Post-Exodus Welfare Economics: John Rawls and Amartya Sen
In contrast with Hicks’s attempt to reorient the post-exodus welfare economics on the basis of the classical tradition, there are two modern developments that have been exerting influence on the post-exodus welfare economics, viz., John Rawls’s theory of justice (Rawls (1971/1999) and Amartya Sen’s capability approach to well-being, freedom, and equality (Sen 1980,1982,1985,1993).
In what follows, we examine briefly these two approaches one by one.7.5.1 Rawls’s Theory of Justice by Means of Social Primary Goods According to Rawls (1971/1999, p. 54), two principles of justice on the basic institutional structure of society, which governs the assignment of rights and duties in major social institutions and determines the appropriate distribution of the benefits and burdens of social life, should be chosen in the original position of primordial equality.17,18 The first principle maybe called the principle of maximal equal liberty, which requires that each individual should be assured of an equal right to the most extensive liberty compatible with similar liberty for all individuals. The second principle is widely known under the title of the difference principle, and it maintains that inequalities are arbitrary unless it is reasonable to expect that they would work for every individual’s advantage. To make the difference principle operational, Rawls paraphrased it as follows: Social inequalities should be arranged so as to make the worst-off individual best-off. We must further ask: How can we identify the worst-off individual for each social state? This further question is answered by Rawls (1971/1999, p. 54 and pp.
17 This set-up of the problem of justice by Rawls clearly suggests that his theory of justice is a salient example of transcendental institutionalism in the sense of Sen (2009).
18 The original position is the hypothetical situation of equality among individuals, under which a certain conception of justice will be spontaneously agreed on.
The principles of justice will be chosen behind a veil of ignorance. In this hypothetical situation of primordial equality, no one is advantaged or disadvantaged in the choice of principles by natural chance or contingency of social circumstances. No one is able to design principles to favor his particular condition, so that the principles of justice cannot but be the result of a fair agreement or bargain.60-65) by means of the concept of social primary goods, which are defined to be general-purpose means for pursuing various ends including such diverse things as rights, liberties, opportunities, income and wealth, and the social basis of self-respect. Rawls asserts that all social primary goods have use value whatever an individual’s rational life plan may be. Thus, the second principle is rephrased that all social primary goods should be distributed equally among all individuals unless an unequal distribution of any, or all, social primary goods is to everyone’s advantage.[64]
With this understanding of the universal use value of social primary goods, Rawls crossed the Rubicon by choosing social primary goods as the informational basis of his theory of justice. Rawls’s focus on the means rather than on the ends in the pursuit of rational life plans of individuals in society dissociated him from welfaristic theories of social judgments.
Two insidious features of Rawls’s informational basis should be noted. On the one hand, as Rawls himself enumerated, there are multiple components of social primary goods. Thus, if we want to compare the well-being of two individuals in terms of the relative richness of social primary goods at their respective disposal, we must compare two vectors of social primary goods and decide which vector is richer than the other. Even if all individuals agree that more of each social primary good is better, there is no clear criterion for judging if one vector of social primary goods is better or worse than the other, or both are indifferent, neither is there any obvious method of defining an index of social primary goods.
On the other hand, as Sen (1980; 1982, p. 368) points out, “[social] primary goods suffer from fetishist handicap in being concerned with goods, and even though the list of [social primary] goods is specified in a broad and inclusive way,... it still is concerned with good things rather than with what these good things do to human beings.”It was this observation that led Sen to replace the Rawlsian theory of justice in a non-fetishist direction by means of his own capability approach to well-being, freedom, and equality. It is to this alternative approach that we now turn.
