'Recognition of complexity leads to humane solutions'

Amartya Sen's human science of development: Part II

Published : Jun 19, 1999 00:00 IST

Professor Amartya Sen is one of the world's most important and influential intellectuals, one of its foremost thinkers. The award of the 1998 Nobel Prize for Economics to the great economist, "a master practitioner of the human sciences", was the best thing that happened to the Nobel Prize in this field. This long-overdue award was for Sen's contributions to welfare economics and, among other things, for restoring "an ethical dimension to the discussion of vital economic problems". (For an appreciation of Sen's economics and its implications, see V.K. Ramachandran's Cover Story interviews in Frontline, December 12, 1986 and November 6, 1998.) The award represented a break in a two-decade trend reflecting a pronounced "bias in favour of technoeconomics in the service of the free market, private property and footloose finance". The break in the trend warrants celebration also for two other reas ons: the Nobel for Sen recognises "the central role of human development in the professional endeavour of economists", and "the human development of the Third World occupies a central position" in this laureate's work. In this second of a three-part article contributed at the invitation of Frontline, economist and economic historian Professor Amiya Kumar Bagchi takes the reader on an intellectual journey through Sen's work on complexity and problems of choice, which revolutionised welfare economics and enriched philosophy, his important examination of inequality in human societies, his profound conceptual and analytical work on famine, chronic starvation, various forms of deprivation, entitlements and rights, freedom and human capabilities, and the path-breaking analysis showing the link between the deprivation suffered by women (something that begins even before they are born) and the system of entitlements prevailing within the family, thus helping to "demystify family relationships".

- Editor, Frontline

4. Complexity and problems of choice: turning welfare economics inside out

Great theorists, mediocre model-builders and decision-makers in a hurry have something in common: they try to obtain their results by means of strategic or heedless simplification, as the case may be. In building some models, Amartya Sen also has had to resort to simple structures or parables to illustrate or elucidate a vital point. But his method has almost always been to recognise the complexities that obscure the simple point and then patiently unravel them.

We can watch him doing this as he tackles the issues of choice of techniques, method of evaluation of projects, or setting up sensible programmes for providing more employment in less-developed countries. In Sen's world, the complexity arises from the need to make precise the nature of the objectives of individuals and the constraints under which they operate (cf. Sen, 1970d). But Sen has also been continually aware that in any society (even under a dictatorial or authoritarian regime) we are dealing wi th a community of individuals with different tastes, needs, expectations and life chances. How to get a decision-rule or a defensible way of formulating issues of social or governmental policy has been a major concern of Sen's throughout his career.

Sen has tried to find out both whether, in spite of all this complexity, simple decision rules could exist, and whether rules or procedures that look simple or incontrovertible turn out to be muddled, inconsistent or unhelpfully complicated, on closer ex amination. We have seen how a possibly unanimous and democratic procedure can emerge when individuals play an assurance game. Another case, which Sen examined in an early article (Sen, 1959), is that of free will versus determinism. Philosophers such as Karl Popper and Isaiah Berlin argued that no deterministic prediction in human affairs can be logically valid because the prediction itself is likely to change the behaviour of the subjects concerned. Sen argued, inter alia, that even if predictions, for example of stock market prices, alter people's behaviour, under certain conditions, a fixed point located at the predicted position would exist and therefore a deterministic prediction could be valid even if people behaved freely and reacted to t he prediction made.

In a paper jointly authored with W.G. Runciman, Sen had equated Rousseau's concept of the "general will" with the solution of a collusive or cooperative n-person game as contrasted with the "will of all" which is the solution of a non-cooperative game with all agents atomistically pursuing their self-interest (Runciman and Sen, 1965). In these papers, Sen was demonstrating the differences in results that occur when we carefully distinguish between individualistic and collusive behaviour, and between mod els that take into account the information about the structures of preferences and constraints, and models that do not. Extended uses of such demonstrations would recur in his subsequent writings. There is one paper in particular which contributed powerfully to the rich conceptualisation that enabled Sen to connect welfare economics, social choice and what can be termed the human science of development.

