James Foster George Washington University and OPHI, Oxford

James Foster George Washington University and OPHI, Oxford
Capabilities: Theory James Foster George Washington University and OPHI, Oxford

Guide Formalization

Motivation What is wellbeing?
What is the “right” space for evaluating inequalities? Sen’s Answer Functionings Beings and doings that people value and have reason to value Capabilities The collection of functionings available to people

Motivation Examples of functionings
Being adequately nourished Being free from avoidable disease Being able to take part in the life of the community Having self-respect If can represent each functioning by a continuous variable Have following graph from Foster and Sen 1997

Motivation Capability set and functioning vectors

Motivation Note the distinction between functionings and capabilities:
Capabilities reflect one’s freedom to choose valuable alternatives; what “could be” Independent of person’s preferences or choice rule Functionings reflect “what is” The current achievements of the person Which may have much or very little to say about other alternatives (now or in the future) Ex: Fasting is different from starving in capability, not functioning

Motivation Note also that functionings and capabilities (and the associated freedoms) are Ends desirable in themselves Means instrumental for other ends and means Ex Being healthy is an end in itself and it helps to achieve other ends and means Social interaction is an end in itself and it helps to achieve other ends and means

Motivation Wait a minute – why not just use income? Easy to understand
Easy to measure Single dimensional Comparable across people Underlies most evaluations of wellbeing Fungible and policy relevant

Motivation Sen’s answer Means, not an end
Aristotle: “The life of money-making is one undertaken under compulsion, and wealth is evidently not the good we are seeking, for it is merely useful and for the sake of something else” Nicomachean Ethics The conversion of means to ends varies dramatically across persons and groups of persons Two persons with the same income may have very different levels of wellbeing if one is very disabled.

Motivation “The real opportunities that different persons enjoy are very substantially influenced by variations of individual circumstances (e.g., age, disability, proneness to illness, special talents, gender, maternity) and also by disparities in the natural and the social environment (e.g., epidemiological conditions, extent of pollution, prevalence of local crime). Under these circumstances, an exclusive concentration on inequalities in income distribution cannot be adequate for an understanding of economic inequality” Foster and Sen (1997) Goodbye to the anonymity axiom of income inequality comparisons Hello multidimensional inequality (and poverty and wellbeing analysis)?

Motivation Why not utility?
Not cardinally measurable No basis of comparison across persons Subject to adaptation and other variations “That’s to say like if you got a cold you take a shot of malaria” John Birch Paranoid Blues Bob Dylan Why not the commodity bundle (or budget set)? Means, and subject to very different conversion functions However useful analogy to functioning vector and capability set

Motivation There may be other reasons for using functionings and capabilities Many key functionings are almost stocks (analogous to human capital) May be influenced by current conditions But largely reflect past investments And may be more predictive of future prospects Especially for children The “pre-distribution” set

Motivation One could argue that this is the shape of the newest version of welfare economics Regularly invoked by Deaton, Heckman, Atkinson, Stiglitz,… Although Sen regards the capability approach first as framework for thought, second as a critique of other approaches to welfare evaluation, and only third as a method of making interpersonal comparisons of welfare Robeyns (2000) Consequently, let’s dive in. Problem Like Sen’s Nobel winning work on Social Choice There are two versions of the same theory – one verbal-descriptive the other formal-symbolic Need both

Plan Review the capability approach Explore two extensions
Origins Definitions Implications Explore two extensions External capabilities Freedom as flexibility Discuss applications Poverty Robustness Capability creation

Origins The capability approach can trace its origins through the ages and across many countries Let’s have a quick look round Sources Basu and Lopez Calva (2011) Alkire (2013)

Origins Aristotle Politics and Nicomachean Ethics
What should be the aim of public policy? To provide the conditions that enable people to have a flourishing life (cf: Bhutan’s GNH) These conditions help produce the capabilities, or the possibilities of “functioning in certain human ways” Which ways? Nutrition, growth, and other biological ways Exercising choice and practical reason Participating in the political life, etc. What is “the good”? Where all are able to flourish Eudaimonia (or makarios) Egalitarian in space of capabilities

