Economics and Ethics: Amartya Sen as Point of Departure

Economics and Ethics: Amartya Sen as Starting Point*

Ben Fine, Professor of Economics, SOAS, University of London

Introduction

Economics as a discipline, in teaching, research and policy, is very poor at ethics. There are six inter-related reasons for this. First, whilst the rigid distinction between positive and normative economics (and theory and fact) has long been recognised in principle to be invalid, the discipline has continued in practice as if nothing were wrong with the separation(s) between the two. Second, economics is negligent of, and backward in, methodology, and so unlikely to interrogate its own ethical or other foundations. Third, economics also neglects its own history as a discipline, and so its own shifting ethical approaches and content. Fourth, economics has been isolated from the other social sciences so that their contribution to ethical questions has been ignored. Fifth, mainstream economics has always been and is now almost absolutely intolerant of heterodox alternatives from which ethical differences might be teased out. Sixth, in sum, with method, methodology, history of economic thought, interdisciplinarity and heterodoxy sidelined to marginal status, this has all meant that economics is extraordinarily lacking in circumspection around the (ethical) meaning and implications of its standard concepts such as production, consumption, utility and the market, let alone development itself. It stumbles among these as if partially sighted, a lack of vision that is compounded in turning to development where the urge to prescribe is rarely matched by attention to context.

For reasons laid out later to do with the latest phase of economics imperialism, some of these features are liable to change in the near future. Of course, little or none of these faults apply to those working concertedly on ethics of economics itself where the body of literature is sophisticated, scholarly, and grounded in full understandings of both disciplines in ways that preclude the criticisms of the previous paragraph, (Qizilbash 2002). The problem is that this work, like methodology, history of economic thought, and alternatives to orthodoxy, lie outside even the casual acquaintance of most economists in all of their practices as much as by design as by default. This applies almost as much to those economists who stray in and out of the ethical. Such occasional forays into the subject matter are exceptions that prove the rule. (Stiglitz’s 2002) contribution, for example, is more interesting for his feeling the need to say what he has to say rather than what he actually says. His opening gambit might be thought to portray a certain naiveté (and eccentricity) on the part of those who regularly deal in the subject matter:

There are five concepts, in particular, on which I will focus: honesty, fairness, social justice (including a concern for the poor), externalities, and responsibility … the meaning of most these terms should be self-evident.

Against such competition,¹ over the past few decades, it is hardly surprising that the issue of ethics and economics, especially in the context of development and in exerting influence upon economists, has been dominated by Amartya Sen, almost to the extent of being a one-man show with supporting acts. No doubt, this is a consequence in part of his commanding an established and, as such, unrivalled position in both fields simultaneously. He has not, however, been capable of fully compensating for many of the lacunae outlined in the opening paragraph. The key issue now is how his contributions will be taken forward. This paper argues that the evolution of his work, from social choice to development as freedom, has brought us to an appropriate starting point for further work. For Sen can be interpreted as negotiating a number of tensions, not simply nor primarily those of interdisciplinary endeavour. In this paper, the focus will be on two tensions, between micro and macro, or the individual and the social; and also between generality/formalism as opposed to specificity/context. Sen can be seen as moving both from micro/individual to macro/social and from general/formal to specificity/context. By critically tracing the trajectory of his work, the case is made to begin where his journey now ends.

From Social Choice to Development as Freedom

Social choice theory, from the classic (Sen 1970) to his Nobel acceptance (Sen 1999b), has remained at the heart of his thinking. In retrospect, two central issues have been raised and resolved. First, supposing the value of alternative states of the world to different agents could be quantified, then interpersonal comparisons come to the fore – how much should one person’s welfare count against another’s? Second, a dual problem, is the intensity of one individual’s preferences – how much weight should be given to one individual’s welfare in moving from one alternative to another of different utility?

Crucially, for each of these issues, much analysis has been purely formalistic, with both ethical and substantive issues on the backburner. We have little or no idea who are the individuals, (poor, rich, men, women,…), nor the alternatives over which they have preferences (food, arms, …). In addition, society itself is absent – beyond somehow offering individuals unexamined choices, and being the outcome, in principle, of individual choices. The framework is one of deriving the social from the individual, with no feedback in the other direction. (Sen 1995, p. 3) himself simply but devastatingly puts it, “Another issue, related to individual behavior and rationality, concerns the role of social interactions in the development of values, and also the connection between value formation and the decision-making processes. Social choice theory has tended to avoid this issue”.