In Sen (1967a), he disputed the Humean proposition that facts and values are categorically different and that it is impossible to deduce value judgments from factual propositions alone. Sen had basically two sets of arguments for doubting the efficacy of Hume's Law. The first was that few value judgments are really as basic as "thou shalt not kill". If a white American believes that privileging the white man is a basic value of civilisation, he might change his judgment if he were made seriously to masquerade as a black man for an extended period. Secondly, most value judgments are based on a combination of a preferred ranking of situations and a belief about the facts of the world and the way those facts influence or connect with other relevant facts. These value judgments can be disputed if the two-fold beliefs about the facts of the case can themselves be disputed (cf. also Sen, 1970b, chapters 5 and 9). Disputing the validity of the watertight fact-value compartmentalisation is part of the grand conceptual strategy that allowed Sen to break out of the confines of old and new welfare economics and connect social welfare judgments with issues of human deprivation and capability, and of freedom in a world of necessity. I will argue later that when w e take account of his scrutiny of the philosophical foundations of neoclassical economics, Sen's work amounts to refounding economics as an integral branch of the human sciences of development and recovering the rich concerns with human destiny and freed om that motivated the work of Adam Smith and Karl Marx.

In spite of interesting contributions by a number of authors, the so-called "new welfare economics" had seemed to reach an impasse. On the one hand, there remained a group of "individualists" (this may not be the best way to characterise them, but it will do in this context) who ruled out all inter-personal comparisons. For them only the Pareto principle remained: all states of affairs in which no person could be made better off without making somebody else worse off are equally good. Only a state of affairs in which at least one person is better off while the others are at least as well off as before could be pronounced better than the other states of affairs. But this left the question of income distribution hanging in the air: no economist could recommend a change on "objective ground" if it meant taking away one rupee from a billionaire in order to benefit a starving woman. Those who thought that inter-personal comparisons of utility or welfare could be made evolved so-called compensation criteria . However, these criteria often produced inconsistent results. Moreover, supplementary propositions to strengthen the compensation criteria proved to be inadequate to produce a complete ordering of the range of choice.

There seemed to be another way out of the dilemma posed by the weakness of the (acceptable) Pareto principle in ordering the space of social states and the inconsistency and incompleteness of the ordering produced by the compensation criteria advanced by John Hicks, Nicholas Kaldor and Tibor Scitovsky, supplemented by further desiderata of choice proposed by Ian Little. This is the formulation of a social welfare function along the lines proposed by Bergson (1938) and Samuelson (1947). However, the startling Possibility Theorem, which is better called the impossibility theorem, proved by Arrow (1951) showed that it is impossible to derive a consistent social ordering from reasonably behaved individual preference functions if that social choice function or ordering is to satisfy certain very reasonable-seeming conditions. One, for example, was the condition that no single person's choice alone should decide the social choice. In a critique of Kenneth Arrow's result, Little (1952) argued that it was irrelevant to welfare economics because Arrow took individual values to be given, whereas it is the function of democratic politics to allow competing values to surface and competing claims to be settled by unanimity or the decision of the majority. However , Little did not indicate how people can engage in a serious discussion of competing value or preference systems, without ending up in back-to-the-wall positions such as, A: "I like black" and B: "I like white", and ending the possibility of all further discussion. Furthermore, majority decisions were found generally to be intransitive and cyclical in nature. Sen and Pattanaik (1969/1982) showed that if every triple of alternatives X, Y and Z satisfies the "extremal condition", namely, that "if someone prefers X to Y and Y to Z, then Z is uniquely best in someone's ordering if and only if X is uniquely worst in his ordering" (Sen, 1970b, p.169), then the method of majority decision produces a transitive social ordering. Similar other conditions for the method of majority decision to produce a social ordering or a social welfare function have been produced (see, for example, Sen, 1977/1982, pp.160-64).