Origins Marx and Engels Define a commendable human life:
Material (biological) needs are satisfied Eating, drinking, dwelling, clothing Human needs (to exercise reasoning) are satisfied Correspond to functionings A liberated society requires freedom in both spheres Enhanced opportunities in material dimensions “It is not possible to free men if they cannot be assured access to food, drink, housing, and good quality-clothing” Freedom to choose “…make it possible for me to do one thing to-day and another tomorrow, to hunt in the morning, fish in the afternoon, rear cattle in the evening, criticize after dinner, just as I have in mind, without ever becoming hunter, fisherman, shepherd or critic.” Corresponding to capabilities. “Freedom to” rather than “freedom from” Berlin

Origins Smith While discussing commodity taxation, defining which commodities are necessaries and which are luxuries Emphasizes the instrumental use of commodities in satisfying material and social needs By necessaries I understand not only the commodities which are indispensably necessary for the support of life, but whatever the custom of the country renders it indecent for creditable people, even of the lowest order, to be without. A linen shirt, for example, is, strictly speaking, not a necessary of life. The Greeks and Romans lived, I suppose, very comfortably though they had no linen. But in the present times, through the greater part of Europe, a creditable day-labourer would be ashamed to appear in public without a linen shirt, the want of which would be supposed to denote that disgraceful degree of poverty which, it is presumed, nobody can well fall into without extreme bad conduct.

Origins Smith (Continued) Custom, in the same manner, has rendered leather shoes a necessary of life in England. The poorest creditable person of either sex would be ashamed to appear in public without them. In Scotland, custom has rendered them a necessary of life to the lowest order of men; but not to the same order of women, who may, without any discredit, walk about barefooted. In France they are necessaries neither to men nor to women, the lowest rank of both sexes appearing there publicly, without any discredit, sometimes in wooden shoes, and sometimes barefooted. Under necessaries, therefore, I comprehend not only those things which nature, but those things which the established rules of decency have rendered necessary to the lowest rank of people.

Origins Smith If commodities are instrumental, what are the ends?
Human functionings Including usual basic ones like having enough to eat, having adequate shelter But also social interaction, dignity and participation in the life of the community Implications: See “Poor, Relatively Speaking” by Sen

Origins Sen 1980 “Equality of What” Capabilities, given diversity of people 1983 “Poor, Relatively Speaking” Absolute poverty standard in capabilities 1984 Commodities and Capabilities Brief and clear presentation of CA 1992 Inequality Re-examined Summary of work in context of inequality and poverty – any theory of justice requires equality in some space – argues for capabilities as the right space given the diversity of people Theory of justice requires equality in some space – capabilities Sen’s CA was in some sense an attempt to breing a coherence philosophical context for the basic needs approach, which was a very practical attempt to account for the aspects of life people need, but with less focus on people’s own agency to make this happen HDR themes – what happens if you try to focus on human beings as objective of economic activity

Origins Sen 1993 Quality of Life (with Nussbaum) outcome of WIDER project (philosophers and economists) 1999 Development as Freedom synthesis following Nobel 2009 The Idea of Justice goes beyond capability approach to discuss principles of justice and processes Theme: Approach was parallel to and grew out of applied and policy work: 70’s Basic needs approach, 80’s growth should be people based, or focused on human ends, 90’s annual thematic Human Development Reports by UNDP Theory of justice requires equality in some space – capabilities Sen’s CA was in some sense an attempt to breing a coherence philosophical context for the basic needs approach, which was a very practical attempt to account for the aspects of life people need, but with less focus on people’s own agency to make this happen HDR themes – what happens if you try to focus on human beings as objective of economic activity

Origins Nussbaum 1990 “Aristotelian Social Democracy”
1993 Quality of Life (Edited with Sen) 1995 Women Culture and Development 2000 Women and Human Development: The Capabilities Approach 2011 Creating Capabilities Many other authors Similar words, different meanings

Origins Nussbaum Includes list of categories of capabilities
1. Life: not dying prematurely 2. Bodily health: good health; adequately nourished; shelter 3. Bodily integrity; mobility; free from violence; choice in sex and reproduction 4. Senses, imagination, and thought: education, religion, art 5. Emotions: attachments, love 6. Practical reason: form conception of the good, planning of life 7. Affiliation: social interaction; respect and dignity 8. Other species: concern and relation to animals, plants, nature 9. Play: laugh, play, enjoy recreational activities 10. Control over one’s environment: political participation; property, employment.

