Contemporary Thinkers)

 

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Whose choice?

I’m improving my Public Policy Economics course ready for the next academic year at Manchester (hello, prospective ECON20431 students, if you’re reading this blog!) One of the areas that troubled me last year was how economics treats questions of social welfare in public policy analysis. I thought it was just me, as it had been many years since I thought about it. Having just finished Daniel Hausman’s Preference, Value, Choice and Welfare, I’m reassured that it is just difficult territory.

Preference, Value, Choice, and Welfare

The book has two big points. One is to argue that ‘preferences’ in economics is used, and ought to be used, to mean subjective comparative evaluations that include all relevant considerations – including moral imperatives, social norms, passions, whims. This obviously does not mean the same as everyday usage of ‘preference’; in everyday language we consider moral duties can conflict with preferences, for example. It also means self-interest can’t be built in to preferences. “Preferences are the outcome of demanding and poorly understood processes of comparative evaluation.” People might often take short cuts (as per Gerd Gigerenzer) or be vulnerable to certain biases (per R Thaler et al).

Preferences are then combined with beliefs to determine choices. Hausman argues that economists often ignore the role of beliefs or judgements about the choice environment because they tend to assume people’s beliefs are correct.

His second big point is that economists should not and cannot then say that what determines preferences is a matter only for psychologists or other social scientists; economics itself has to engage with the question of preference-formation.

I agree with Hausman so far. I am less clear about the part of the book that is about preferences and welfare. He argues that the satisfaction of people’s preferences is evidence that their welfare is being improved, but that welfare cannot be defined as the satisfaction of preferences, as economists assume. I don’t understand the second part of this: he says it is because preferences are not defined by self-interest, but I don’t follow why welfare has to be defined by self-interest rather than being defined by preferences (including moral imperatives, emotions etc). Hausman then goes on to assume policies should aim to improve social welfare, which is fine if you agree with the definition of welfare. But he asks why policy should be sensitive to people’s preferences beyond the promotion of their welfare, and goes on to discusss the behavioural economics findings that people might often not be good judges of their own interest. He challenges methods such as contingent valuation, because they reflect people’s sense of moral obligation, for example. That doesn’t seem to me to be a problem at all.

I think my difficulty with this is that as soon as you posit an ‘objective’ concept of welfare as what is in people’s best interests, and allow this to diverge from their preferences – especially in this wide sense which can include concern for others or for absolute moral imperatives – you are in the territory of social scientists determining what is best. Indeed, Hausman agrees that if people do include the seeking of their own benefit and are good judges of circumstances, preference satisfaction is a good indicator of welfare; and even if not, it might be better than a third party deciding.

Anyway, an interesting book (& there’s much more than I’ve summarized here including a discussion of Sen‘s approach), even if it hasn’t saved me from having to continue puzzling over this territory.

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