Nominated essay for our essay contest
As part of the Future Markets Consultation, students and young scholars were invited to participate in an essay contest. This essay was nominated in the category of master students. It was written by Martijn de Vries, student at the University of Amsterdam and the Vrije Universiteit Amsterdam. He can be reached at firstname.lastname@example.org.
The neglect of economics’ inseparable philosophical and political foundation is problematic in itself already for a plentitude of reasons. To make matters worse, the evaluative framework that underpins mainstream economic thinking only allows for a particularly narrow class of considerations to enter the discussion of what constitutes the conditions for human flourishing. In this essay, I will address the limitations of this welfarist evaluative framework by building on the pioneering work of Amartya Sen.
The conventional view that economic growth contributes to human flourishing is under pressure. As we increasingly find ourselves confronted with the downsides of our current economic system, we cannot help but question whether the benefits of economic growth still outweigh the costs. The ecological problems induced by rapid post-WWII economic expansion make headlines on a daily basis and in recent years, widespread awareness has kicked in that these problems are truly existentially threatening.1 To make matters worse, the unprecedented welfare gains that this ‘great acceleration’2 has produced have been reaped in an increasingly financialized market system that predominantly favors a small capitalist elite. As a result, the heralded welfare gains are both distributed highly inequitably and all too often value-extracting to society as a whole.3 The characteristics of our current market system moreover disproportionally favor short-term instrumental gains over long-term benefits. This skews our behavior, as we all participate in this system, towards the pursuit of instantly gratifying outcomes at the expense of other activities that are crucial for our well-being in the long-run, such as sufficient leisure time and maintaining strong social relations.4
That an economic convention is under pressure need not necessarily worry us. At the most foundational level, economics is concerned with profit and prosperity (the former, derived from proficere in Latin, stands for progress or advantage in the broadest sense, meaning that financial profit is only one form of progress). Underlying all economic theorizing and thinking thus lies the question what it means for humanity to prosper, or put differently, what the conditions are for humans to flourish. This is a fundamentally and deeply philosophical question. It is therefore not strange, to be expected even, that economic conventions are challenged as we learn more about our human condition and the world we live in. What is worrisome however, is that economists are poorly equipped to address challenges to their conventions.
Many misconceive of economics’ fundamentally philosophical foundation, reducing our ability to adequately address the various challenges to ensuring flourishing lives for all. Insufficient understanding of economics undoubtedly contributes to this misconception. However, given the impoverished state of the economics curricula in the Netherlands,5 this says more about the discipline’s predicament than about the people who study it. Throughout the 19th and 20th century, the science of economics has been gradually cut off from its philosophical (and political) roots.6 Consequently, those interested in economic problems are commonly unaware of the philosophical ideas that underly economic models and shape economic ideas.
Take cost benefit analysis for example, the economist’s primary tool. Such analysis can never include all costs and benefits to society, for the simple reason that in order for something to be considered a cost or benefit, it first has to be valued. This poses an obvious but unfathomable epistemic limitation on what is included in cost benefit analysis, for if we do not know the value of something, it cannot be accounted for. A second, more palpable limitation is normative in nature, namely that the value theory that economists ascribe to fundamentally shapes their view on what they consider to be profitable; on what constitutes progress and what constitutes recession.7
The neglect of economics’ inseparable philosophical and political foundation is problematic in itself already for a plentitude of reasons. To make matters worse, the evaluative framework that underpins mainstream economic thinking only allows for a particularly narrow class of considerations to enter the discussion of what constitutes the conditions for human flourishing. In this essay, I will address the limitations of this welfarist evaluative framework by building on the pioneering work of Amartya Sen. He has laid the foundation for a broader framework that evaluates human flourishing in terms of capabilities to fulfill meaningful functionings that has already been successfully implemented to move beyond the conventional view on how economic growth contributes to human flourishing in the context of severe inequality, poverty and human development.8 I will argue that maintaining the conditions for human flourishing in a world characterized by ecological limits requires a similar shift and that have to start thinking of sustainable development in terms of our capabilities to function too.