Origins Sen Produces no list (reasons) Critique
Unfinished theory (Romer, Blume) Sen would argue flexible This interpretation is empirically validated – many, many papers are using the approach Sen would agree that the capability approach is not a complete theory of justice Partial and incremental

Capability Approach: Description
We begin with a verbal and graphical description of the capability approach Sources Alkire (2013) Foster and Sen (1997) Sen (1999) Foster and Handy (2008) Basu and Lopez Calva (2011)

Description What is it? Theme
Sen’s capability approach is a moral (evaluative, or normative) framework that proposes that social arrangements should be primarily evaluated according to the extent of freedom people have to promote or achieve functionings they value. Theme In many of Sen’s writings, the language is not entirely self evident; much of understanding Sen is understanding why the specific language is used. Evaluative, rather than predictive or causal

Description Capability
the various combinations of functionings (beings and doings) that the person can achieve. [It] is, thus, a set of vectors of functionings, reflecting the person’s freedom to lead one type of life or another...to choose from possible livings. (Inequality Re-examined) Analogous to a budget set Budget set, by a book, a movie. Concrete functionings one could do or be, time unspecified, boundaries unspecified

Description Capability
“The focus here is on the freedom that a person actually has to do this or be that – things that he or she may value doing or being.” Idea of Justice 232 Alkire: All formulations of capability have two parts: freedom and valuable beings and doings (functionings). Sen’s key contribution has been to unite the two concepts. Describing CA – contrast with concepts of opportunity or freedom on paper, “There is no law against dying of hunger opening line of poverty and famine. Sen is interested in actual choices.

Description Functionings
The various things a person may value and have reason to value doing or being Intuitive abstract but understandable intrinsically valuable to the person not just instrumental intrinsic value (have reason to value) broccoli so avoids adaptive preferences on further reflection would not value ‘doings and beings’ is our focal space the space of human lives A point in space – such as being well nourished, attending – participatory responses list different functionings in their lives, health, education, work, etc. Value: torture small children. Don’t have reason to value. Who can choose? Not stated. Allow public debate. Being well nourished, being serene, and also activities

Description Functionings Examples
Resources Capability Functionings Utility Bike Able to Ride around Cool ride around Food Able to be Nourished Cool nourished Key Allows for different conversion factors Example of a bicycle – resource. Can measure as with most indicators. Hope bicycle will give mobility (capability) the functioning is that we would indeed ride around, and utility is the pleasure we get from riding around. Different focal spaces: resources is one space, capabilities and functionings are in the same space, set and a point. Utility entirely different: space of mental or psychic utility. When we attempt to evaluate social arrangements, the task of the capability approach, Sen argues we should not focus on resources. Why not: no legs, cant use it. Doesn’t give capability to move around, I don’t’ move around, and I’m not too happy from it. Don’t use utility space, I could be happy not from the bicycle. Second example (Sen) is food. A pound of rice - pregnant person, very old, very young, day laborer, another has high metabolism. What is nutritional status from the rice? Pregnant, day laborer, high metabolism persons may have low nutritional status; child and older person may have very high status. Same commodity, different levels of capabilities and functionigs, Sen refers to this as having different abilities to convert resources into functionings. Likewise different conversion to utility. Could be happy for various reasons unrelated to material conditions. Sen’s example of a poor devout widow who is happy because she has accustomed herself to very meager circumstances. “content for small mercies” If we looked at utility alone without examining her conditions, get the wrong picture. Problem with only looking at psychic state of a person, as a proxy for their well being more fully. Different evaluative spaces give different pictures – it matters which you choose. If there were identical conversion possibilities, then it would not matter and we could use any for all.

