Virtual Bangladesh : Commentary : Incredible Sen

Dr. Iftekhar Hossain

Economics is concerned with society - with its limited resources - and human desires to attain the best of life. But what actually is welfare and how can it be enhanced? A particular branch of economics, welfare economics, is exclusively devoted to these issues. Many decisions aimed at increasing welfare are taken on individual basis. But still more are made collectively. What principles should these collective decisions abide by, so that neither rationality nor democratic norms are violated? Yet another branch of economics, social choice, deals with these issues.

Amartya Kumar Sen has been preoccupied with these two sub-disciplines in economics, as was Kenneth Arrow, a Nobel prize laureate before him. Arrow set up a few plausible conditions that a good collective decision should fulfil. These are as simple as regarding the desires of all the members in a society, not imposing a single person's preference on the rest, and so on. Arrow concluded that it is impossible to arrive at a collective decision by following these rules. This is called Arrow's Impossibility Theorem (1951). This conclusion had cast a dark shadow on welfare economics.

Sen's point of departure has been this Impossibility Theorem. Sen pointed out - from a philosophical angle - that decisions and judgements are highly vulnerable to the information that they are based upon. Soon he came to demonstrate that this impossibility of arriving at a collective choice is a result of a peculiar type of information that is customary in economic theory. The only information that is allowed is utility, and even that of a particular type, ordinal. A simple example may clarify.

If two people may both prefer a mango to an apple, we have no way to compare the intensity of their desires (cardinality) for mangoes so that we can allocate the fruits in a welfare enhancing way to the two people. Still more serious is the ruling out of non-utility information entirely, such as considering whether the one individual has any special "need" for mangoes. The practical consequence of not permitting a richer information is grave.

In today's world of plenty millions of people are suffering from poverty, lacking the minimal level of well-being. But still in the standard texts of economics little mention is found on poverty. Since economic reasoning about welfare is based exclusively on utility (one meaning of which is happiness) there is hardly any room for discussing poverty.

Once sorting out the importance of information for judgement, Sen concentrated his research on poverty. An acute case of poverty is famine. Sen took an empirical approach.

It is a common belief, not least in the West, that famine is caused by a lack of food. Sen scrutinised the actual statistical evidence of three famines, two in Bengal and one in Ethiopia. It turned out that during the famines the food availability was not only adequate to avoid a famine, it even surpassed what it used to be in normal times. The cause of famine, consequently, is not an inadequacy of food. What then really happens?

Let us imagine a community, perhaps a small village, where every villager dines in a grand hall. One day there appear a doorman. He keeps some people standing outside by not letting them enter into the hall. The outsiders loose their "entitlement" to food. The outsiders, in other words, loose their "capability" to be fed.

The failure of entitlement may arise out of many reasons. In the particular case of famines in Bengal (both in 1943 and 1974) the price of food, i.e. rice, sky-rocketed due to some political turmoil. The destitute in both villages and cities died like flies. But many more suffered in the cities since people there had to buy their own food.

This reasoning may easily be extended for the case of poverty as well. It is rarely the lack of income that constitutes poverty, but rather a lack of basic capabilities. These capabilities are related to income but more importantly they are related to literacy, availability of clean water, housing, medical care, women's literacy and so on. These, in turn, require good policies and sound social institutions.

Sen has once again demonstrated, in the spirit of Aristotle and much of the welfare economics, that human well-being and destitution are not the same as the abundance or lack of income. Income and wealth are contributing factors and not well-being as such. And many other factors may as well be equally important.

Much of Sen's arguments and reasoning are abstract and are methodological and philosophical in nature. Still more employ mathematics. But an unsual large portion of his enormous publications is accessible to common readers. A central theme cutting through all his essays is a concern for human well-being. Sen has bridged the gap of the three interrelated disciplines in economics: welfare economics, social choice and development economics. Such is the methodology of a true economist.

The implication of Sen's work for practical life has already began. In reducing poverty, the emphasis has already shifted away from the decade-long over-concentration on income. More and more people in the academic circle and in the development community have come to advocate that it is the human capability that should be put into focus. The UNDP Human Development Reports of the recent past bear a living evidence.

In the debate on poverty, to my understanding, one should be vigilant of two fallacies. One arises from the over simplification of poverty, equating poverty with the lack of income alone. An increase in income, i.e. economic growth, is well and good and is indispensable for economic development in general. But in many parts of the world an excessive growth rate may fail to realise (not the least, keeping in mind the necessity of "sustainabilty" of growth). "Asian miracle" may not be replicated everywhere. An excessive reliance on growth may frustrate the plight for alleviating poverty.

The source of the second deviation may arise from an over zeal. This would, quite unnecessary, tend to complicate the poverty concept. A functioning democracy, community participation, a reduction in the inequality - all these are important for a civil society. But one should not forget that poverty is merely the "lower end" in the ladder of welfare. Attributing too much burden to it may, once again, invoke frustration.

Basic capabilities related to some basic needs are all what poverty should be. And it is entirely possible to make progress to enhance them. Already now and today.

Still this apparent simple solution may turn out to be tricky. An increased investment, for instance, in child care may not be the single cost-effective solution to high child mortality rate. It may as well be the case that efforts to increase mothers' literacy and nutritional knowledge produce a better result. But here lies the intellectual challenge: To single out the relevant capabilities and to target them efficiently.

Amartya Sen has once again demonstrated the strength of economics science: It is the human well-being that economics is all about.

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