Sen mounted a three-pronged attack on old ("new") welfare economics and thereby demolished the grounds for Little's (1952) scepticism regarding the Arrovian framework and breached the impasse in the so-called new welfare economics we noted earlier. First , he showed that welfare judgments that become embodied in social decisions are necessarily political, and politics, and democratic politics, necessarily involves putting restrictions on people's preferences (such as "eating people is wrong"). Secondly, he demonstrated the relevance of inter-personal comparisons in making social choices. He had been independently moving in this direction since the beginning of the 1960s, but he acknowledged the influence of the seminal work of John Rawls, who had introduced different individuals' access to primary goods rather than their utility or satisfaction as the foundation of a theory of justice. 1

Thirdly, Sen brought in the facts of the real world into welfare discussions (a) by distinguishing between basic values and non-basic values, (b) by showing the obvious relevance of facts in deciding questions of non-basic values, and (c) by pointing out that many of our supposedly basic values are vulnerable to criticism on the grounds of their opacity, their changeability, and very often their unsuspected grounding in beliefs about the real world which are simply false or at least doubtful. His massive researches into poverty, famines and human deprivation can be seen to be grounded in the freedom he obtained by breaching the confining limits of the old-fashioned "new welfare economics".

Many adherents of liberalism, for example, Lionel Robbins, had believed that inter-personal comparisons are illegitimate in economics. Implicitly, most of them, however, had connected the competitive equilibrium with the attainment of Pareto efficiency: under certain conditions it can be shown that in an exchange economy, a Pareto-efficient configuration is also an equilibrium under the rules of pure competition, and that conversely, a purely competitive equilibrium is Pareto-efficient. In a powerful theorem, however, Sen (1970e/1982) proved that no liberal who believes in the sanctity of individual preferences can also believe that every Pareto-superior state should be acceptable to society.

This paper is closely connected with his scrutiny of the Arrovian possibility theorem and its cousins. Sen proved that if liberalism consists in respecting individuals' preferences (such as allowing a person to sleep on her face rather than on her back), then a social choice function (that is, a function that picks the best - not necessarily unique - out of all possible orderings) protecting such preferences does not exist (see also Sen, 1976/1982). Many of the liberal economists believed that all inter -personal comparisons are illegitimate, but by sticking to the Pareto principle (namely, that a social ordering is superior if at least one person is better off under it and nobody is worse off) they would sail through. They would now be in a fix. For, it would appear that majority decisions (the form of decision-making preferred by liberal democrats and by most other democrats as well) would violate the principle of liberalism. Sen's interpretation of this result is that the ultimate guarantee for individual liberty rests not on rules for social choice but on developing values that respect each other's personal choices (Sen, 1970e/1982, p.289).

When put together with the methodological principles of neoclassical economics which do not permit comparisons of intensities of preference, or the welfare of different individuals, Sen (1973, pp.9-13) showed that the Pareto principle can produce other perverse results. Suppose that among the conditions required for the original Arrow possibility theorem, that of transitivity of social ordering R is relaxed, and that only social preference is assumed to be transitive, and that all social states which are not strictly preferred to some other are considered to be indifferent. (This implies that some states are not Pareto-comparable.) Then Sen's Theorem 1.1 showed that the only functional relation mapping individual preferences into a social welfare function "must make all Pareto-incomparable states socially indifferent" (ibid., p.10). This meant that merely using the Pareto principle is a very crude guide to social welfare judgments.

Sen's theorem on the impossibility of a Paretian liberal did not go unchallenged (for references to the subsequent literature up to 1976, see Sen, 1977/1982). One particularly appealing solution seemed to be provided by Gibbard (1974) who showed that the Pareto principle can be protected if a person's right to the exercise of his preferences can be waived when it conflicts with other people's rights of the same kind. However, Alan Gibbard's resolution of the problem requires that everybody is informed a bout the exact nature of other people's rights, and that the motivation for people's preferences (whether they are meddlesome or vindictive) is also known. From his examination of the Gibbard resolution of the Pareto-libertarian conflict, Sen concluded:

The fundamental issue really is whether individual preference orderings alone provide enough of a basis for a social judgment without going into the causation of and the motivation behind these preferences ... To axe invariably personal rights over assigned pairs (of social states - A.B.) and never the Pareto principle, when they conflict, as Gibbard's system does, seems to me to be hard to justify (Sen, 1976/1982, p.302; see also Sen, 1979/1982, pp.340-346).