Description Robeyn’s (2005) schematic (with social influences)
Evaluative, rather than predictive or causal

Description Freedom “the real opportunity that we have to accomplish what we value” “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.” It is authentic self-direction – the ability to shape one’s own destiny as a person and a part of various communities. Capabilities = functionings and freedoms

Description Freedom Not a ‘paper’ freedom: it has to be effective freedom, a real possibility. Not maximization of choices without regard to their quality and people’s values “Indeed sometimes more freedom of choice can bemuse and befuddle, and make one’s life more wretched.” Not necessarily direct control by an individual , groups, states, etc can increase freedoms by public action and investment. Cohen in quality of life = washing powder. Want things you value and choices you value, and depend on clulture = have others make choices. Freedom as control in west, but broader context: Malaria. Jehovah’s witness accident and blood. By public action or on behalf of someone.

Description Freedom has two aspects Opportunity Aspect:
Process Aspect: Ability to act on behalf of what matters (agency) Institutions, movements, democratic practice as well as each person’s agency Opportunity Aspect: Real opportunity to achieve valued functionings, selected from among various good possibilities. (capability) Sen: two parts Opportunity aspects, Process aspects. Opportunity is set; process aspect is ability to act out on what matters. Sen’s Arrow lectures. Nussbaum does not have concept of agency. For sen this concept is broad.

Description Agency “…what a person is free to do and achieve in pursuit of whatever goals or values he or she regards as important.” “…someone who acts and brings about change, and whose achievements can be judged in terms of her own values and objectives, whether or not we assess them in terms of some external criteria as well” agency is the person’s ability to act on what they value and have reason to value. Opposite from principal agent – includes value. Was bin laden greatly ed?

Description Agency and Capability
“The approach … is essentially a ‘people-centered’ approach, which puts human agency (rather than organizations such as markets or governments) at the centre of the stage. The crucial role of social opportunities is to expand the realm of human agency and freedom, both as an end in itself and as a means of further expansion of freedom. The word ‘social’ in the expression ‘social opportunity’ (…) is a useful reminder not to view individuals and their opportunities in isolated terms. The options that a person has depend greatly on relations with others and on what the state and other institutions do. We shall be particularly concerned with those opportunities that are strongly influenced by social circumstances and public policy…” (Drèze & Sen 2002 page 6). More recent versions of capability approach: Not just personal, but can be achieved through collective action. Key role for political freedom.

Description General Features Interactions: Ends and means
Outside market solutions Encourages investments Focus on freedoms Multidimensional and complex

Description Misunderstandings
The breadth goes well beyond health and education It is deliberately incomplete – it has to be operationalized differently in different contexts Individualism (is ethical not methodological) Evaluative vs Prospective analysis. It can evaluate activities, or guide policy to create choices. Not all multidimensional analyses are capability analyses Many don’t consider freedom/agency, intrinsic value, capabilities not resources, and the process of public debate etc. Hard to measure freedom, to consider counterfactual options What they could have chosen but didn’t Overview in 30 minutes Many examples in health education (HDI) clearly goes beyond. Incomplete – you fill it in for the problem at hand – you have choice, agency. Ethically it is individualistic; collective does indeed matter. He invokes the social. How to implement policies – different kinds of analysis. Difficult to measure freedom.

Capability Approach: Formalization
The approach has been formalized by Sen and others We now take a quick look at this version and its implications Sources Sen (commodities and capabilities) Foster and Sen (1997) Basu and Lopez Calva (2011)

Formalization Notation xi is a vector of commodities for person i
c(xi) is the vector of characteristics from xi Gorman or Lancaster fi is i’s personal utilization function Converting vector of characteristics into vector of functionings Note: Sen assumes is a choice; we will assume given bi = fi(c(xi)) is i’s vector of functionings Xi is the set of vectors of commodities are feasible for i Qi = { bi such that bi = fi(c(xi)) for some xi in Xi } Note Many other formalizations possible (social influences, etc)

Formalization Motivates interesting empirical issues
Links across deprivations Motivated work on head start Education impact health? Key

Practical Considerations
Sen suggested that his capability approach could be applied to evaluate circumstances However, he was not especially clear how to do so Let’s briefly explore some practical barriers to using this approach Sources Foster and Sen Sen Development as Freedom Foster, MacGillivray, Seth “Robustness” Allison and Foster

Is the theory implementable? Review of Inequality Re-examined Main question Do you have a feasible implementation? An example where the approach can be applied and makes a difference How to measure capabilities, functionings, freedom?