7.5.2 Sen’s Capability Approach to Well-Being, Freedom, and Equality[65] [66] [67] Sen’s capability approach started from abandoning the classical informational basis of opulence or utility in the evaluation of the state of persons, and replacing it with the Aristotelian basis that consists of the achievement of valuable functionings, and the capability to achieve them.21,22 These basic components of his approach are explained as follows: Functionings represent parts of the state of a person - in particular the various things that he or she manages to do or be in leading a life.[68] The capability of a person reflects the alternative combinations of functionings the person can achieve, and from which he or she can choose one collection. The assessment of welfares and of freedoms can be related to the functionings achieved and to the capability to achieve them. (Sen 1996, p. 57) Three intermediate concepts must be introduced at this juncture. Commodities are clearly of instrumental value in enabling individuals to function, so that the human command over commodities is the natural point to kick off our analysis. To dig deeper into what is of intrinsic value, Sen introduced characteristics, characteristics function, and utilization function in between commodities and functionings. According to William Gorman (1956/1980) and Kelvin Lancaster (1966, 1971), the characteristics are desirable properties that commodities embody. From the point of view of the system designer or the person in charge of policy-making, who will be called the “government” for brevity, there are two channels through which the government can exert influence on the attained individual functionings, viz., either through (a) the design and choice of a set of rules that regulates the allocation of commodities among individuals; or through (b) the design and choice of a set of rules that affects the set of admissible utilization functions, from which each individual can freely choose. Given the government’s design and choice of these sets of rules, each individual is provided with a set of commodity vectors, to be called his/her entitlement set, from which he/she is able to choose freely as well as a set of admissible utilization functions, from which he/she is able to choose freely. By exercising these double freedoms of choice, each individual is able to attain his/her functionings vector from the set of admissible functionings vectors, to be called his/her capability set.[71] The next order of our business is to describe how these individual choices can be described. freedom may have intrinsic importance for a person’s well-being also. In sharp contrast, if choosing is seen as a part of living..., then even the achievement of well-being need not be independent of the freedom reflected in the capability set. The “good life” is partly a life of genuine choice, and not one in which the person is forced into a particular life - however rich it might be in other respects. With this additional consideration, the assessment of well-being as well as that of the freedom to achieve well-being would depend on the person's “capability set.” As an analytical vehicle for capturing the intrinsic value of opportunities for choice, let us introduce the concept of an extended evaluation ordering.[75] The ordering > is defined over the ordered pairs of functionings vectors s, t and opportunity sets S, T such that (s, S) > (t, T) means that choosing a functioning vector s from an opportunity set S is judged at least as good as choosing a functioning vector t from an opportunity set T.[76] This concept enables us to capture an individual’s intrinsic preference for freedom of choice as follows: If (s, S) > (s, {s}) holds true for some (s, S) such that s ∈ S and {s} ⊊ S,[77] then the agent prefers having freedom of choosing s from S rather than being forced to choose s from the singleton opportunity set {s} with no effective freedom of choice.[78] Let > be the extended evaluation ordering of an individual i ∈ N := {1, 2,..., n}, where n is the total number of individuals in the society, together forming a profile > := (>1, >2,..., >n>) of individual extended evaluation orderings. This completes the brief articulation of basic ingredients of Sen’s capability approach. It describes several channels through which the government can exert influence on the economic and social environment for each individual to pursue valuable human life to him/herself; it also helps us identify instruments for improving human well-being and freedom. Observe that this approach accepts thorough diversity of human beings, and it makes use not only of subjective preferences and ethical preferences, both being defined on the set of accomplished functionings, but also of extended evaluation orderings that pay due attention to the intrinsic value of the freedom of choice. In this sense, Sen's capability approach to well-being and freedom is an attempt to escape from the narrow cage of welfarism and proceed toward non- consequentialism, as it assigns a crucial role to the intrinsic, as distinct from instrumental, value of the freedom of choice. Full justification of these claims requires rather involved analysis, the exploration of which must be relegated to the companion paper, viz. Suzumura (2020), where the conceptual framework of the capability approach is set in motion in the context of giving substance to the Rawlsian notion of the equitable allocation of maximal overall freedom in the non-fetishist way. It is our hope that the present incomplete description of the basic structure of the capability approach may still suggest a possible avenue to explore in the post-exodus welfare economics. 7.6