When Sen proved the inconsistency of the Pareto principle with principles of liberalism, he also demonstrated the surprising poverty of the so-called fundamental theorem of economics, namely, that every Pareto-efficient system can be shown to be consistent with an equilibrium in a model of pure competition and conversely that every purely competitive system has an equilibrium configuration which is Pareto-efficient. About the same time, he was also demonstrating the informational, ethical, and behaviour al deficiencies of an approach that takes individuals maximising their utility as its sole foundation (Sen, 1977a/1983). The postulates of individual utility maximisation, in his view, have provided some useful results in the field of consumer behaviour theory, but scarcely in any other conceptual field. One basic reason for this failure is that "traditional theory has too little structure. A person is given one preference ordering, and as and when the need arises this is supposed to reflect his interests, represent his welfare, summarise his idea of what should be done, and describe his actual choices and behaviour" (ibid., p.99). The structure that Sen suggests would include the role of sympathy (stressed by Adam Smith, among others), which traditional theory can treat only as an externality, commitment, that is the ability to stick to the truth or to certain values in spite of the fact that such behaviour can harm a person's interests, and its opposite, akrasia, that is, the weakness of will.

5. From an examination of inequality in human societies to a human science of development

We have seen how Sen was breaching the ramparts of the narrowly-confined space of traditional welfare economics and choice theory and allowing ethical considerations and inter-personal value judgments to enter that space. He was engaged, at the same time , in a closer examination of the nature and structure of inequality in existing human societies.

In many ways, his On Economic Inequality (Sen, 1973), delivered as Sen's Radcliffe Lectures in 1972, was a pointer to much of his later theorising and his empirical investigations in the closely connected areas of inequality and poverty. He had al ready established the necessity and legitimacy of judgments regarding inter-personal welfare. He now introduced two key concepts as entry points into the area of inequality of the human condition. The first was what he called the Weak Equity Axiom (WEA) (ibid., p.18).

Let person i have a lower level of welfare than person j for each level of individual income. Then in distributing a given total of income among n individuals including i and j, the optimal solution must give i a higher level of income than j.

The second basic consideration underlying the framework used in his book was "the possibility of being in different persons' positions and then choosing among them. Thus interpreted, WEA amounts to saying that if I feel that for any given level of income I would prefer to be in the position of person A (with his tastes and his other non-income characteristics) than in that of person B, then I should recommend that B should get a higher income level than A" (ibid., p.19). Sen's criterion here, of course, is very reminiscent of the analysis of philosophers such as R.B. Braithwaite and John Rawls, of justice as fairness.

Atkinson (1970) had shown that, given the same mean income and the same population size, if the Lorenz curve for income distribution of group A (a descriptive measure) lies entirely inside that of the income distribution for group B, then for additively separable social welfare functions, the social welfare of the former group would be higher than that of the latter (which is a normative judgment). Sen generalised Tony Atkinson's result to (a) the class of symmetric and quasi-concave social welfare func tions which need not even depend only on individual utilities, and (b) any population group, so long as it had similar income levels.

However, Sen wanted to be able to talk about inequality where it really hurts, namely, among people who are obviously disadvantaged because of low incomes, but also because of ill health, illiteracy and so on. The deviation of his route from that of the traditional egalitarian publicist can be put in terms of the first golden rule of John Tanner's ''Maxims for Revolutionists" in Bernard Shaw's Man and Superman: "Do not do unto others as you would they should do unto you. Their tastes may be different." Sen would add, "and their needs may be different." Sticking to the domain of the poor, Sen did not have to talk about how to make a judgment if two Lorenz curves crossed at the upper level, that is, to make normative judgments about the welfare of a Dhirubhai Ambani as against that of a Bill Gates.

The poor or the deprived have to be identified, and then some aggregation exercise would have to be carried out. For the identification and aggregation exercise the first step was generally taken to be the poverty line. That itself could be variably fixe d, depending on the level at which the minimum needs of a family were pitched. Once a poverty line was agreed upon, the poor were identified as all those whose incomes failed to reach that income level. Two widely used measures of poverty were the head-count ratio (HCR), namely, the ratio of the population below the poverty line, and the income gap (IG), namely, the deficit of the actual income of the poor from the total they would have to receive if they were all to reach the poverty line income level. Sen objected to the sole use of these two measures. The former measure was insensitive to the depth of poverty among the poor. This had the implication, for example, that if a policy lifted the people just below the poverty line above it, but increased the misery of the other, poorer people, the HCR would decline and give a misleading signal. On the other hand, the use of IG alone would provide no information about the number of poor people (Sen, 1973, chapters 2 and 3; Sen, 1976a/1982, pp.373-4).