The challenge of measuring freedoms Freedom has two elements Agency and empowerment Broadly configured in Sen’s work Usually more narrowly confined to personal agency Opportunity Range of real opportunities Both are difficult to infer from observed choices Without asking, how are we to know the conditions under which a choice was made? Without asking, how are we to know the choices that were not taken?

Data on agency? OPHI questionnaires Subjective assessments Women’s Empowerment in Agriculture Index (discussed later) Questions on inclusion in decision making

Data on opportunities? Recall budget set Income and prices are all that is needed to infer the shape and size of a economic opportunity set Capability sets Can observe functionings But how do we know the shape and size of a capability set? Direct questions Inference (need models) Analogous to inferring treatment effect Observations over time Ramadan vs ordinary time

Measuring Opportunity Freedom Several lines of thought in literature (mostly over abstract sets) Traditional indirect utility valuation Sen’s “elementary” evaluation No value for unchosen options Pattanaik and Xu Counting approach Axiomatically derived But depends on inability to discern the relative quality of options Basically assumes options have value without explaining why

Measuring Opportunity Freedom Kreps (1979), Foster(1993, 2010), Arrow (1995) Provide answer to why “unchosen” options have value Freedom as flexibility Good choices for every contingency A kind of options value Discussed at greater length below

How to measure achieved functionings? Why important? They miss out on freedom, but: Functionings describe what is, not what could be The real conditions people are experiencing Whether due to their own choice or imposed Whether a result of an irrational choice mechanism or mistakes Agency and opportunity (freedom) also matter, but taking stock of functionings is very relevant. Most applications of the capability approach do this

Using functionings as a basis Series of issues noted in Foster and Sen Many dimensions How to make coherent? Incompleteness Possible outcome is no evaluation Weights and measures Deciding on weights Rank robustness Sensitivity to choice of weights Foster, MacGillivray, Seth Multiple dimension – what to do Normative thing

Example 1 Human Development Index (for countries) Living standard, education, health Variables transformed and normalized Then averaged Many assumptions and possible criticisms Inequality Adjusted HDI

Example 2 Multidimensional Poverty Index Alkire-Foster (2011) Avoids many problems Of ordinal and incommensurate variables Etc. Will discuss later

Capability and Opportunity Freedom
From practical to the theoretical Q1 How to measure (opportunity) freedom? Q2 Why should we care about the functionings that are not chosen? Start with the simplest of worlds Functionings are discrete and finite in number Sources Pattanaik and Xu (1990) Sen Foster (1992, 2011) Arrow (1995) From the practical to the theoretical

Measuring Freedom Notation Goal
X is the (finite) set of functions or alternative An opportunity set is a nonempty subset of X A, B typical sets Z is the set of all opportunity sets Goal Find binary relation R on Z “Freedom ranking” A R B “A has at least as much freedom as B”

Measuring Freedom What assumptions on R? Note Which R?
R is a quasiordering reflexive and transitive Note Completeness not assumed Associated P and I are transitive Which R?

Freedom Counts Candidate 1 Cardinality ranking Define RC by:
Pattanaik and Xu, Suppes, Sugden, others Define RC by: A RC B iff |A| > |B| Measures using number of functionings Characterized by Pattanaik and Xu

Freedom Counts Th 1 Cardinality ranking RC is characterized by three axioms: S-Strict Monotonicity A  B implies A P B when A ≠ B, A is singleton, and B has two elements S-Anonymity #A = #B implies A I B when A singleton S-Independence A R B if and only if (A  C) R (B  C) when A  C =  = B  C and C singleton

Freedom Counts Th 1 Cardinality ranking RC is characterized by three axioms: S-Strict Monotonicity A  B implies A P B when A ≠ B, A is singleton, and B has two elements S-Anonymity #A = #B implies A I B when A singleton S-Independence A R B if and only if (A  C) R (B  C) when A  C =  = B  C and C singleton Proof: Can drop singleton restrictions, then obv.