One way of interpreting Sen’s subsequent work is in rendering social choice less individualistic and formal. As (Sen 1999b, p. 350) suggests, “Also, some investigations, while not directly a part of social theory, have been helped by the understanding generated by the study of group decisions (such as the causation and prevention of famines and hunger, or the forms and consequences of gender inequality, or the demands of individual freedom seen as a ‘social commitment’). The reach and relevance of social choice theory can be very extensive indeed”.

Inequality is the first step. Over and above the general if not universally valid claim that more income is better, ethical considerations can be introduced concerning income distribution. Alternative states of the world are simply specified as different numerical distributions of income. These are ranked according to (I) how each person’s own changes in income are valued and (II) how one person’s income is measured against another's.

Formally, for (I), (Atkinson 1970) suggests the use of a parameter ε to measure inequality aversion. This is misleading because inequality is not addressed directly by the parameter ε as it pertains only to changes in income for a single person. It is attached to a measurement of inequality only by adding up ε-adjusted incomes across individuals. To gain a measure of inequality, interpersonal comparisons, (II), must also be made. Atkinson implicitly does this by treating all individuals equally subject to ε-adjusted incomes. As (Fine 1985) shows, rather than setting the parameters of interpersonal comparison, b_i all equal to 1 (weight all people the same as does Atkinson) and varying ε (more or less inequality-averse), the b_i can vary with ε fixed. Raising the b_i for those on lower income represents a greater bias against inequality. So, varying ε and the b_i are essentially equivalent to one another from a formal point of view. The less you rank more income for an individual, the more you favour the poor against the rich in interpersonal comparisons and vice-versa.

This result highlights the formalism of the inequality literature and its limitations. For, whilst the two approaches to inequality are mathematically equivalent, they are far from ethically equivalent. Comparison of given incomes between people is entirely different from comparison of different incomes for a single person. Further, the ethics can only be engaged meaningfully at some level of detail concerning the nature of the people and the uses to which income is or can be put. In this respect, Sen’s (1987) On Ethics and Economics is notable not only for charging economists with the need to debate ethics but also for his own questioning of the ethical content of human motivation.² This leads to a corresponding rejection of simple utilitarianism in the form of targeting the greatest aggregate happiness/welfare. For (Sen 1995, p. 8), “To try to make social welfare judgements without using any interpersonal comparison of utilities, and without using any nonutility information, is not a fruitful enterprise”.

The shift in Sen’s focus from inequality and poverty to a renewal of interest in famine can be viewed in these terms. Food and starving are concrete applications. Sen counterposes the entitlement approach, EA, to supply-side explanations, food availability decline, FAD. Two features stand out from EA, marking continuities with previous work. First, the formal analytics of EA are derived from set-theoretic microeconomics, with generalisation through access to non-market-related entitlements. What can I get from what I have, given the conditions for transforming one to the other? Consequently, EA is individualistic in methodology. Second, as is immediate, the formal analytics of EA are not food-specific. They could apply equally to anything – whether basic needs or luxuries.

This is not to suggest that EA, as deployed in practice, is purely micro-based, and never macro, and fails to be food-specific. Nor that it is ethically neutral (and hence biased given lack of equality in the world) despite its analytical origins and affinities with neoclassical economics. Despite this, Sen has been driven by major humanitarian issues and the ethical values that they raise rather than succumbing to mindless application of the nostrums and techniques of neoclassical orthodoxy. So (Sen 1999a, p. 170) argues, famine is dependent upon “the exercise of power and authority … the alienation of the rulers from those ruled … the social and political distance between the governors and the governed”. Such considerations, however, tend to enter separately from the micro-analytics of entitlements. In part, macro references to food and famine arise directly out of empirical applications rather than from the theory. The macro-social also enters more obliquely through the incorporation of social relations, structures and processes. But these are superimposed, not built, upon the micro-foundations. An obvious example is the class of landless labourers. Unable to produce for own consumption or to command sufficient (wage) revenue or payment in kind to gain sustenance, they are potentially subject to famine irrespective of overall aggregate supply of food. Yet, such arguments pre-suppose social relations on the land, between landlords and labourers, and in the distribution of food. None of these is reducible to the individualistic micro-analytics of EA.

My own assessment of EA, (Fine 1997), was motivated less by famine than by earlier research on food that drew upon a broader study of the determinants of consumption. The organising theme was to hypothesise that commodities serving consumption are attached to distinct, integral “systems of provision” – structurally integrated along the chain of activities from production to consumption itself, as in the clothing, energy and food systems, for example, (Fine 2002) most recently. As a result, I was acutely sensitive to the limited extent to which EA had in theoretical principle, if less guilty in empirical practice, addressed the specificity of food and of food systems as the latter vary by crop, time and place. In a nutshell, given its transparent conceptual and technical origins in the mainstream microeconomics of feasibility sets, EA is profoundly neutral with respect both to underlying social relations and historical specificity (except in defining endowments and their potential transformation into outcomes) and to the specificity of food itself in both material and cultural terms.