Sen proceeded to remedy these defects, and formulated a new measure of poverty, P of the following form (Sen, 1976a/1982; Sen, 1981, Appendix C).

P = H [ I + (1-I) G ],

where H is the head-count ratio, I is the poverty gap ratio rates, and G is the Gini coefficient of distribution of the incomes of the poor. If Z is the poverty line, q the number of people below the poverty line and n the total number of people in the community, H = q/n. If Yi is the income of person i among the poor, then gi = Z - Yi is his poverty gap, g = gi is the total poverty gap, and I = g/qZ is the poverty gap ratio.

Sen (1976a/1982) showed that this formula satisfied several desirable properties, namely, that (a) given other things, "a reduction in income of a person below the poverty line must increase the poverty measure", (b) a weak transfer of income axiom such that the transfer of income from a person below the poverty line to anyone who is richer must increase the poverty measure, provided that the transferee continues to remain below the poverty measure, and (c) P is insensitive to an increase in the income of a non-poor person. Sen's desiderata and variations on them have been used by other theorists, and other measures satisfying them have been devised. The most widely used of these measures seems to be the Foster-Greer-Thorbecke index (Foster, Greer and Thorbecke, 1984).

Sen, of course, was not concerned simply with the measurement of poverty. In Sen (1973) he discussed questions of social policy in the light of the distinction between deserts and needs, a distinction he traced back to Marx's Critique of the Gotha Programme (Marx, 1875/1970). He also analysed the experience of the Chinese Communist Party when it tried, during the Great Leap Forward of 1958-1961, to replace material with non-material incentives. The experiment was attended with disastrous consequences, not all of which could be attributed to the effect the incentive system had on work motivation. But it had to be given up anyway. During the period of the Cultural Revolution, the Chinese, under the leadership of Mao Zedong, tried to alter the valu es of the workers, thus in Sen's formulation, replacing the Prisoners' Dilemma game with the Assurance Game. The mixed results obtained from that nationwide cultural experiment again could not be attributed entirely to the Cultural Revolution itself (Sen , 1973, chapter 4; Sen, 1982a; Sen, 1983a).

In his Radcliffe Lectures, besides issues of measurement and structures of inequality, Sen also wanted to illuminate "some of the policy issues, especially in the context of the socialist economy" (Sen, 1973, p.2). I have referred to his analysis of relative merits of allocation of income in accordance with needs and deserts in a socialist economy (but more generally in any society that values egalitarianism, or human development in general). One other interesting policy issue briefly touched on by Sen (1973, pp.78-79) was that of a national health service versus health insurance. Arrow (1963, p.205) pointed out that if the private insurance markets were perfectly competitive (which, because of problems of adverse selection and moral hazard, they cannot be), "those in groups of higher incidences of illness should pay higher premiums". Sen continues:

This means that those with a higher incidence of illness would end up with less income net of insurance premiums. This is, of course, precisely what a national health service run independently of market profitability can avoid. But what is the ration ale of avoiding it? Precisely the needs principle which we have been examining. An ill person has identifiably greater needs, and by spending more money on him the society would give him a greater effective income, which is precisely in line with the Weak Equity Axiom...

An issue that has come up repeatedly in Sen's work is that of relative versus absolute poverty, and more generally, of relative versus absolute deprivation (see, for example, Sen, 1981, pp.15-17; Sen, 1983/1984). It would appear at first sight that relative deprivation has nothing to do with absolute deprivation. However, there are certain kinds of goods which decline in value when other people also claim them: the enjoyment of an uncrowded beach is an example. There are more serious jostling effects of other people's activities. The rise of a multistoried block next to a one-storied house can deprive inhabitants of the latter of sunshine and free flow of air. The requirement that every child should have access to a computer at home can retard the educational development of the poor children. Denial of knowledge to the underprivileged can become the basis of the contrast between the poor and the rich, as Jacques Necker pointed out in the 1780s, and of class divisions in a capitalist society as Marx (1 861-63/1960, pp.296-298) noted in his commentary on Necker.

