A BRIEF HISTORICAL SKETCH

As we defined the quest for a measure of well-being ultimately as a quest for an attractive equalizandum for egalitarian policy, our discussion is related to the large welfare eco­nomic literature on consequentialist versus nonconsequentialist approaches and within the consequentialist approach on welfarist versus nonwelfarist criteria.

As a matter of fact, the initially dominant interpretation of Arrow’s theorem was that it was impossible to define a nondictatorial social ordering of social states, satisfying the Pareto principle of respect for individual preferences. It was soon realized, however, that the independence condition, which was necessary to arrive at the impossibility result, was a strong one. It basically stated that the social ranking of any pair of two alternatives should depend only on the ordinal noncomparable individual preferences over these two alternatives. The so-called informational approach to social choice (d’Aspremont and Gevers, 1977; Sen, 1970)^[55] showed that the impossibility is lifted as soon as one accepts that it is meaningful to represent individual preferences with an interpersonally comparable utility function. Depending on the specific informational assumptions made, a whole range of social orderings can then be defined, ranging from the utilitarian sum of utilities to the leximin ordering giving priority to the worst off.The lesson seemed to be that the only way to escape from Arrow’s impossibility was to work with such an inter- personally comparable notion of utility (i.e., to go beyond ordinal noncomparable indi­vidual preferences).

Amartya Sen, who was one of the main contributors to this literature, later became one of the main critics of what he coined as welfarism (i.e., the approach in which the social evaluation is based solely on individual but interpersonally comparable levels of subjective well-being; see, e.g., Sen and Williams, 1982). Important social philosophers had already rejected the welfarist approach. Rawls (1971, 1982) stated that individuals have life projects and that these life projects should be respected, but that it does not make sense to reduce them to the objective of reaching the maximum level of welfare. What matters to individuals is the content of their project, not the satisfaction following from its realization. These projects are incommensurable. Dworkin (1981a) emphasized the problem of expensive tastes; according to him, someone with expensive tastes (e.g., for “prephylloxera claret and plover’s eggs,” as in Arrow’s (1973) famous example) cannot claim that he should be compensated for his ambitions at the expense of those with more modest tastes. Sen (1985) reformulated similar arguments in an elegant way by pointing out that subjective welfarism suffered from two problems. The first he calls “physical-condition neglect”: Utility is only grounded on the mental attitude of the person and does not sufficiently take into account the real physical conditions of the person. This has two aspects. One is the issue of expensive tastes; the other is that persons may adapt to their objective circumstances or realistic expectations: “A person who is ill-fed, undernourished, unsheltered and ill can still be high up in the scale of hap­piness or desire-fulfillment if he or she has learned to have ‘realistic’ desires and to take pleasure in small mercies” (Sen, 1985, p. 21). The second problem is “valuation neglect.” Valuing a life is a reflective activity in a way that “being happy” or “desiring” need not be (Sen, 1985, p. 29). An acceptable approach to well-being should explicitly take into account this valuational activity by the persons themselves.

In a long series of books and papers, Sen proposed his own concept of well-being in terms of functionings and of “advantage” in terms of capabilities. This approach is the first notion of well-being that we discuss in more detail in Section 2.3. It is definitely non- welfarist in Sen’s own original meaning of the word, as it does not interpret well-being in terms of subjective welfare. It is even explicitly formulated as an alternative to subjective welfare. Yet, it does evaluate social states in terms of the individual achievements (the individual advantage levels) in these social states. It is therefore consequentialist and indi­vidualist. And here the terminological confusion starts. Some authors (e.g., Pattanaik and Xu, 2012) claim that it is natural to use the term welfarist also for such approaches that are centered on personal well-being, even if they use a well-being concept that is not sub­jective utility. Although we prefer the original (narrower) use of the term by Sen, we will try to avoid confusion by adding the word subjective each time we use the notion of wel­farism in this original meaning.

At a time when the criticism on subjective welfarism was winning ground among welfare economists, there was a surprising and spectacular growth of the interest in the measurement of happiness in other domains of economics. Advances in survey research suggested more and more convincingly that happiness and/or life satisfaction could be measured and that interpersonal comparisons of these measured concepts yielded meaningful results. A rapidly growing stream of empirical papers showed that life satisfaction is not exclusively determined by income but is also strongly influenced by nonmonetary dimensions of life (such as health, social interactions, and job market sta­tus). The econometric results were reasonably robust. Although a large part of this liter­ature is meant to be only explanatory, the implicit suggestion that what contributes to happiness must per se be good is very strong.

The third notion of well-being that we will explore in detail is that of “equivalent income,” or money-metric utility. It also has a somewhat surprising history. Money­metric utility was introduced as a representation of preferences by Samuelson (1974) and Samuelson and Swamy (1974) and had some impact on the applied welfare eco­nomic literature during the eighties (see Deaton and Muellbauer, 1980; King, 1983, for instance). It lost popularity, however, as authors argued that it relied on an arbitrary choice of reference values and could have nonegalitarian implications (Blackorby and Donaldson, 1988). Although it slowly disappeared from the applied welfare economic literature, it was (more or less independently) developed within the social choice liter­ature in what is called the theory of fair allocation. This theory looked for a social order­ing that was based only on noncomparable ordinal preferences (i.e., noncomparable life projects). At first sight, this attempt may look hopeless because it should run against Arrow’s impossibility result. However, closer investigation shows that Arrow’s inde­pendence axiom can be decomposed in two components (Fleurbaey and Mongin, 2005; Roemer, 1996): The first is “ordinal noncomparability,” stating that the only information that can be used is information about individual ordinal preferences; the second is “binary independence,” requiring that the ranking of two alternatives should depend only on the individual evaluation of these two alternatives (see Fleurbaey and Blanchet, 2013, p.

Note that the equivalent income is yet another concept of individual well-being that does not coincide with subjective welfare, but is based on individual preferences. Again, some authors claim that “respecting individual preferences” boils down to welfarism. This is then a third possible interpretation of the term (the first relating to the use of com­parable subjective utility levels, the second to any measure of personal well-being). As mentioned already, we will not follow this line of thinking, and we will reserve the use of the term subjective (non)welfarism to its original meaning.

Although the three approaches that we sketched until now can be related more or less explicitly to the welfare economic literature on the measurement of well-being, this is much less the case for another strand of economic research that aimed at broadening the concern for income inequality to include other dimensions. This literature deliber­ately remains agnostic about the formulation of an individual measure of well-being and focuses directly on Pigou-Dalton axioms in a multidimensional space. We will discuss the relationship between this approach and the welfare economic literature in Section 2.4.

2.3.