At this time, I was already concerned with developments in or, more exactly, around economics, see website http://www2.soas.ac.uk/Economics/econimp/econimp1.html. In brief, my argument is that economics has been colonising the other social sciences as never before. This is a consequence of its new micro-foundations with informational asymmetries to the fore. On this basis, economics purports to explain the economic and the non-economic as the rational, path-dependent response to market imperfections. This includes economic and social structures, institutions, customs, culture and so on. Previously, in the older form of “economics imperialism”, the non-market was addressed as if it were akin to a perfect market, most notably in the work of Gary Becker. Now there is a corresponding reductionism of the economic and the social to market, especially, informational imperfections. It has given rise to a whole set of “new” fields within economics – the new microfoundations of macroeconomics, the new trade theory, the new financial, the new development, the new institutional, the new labour economics – as well as new fields outside economics or influence upon the old – the new political economy, economic geography, economic sociology, and so on. I have parodied such initiatives by the formula ss=e=mi². First all economics is reduced to market imperfections, mi, and methodological individualism, mi, (in the form of imperfectly informed rational economic agents). Then, all social science is reduced to such economics.

These perspectives informed my assessment of EA. I suggested an unresolved tension in Sen’s own work – between the micro-foundations of the entitlement analytics and the broader recognition of famine as irreducibly macro, not least because famine is more than the sum of its individual parts – not merely personal starvation for the many. Is famine the choice to starve by self or other on your behalf, a replicated but rational response to market imperfections? Sen commendably refrains from attaching the EA to the new micro-foundations despite his micro-analytics (and emphasis on the informational role to be played by a free press). Nor have I come across any sympathy for such an approach in his work, hardly surprising in view of his uncompromising stance on “rationality”, (Sen 1977).³

Further, when he addresses the macro, it is from a perspective independent of the micro – as in the role of the free press and democracy in guarding against famine, although classes are at times perceived to have entitlements. Further, I argued that the same micro-macro tension is to be found in EA debate. Those adopting a critical stance towards EA have not so much been engaging with it as an alternative to FAD as questioning whether their macro-interpretations of famine had been or could be accommodated within EA – issues of the nature of property, violence, culture and custom, all heavy with ethical content.

This is an appropriate point to move on to well being, capabilities, development and freedom, with (Sen 1985) as stepping stone. This constitutes more than a generalisation and concretisation of what has come before, as in the shift from inequality to famine. For, in the light of economics imperialism, there are other tensions than those attached to micro-macro. The marginalist revolution is recognised to have taken the social out of economics in two senses. It represented a shift to methodological individualism and the construction of the non-market as separate from the market. Information-theoretic economics claims to bring the social back in, on its own terms: - of optimisation subject to informational constraints. Similarly, the path followed by mainstream economics initially separates out material and cultural analyses and sets the latter aside. Yet, once again in its own inimitable style, the current phase of economics imperialism is reintroducing the cultural (trust, customs, norms, etc) as an informational calculus.

Although Sen’s work too has increasingly embraced the social and the cultural, once again, there is no evidence that he has been seduced by the unsubtle charms of economics imperialism. Indeed, if anything, there is a shift, at least discursively, away from the micro-analytic technicalities of EA. The practice was established in the context of famine and can, subsequently, float freely to serve intermediate or macro levels of analysis across capabilities more generally. In short, (Sen 1999a, p. xii) sees a “deep complementarity between individual freedom and social arrangements”. As in EA debate, commentators have questioned whether the macro, the social and the cultural have been or can be appropriately addressed on the basis of Sen’s approach. (Gasper and Cameron 2000), for example, edit a collection that explicitly assesses in order to extend Sen’s work. Gasper, under the rubric of freedoms, achievements and meanings, raises the issue of, “whether to have more options is valuable depends on the meaning the options have for the actor and her audience”, p. 999. Giri is concerned with well being as involving mental self-development and personal transformation towards sharing with others, Cameron with Sen’s neglect of opulence or upper end of capabilities, and Carmen with “capacitation”.