From an analysis of inequality and issues of measurement of poverty, Sen moved to an enquiry into the causes of famines. His first venture in this direction, contributed to the Economic and Political Weekly (Sen, 1976b), was expanded into a book ( Sen, 1981), which became a fore-runner of a decade-long analysis of entitlements and rights, freedom and human capabilities and the massive organisation of a series of studies on the political economy of hunger (Sen, 1976a/ 1982; 1981; 1981a/ 1984; 1983/ 1984; Dreze and Sen, 1989; 1990; 1990a; 1991). He started from the normative concept of entitlements as a theory of justice, and private property rights (Nozick, 1974), but changed its focus to that of a descriptive theory of who gets what and how. A per son in any society has certain endowments (labour power, land, financial assets, skills) which she can directly use to obtain goods and services she desires, or can trade them or the outputs produced with their help, in a formal or informal exchange with others to procure her preferred bundles of goods and services. Thus arises the idea of "exchange entitlements". But not all entitlements consist of such endowments: a child's entitlement in most societies lies at the dispensation of parents. In properly organised welfare states, the state tries to correct gross dereliction of duty on the part of the parents. But in organised societies, the basis of all entitlements is that of the legitimacy of the claims of the person concerned. In many slave societies (not all), for example, the slave had a right to sustenance by the master, and not to be punished unjustly by him.

Sen traced the roots of starvation and famine in most cases to a failure of entitlements and more narrowly to that of exchange entitlements rather than to the lack of availability of food. The sudden collapse of purchasing power because of lack of employment, especially rural employment, caused by floods, drought or war, can lead to prolonged starvation and famine even when enough food is available in the region to stave off starvation. Where commercial agriculture has not penetrated, people often mainly depend on their own production and on gathering produce from the fields and rivers. The closure of these avenues of subsistence to particular groups, paradoxically enough through the privatisation or state take-over of common property resources in the interest of trade and commerce, can cause starvation among those groups. Sen's innovation lay in the unification of all these sources of deprivation under the generic rubric of failure of entitlements and creating an analytical structure applicable to th em.

Famines are an extreme form of deprivation - the denial of the right to live. But in their daily existence people suffer from ill health, malnutrition, homelessness, illiteracy and early death. It is to the aspects of ill health, malnutrition and early death that Sen turned his attention. In this enquiry he came up with the stark fact that half of humanity - namely, women - suffer more than men from all these varieties of deprivation in most countries - but most oppressively in countries of South Asia a nd West Asia. The studies organised under the leadership of Sen and Jean Dreze, Sen's chief collaborator in these areas, provided a mapping of the extent and deprivation of women and men all over the world (Dreze and Sen, 1989; 1990; 1990a; 1991; Ahmad, Dreze, Hills and Sen, 1991). These studies also include analyses of policies pursued by governments and other organisations to fight hunger, malnutrition, ill health and provide social security in other forms. The United Nations Development Programme, again with intellectual leadership provided by Sen, has been producing since 1990 an annual Human Development Report to cover most of the measurable aspects of human development and deprivation, especially women's deprivation, in all countries cover ed by the U.N. system.

Demographers and other students of the health and longevity of women had been aware of the endemic gender discrimination in India and many other less developed countries. Following the lead of Mary Wollstonecraft, J.S. Mill and Frederick Engels, professed feminists, Marxists and other radical students of human society had analysed male domination over women over all societies. Theoretically, women could be systematically subordinated to men without suffering in health, nutrition, longevity or even education. In fact, most of the East Asian societies would fit that pattern. What Sen did was to link the deprivation suffered by women since before their birth (through deliberate sex selection favouring boys), and through their girlhood to pregnancy and bey ond, to the system of entitlements prevailing within the family. His idea of "cooperative conflicts" where men and women cooperate daily but in most conflict situations women systematically lose out (and mostly internalise that loss through the acceptance of their supposed inferiority) has helped demystify family relationships. This demystification implies that children have often to be protected from the conscious and unconscious choices made for them by their "natural guardians". Thus it is not market failure alone which demands public correction, but familial failures and deprivation caused by communitarian demands as well that would require public action (Sen, 1983b/1984; Kynch and Sen, 1983; Sen and Sengupta, 1983).

(To be continued)References

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