Freedom Counts Th 1 Cardinality ranking RC is characterized by three axioms: S-Strict Monotonicity A  B implies A P B when A ≠ B, A is singleton, and B has two elements S-Anonymity #A = #B implies A I B when A singleton S-Independence A R B if and only if (A  C) R (B  C) when A  C =  = B  C and C singleton Proof: Can drop singleton restrictions, then obv. Note RC is extreme. Which axiom is culprit?

Freedom Counts Th 2 Cardinality ranking RC and trivial ranking RT are characterized by three axioms: Monotonicity A  B implies A R B S-Anonymity #A = #B implies A I B when A singleton S-Independence A R B if and only if (A  C) R (B  C) when A  C =  = B  C and C singleton

Freedom Counts Th 3 Censored cardinality ranking Rk is characterized by three axioms: Monotonicity A  B implies A R B S-Anonymity #A = #B implies A I B when A singleton Semi-Independence A R B implies (A  C) R (B  C) when A  C =  = B  C Where Rk counts until k for k = 1,2,… Note: S-Anonymity – ignores quality of options

Preference and Freedom
Suppose agent has complete ranking Ra on X and has full agency to select best element. How does this change our view of freedom?

Define RU by: A RU B iff x Ra y were x is any best element of A under Ra and y is any best element of B under Ra. Indirect Utility freedom ranking Studied by Pattanaik and Xu and many others

Note: RU is a complete ordering satisfying Monotonicity (not strict) Semi-Independence (not independence) but not singleton anonymity (unless Ra is trivial)

Th 4 Indirect utility ranking Ru is characterized by three axioms: Monotonicity A  B implies A R B Extension R follows Ra over pairs of singletons Consitency A R B and C R D implies (A  C) R (B  D) Note Cares only about quality of best alternative, not the quantity (or quality) of other alternatives in set. No value for unchosen alternatives.

Plural Preferences and Freedom
Suppose agent has a collection of potential preference orderings  = {R1,…,Rn} on X Timeline Select Z: Preference revealed: Select x from Z How can this alter our view of freedom? Kreps (1979), Foster (1992, 2011), Arrow (1995), Sen (2003), Sugden, Puppe, many others

Suppose agent has a collection of potential preference orderings  = {R1,…,Rn} on X Must rank opportunity sets before specific Ri is known When Ri revealed, will get best element according to Ri Idea: Could feel vegetarian or non veg on a given day Marx: “…make it possible for me to do one thing to-day and another tomorrow, to hunt in the morning, fish in the afternoon, rear cattle in the evening, criticize after dinner, just as I have in mind How can this alter our view of freedom? Kreps (1979), Foster (1992, 2011), Arrow (1995), Sen (2003), Sugden, Puppe, many others

Definition Effective freedom ranking R* One opportunity set A is said to have as much effective freedom as a second opportunity set B, written A R* B, if A has as much indirect utility freedom as B for all allowable preferences; i.e., A R* B if and only if A RiU B for all Ri. Interpretation A is as good as B no matter which Ri obtains, strict if one is strict Note R* is quasiordering as intersection of complete orderings over Z So incomplete (exactly when RiU disagree) Kreps, Arrow complete R* via subj probs and exp utility for ui

Example 1: (Sen) Agreement A = {g, t, w} “great, terrific, wonderful” B = {b, a, d} “bad, awful, dismal” RC is indifferent R* has A P* B

Example 2: Utter Disagreement X in R2+ R1 is represented by u(x1,x2) = x1-x2 R2 is represented by w(x1,x2) = x2-x1 A = {(1,1), (3,3)} B = {(1,3), (3,1)} R* has B P* A Indeed some scope for comparisons under R*

Overview Examined the capability approach Next Origins Description
Formalization Practical Problems Measuring Freedom Next Applications

James Foster George Washington University and OPHI, Oxford

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