These all sit uncomfortably within an individualistic and formalistic methodology. The social and contextual are imperative. Thus, the new welfare economics proceeds on the basis of informationally imperfect contracts between state and citizen. But, by extension of the earlier argument around the specificity of food (and other basic needs), it is essential to attach public as well as private contributions to capabilities to specific systems of provision, (Fine 2002a). To ask not only “How is each of health, education, housing and welfare differentially created, distributed and used” but also how are these interactive with, and constitutive of, corresponding cultures, ideologies and political practices, each with their own ethical content.

Whether for food or other capabilities, Sen’s analysis does not appear to engage sufficiently with these issues to the extent that it remains formalistic/individualistic. In arguing, controversially, that famine (dire under-provision for the many) is liable to be avoided by the presence of a free press and democracy, what exactly is the analytical content of such an observation? Is it specific to food, or does the same apply to housing and education (and excessive mortality of female children)? What are the mechanisms through which the free press and democracy work (or not)? Are they the same or different across different capabilities, entitlements and freedoms? My presumption is that they are different both for the nature, forms, levels and incidence of provision and their mode of functioning. By the same token, the nature and consequences of the ethics of provision are diverse according to what is provided, by and for whom, and how.

With respect to Sen himself, I suspect that these comments may be pushing against an open door not least in view of his longstanding empirical work that does engage with context and specificity, from (Dréze and Sen 1989) to (Dréze and Sen 2002). This is simply to support the organising principle of this paper – that the evolution of Sen’s work has brought us to an appropriate starting point, with the social, the specific and the contextual to the fore rather than, if not to the exclusion of, more formal and general treatments. My concern is that Sen should not be appropriated and his achievements reversed by the newest phase of economics imperialism. One result would be to block progress in what are already weaknesses, if not absences, in his work - the attention to ethnographic (contextual meaning) and to processual (capacitation) issues.⁴

Lest this warning be considered unnecessary, consider the treatment of ethics by those economists who dally in notions such as trust, norms and values. These always come in stripped down versions, as in (Dasgupta 1993 and 2001), and (Stiglitz 2002) whose ethics are drawn in exemplary fashion from the new economics imperialism:⁵

In simplistic models, individual self-interest leads to efficient outcomes; individuals act, and are expected to act, in their own self-interest. But in modern theories in which information imperfections and incomplete markets play an important role, self-interested behavior in general does not yield efficient outcomes. Equilibria based on trust can yield better outcomes than those in which trust is absent … There is thus an instrumental argument for ethical behavior.

I suspect that many working seriously in economics and ethics will willingly accept the limited analytical content of such prognostications and proceed with more sophisticated and challenging ideas. Whilst to do so is liable to be more intellectually rewarding in the field of ethics, the danger is in conceding ground on the economics underlying the assault on ethics from economics imperialism. For, with little prospect of the discipline of economics being contested from within, given its intolerance of alternatives, debate about the economy and economics can only primarily take place at the boundaries of the discipline around which ethics must engage as well as politics, sociology, history, and so on.

Conclusion

The lessons drawn from reviewing Sen’s passage from social choice to freedom are:

• 
  The social, contextual and empirical should be the starting point for discussion of economics and ethics as opposed to the individual, the formal and the a priori.
  
• 
  It is as important, if not more so, to examine how ethics are created as it is to target what they should be.
  
• 
  The connection between economics and ethics varies according to the specific entitlements, capabilities, developments and freedoms involved.
  
• 
  Last, controversially and not previously argued, the study of the political economy of capitalism is the key to progress on these and related issues.
  

The case can begun to be made by reference to the dictum of Brecht, “first grub, then ethics”. This is open to at least three different interpretations cutting across priorities, epistemology and ontology.⁶ First, you have to eat to be able to engage in the luxury of ethics (as unwittingly revealed by Marie Antoinette). Second, each food and way of providing food generates its own corresponding ethics (from vegetarianism to cannibalism).⁷ Third, the nature of ethics depends upon the nature of food and eating (you are what and how you eat as in conviviality, national cuisines, and the Sunday roast).⁸ Whether for food or other capabilities, the issues raised by each of these interpretations rests on an understanding of the political economy of capitalism in economic, cultural and ethical terms.

Footnotes

• 
  This paper was prepared for the ABCDE, (Fine 2002b), by revising and shortening (Fine 2001) to a third of its original size. It has now lengthened by half, especially in light of penetrating commentary around the ABCDE from Des Gasper, Desmond McNeill, Mozaffar Qizilbash, Asuncion St. Clair, and Bertil Tungodden. It remains marked by the author’s levels of (in)competence.
  

References

Atkinson, Anthony B. 1970. “On the Measurement of Inequality.” Journal of Economic Theory 2(3): 244-63.

Becker, Gary S. 1996. Accounting for Tastes. Cambridge: Harvard University Press.

Cameron, John, and Des Gasper (eds).2000. “Amartya Sen on Inequality, Human Well-Being, and Development as Freedom.” Journal of International Development 12(7).

Carmen, Raff. 2000. “Prima Mangiare, Poi Filosofare.” Journal of International Development 12(7): 1019-30.

Dasgupta, Partha. 1993. An Inquiry into Well-Being and Destitution. Oxford: Clarendon Press.

Dasgupta, Partha. 2001. Human Well-Being and the Natural Environment. Oxford: Oxford University Press.

Desai, Meghnad. 2001. “Amartya Sen's Contribution to Development Economics.” Oxford Development Studies 29(3): 213-224.

Dréze, Jean, and Amartya K. Sen. 1989. Hunger and Public Action. Basingstoke: MacMillan.

Dréze, Jean, and Amartya K. Sen. 2002. India: Development and Participation. Delhi: Oxford University Press.

Fine, Ben. 1985. “A Note on the Measurement of Inequality and Interpersonal Comparison.” Social Choice and Welfare 1(4): 273 75.

Fine, Ben. 1997. “Entitlement Failure?” Development and Change 28(4): 617-47.

Fine, Ben. 2001. “Amartya Sen: A Partial and Personal Appreciation.”Centre for Development Policy Research, School of Oriental and African Studies, University of London, Discussion Paper, no 1601.

Fine, Ben. 2002a. “Economics and Ethics: Amartya Sen as Point of Departure.” Paper presented to the World Bank ABCDE Conference, Oslo, July.

Fine, Ben. 2002b. The World of Consumption: The Material and Cultural Revisited. London: Routledge.

Gasper, Des. 2002. “Is Sen’s Capability Approach an Adequate Basis for Considering Human Development?” Institute of Social Studies, The Hague, Working Paper Series, no 360.

Lestringant, Frank. 1997. Cannibals: The Discovery and Representation of the Cannibal from Columbus to Jules Verne. Berkeley: University of California Press.

Qizilbash, Mozaffar. 2002. “On Ethics and the Economics of Development.” Paper presented to the World Bank ABCDE Conference, Oslo, July.

Sen, Amartya K. 1970. Collective Choice and Social Welfare. San Francisco: Holden-Day.

Sen, Amartya K. 1977. “Rational Fools: A Critique of the Behavioral Foundations of Economic Theory.” Philosophy and Public Affairs 6(4): 317-44.

Sen, Amartya K. 1985. Commodities and Capabilities. Amsterdam: North-Holland.

Sen, Amartya K. 1987. On Ethics and Economics. Oxford: Blackwell.

Sen, Amartya K.1989. “Food and Freedom.” World Development 17(6): 769-81.

Sen, Amartya K. 1995. “Rationality and Social Choice.” American Economic Review 85(1): 1-24.

Sen, Amartya K. 1999a. Development as Freedom. Oxford: Oxford University Press.

Sen, Amartya K. 1999b. “The Possibility of Social Choice.” American Economic Review 89(3): 349-78.

Stiglitz, Joseph E. 2002. “Ethics, Economic Advice, and Economic Policy.” Mimeo, revised from paper presented at the Interamerican Development Bank, Washington, D.C., December.

1 Despite casual reference to Kant and Rawls, there is no citation of any work on ethics in Stiglitz’s piece, let alone to Sen.

2 Note that Becker (1996, pp. 16-18) rejects Sen’s distinction between ethical and personal preferences on the grounds that the one is reducible to the other.

3 See (Desai 2001) for an account of Sen’s antipathy to neoclassical economics.

4 See (Gasper 2002) for a wide-ranging assessment along these and other lines.

5 Equally, as pointed out by Adam Smith, there is an equally powerful argument in favour of unethical behaviour through pursuit of self-interest or other motives. Also, in light of the infinite flexibility of game theory, unethical rather than ethical behaviour may lead to more ethically satisfactory outcomes, a means-ends conundrum, with Stiglitz confessing he “faced a similar dilemma as Chief economist at the World Bank”, ultimately choosing to speak out against the IMF.

6 Cited by (Sen 1989, p. 769) who essentially only uses the first interpretation to follow – in order to argue the importance of reverse priority and causality as well.

7 See Lestringant’s (1997) explicit reference to Brecht in these terms.

8 Consider Marx’s eleventh thesis on Feuerbach not only as a moral imperative but also as a way of inducing philosophers to understand the world in a different way and through different practices. Such praxis is the target of Carmen’s (2000) prima mangiare, poi filosofare.