Welfarism: An Arbitrarily Narrow Box
When evaluating human flourishing, economists are confined to a welfarist approach that evaluates our well-being in terms of the individual utility we derive from certain states of affairs. In the mid 19th century, the so-called marginalists laid this welfarist foundation that would come to dominate economic theory ever after. They reasoned that because relative scarcity determines prices, these prices represent the consumer preferences for scarce goods and thus elicit the utility-value that people attached to them. Economists subsequently only have to focus on price changes that are driven by the utility-induced market behavior of individuals in order to analyze welfare effects.9 Some methodological adjustments aside, this basic logic still underlies the welfare economic theories that are taught to economic students around the world today.
There certainly is much to say for this specific approach in certain contexts, but the tight restrictions the marginalists imposed on welfare evaluation severely inhibits the capacity to meaningfully assess human flourishing in others, as all other non-utility considerations that constitute or contribute to a good quality of life came to be considered as normative humbug that hindered ‘pure’ economic analysis. Criticism against this constriction of welfare economic analysis has always been raised but never managed to make a dent in the welfarist framework that continuous to dominate economic theory today. That was until the ground-braking work of Amartya Sen, for which he was awarded the Nobel Prize in Economics in 1998, finally did set the stage for a broader approach to evaluate human flourishing.
In short, Sen criticized the welfarist approach to evaluate human flourishing on three major points:
- welfarism assumes that well-being is best seen in terms of utility;
- welfarism supposes that well-being is the only type of ethical consideration relevant for evaluating human flourishing;
- welfarism supposes that human flourishing can be evaluated only in terms of achievement or outcome.
Building on a vast body of philosophical and economic literature, he shows that all of these presuppositions are highly dubious and that there is no consistent philosophical foundation upon which they can be justified. Hence, these presuppositions have placed welfare economics in “an arbitrarily narrow box”.10 We will briefly examine this narrow box we have to break out of before we can sketch Sen’s broader frameworknecessary to evaluate human progress in a broader, more realistic sense.
(1) Welfarism only evaluates our well-being in terms of utility gains and losses.
This implies that only subjective desires, commonly narrowed down to solely self-interested desires, matter for our well-being. Our subjective preferences are however ill-suited to reflect our wellbeing for a variety of reasons. One well-established problem is that of adaptive preferences.11 Sen applied this problem to the context of welfare evaluation to argue that poor living condition such as systematic oppression or manipulation can modify a person’s preference to the extent that the person subjectively considers herself to live a good life, whereas this is not actually the case. “The hopelessly deprived lack the courage to desire much, and their deprivations are muted and deadened in the scale of desire-fulfillment”.12 This unstable nature of preferences makes it an insufficient measure to evaluate the conditions for human flourishing.
(2) Welfarism not only is an arbitrarily restrictive view on what matters for well-being, it also supposes that ‘being well off’ is all that matters
In reality though, Sen argues, there exists an irreducible duality in the conception of a person, so that ‘having well-being’ and ‘being well off’ are not identical.13 In addition to being well off, having agency is of vital importance to flourish. ‘Having well-being’ captures this personal component. It includes agency objectives that people value and strongly identify with for personal reasons; it explains why some people (let’s say professional chefs) can be seriously impeded in their well-being by the loss of a function (taste) whereas others that do not identify with this function as strongly (say, the people that have a microwave meal on a daily basis) would experience a lot less significant loss in well-being by the same event. By only addressing the extent to which people ‘are well off’, the welfarist approach judges well-being without including this crucial agency component.
(3) Welfarism evaluates advantages in human flourishing only in terms of outcome or achievement
It is what philosophers would call a consequentialist approach to welfare analysis – and what contemporary philosophers broadly acknowledge to be only one among several types of evaluative approaches. This is I believe most clearly put by Williams’ distinction between various types of ethical considerations. Besides consequentialist considerations, there exist other classes of considerations that do not ‘look forward’ towards outcomes. These moral (i.e. obligations) and virtue considerations (i.e. prudency or honesty) respectively look ‘backwards’ to motives behind an action and ‘sideways’ to the virtue characteristics of an action14 and cannot be ignored in a complete view on personal advantage.
What these three arguments boil down to is that in reality there exists a multiplicity of dimensions alongside which a person’s well-being can be judged. If we are considering someone’s well-being, we might ask a broad variety of questions, including: “Is she well off? Is she happy? Can she get what he wants? Does she have much freedom? Is society being good to her? Is she having a good life?”.15 The dimension of subjective satisfaction that welfarism addresses is therefore insufficient for a complete account of human flourishing.
Capabilities: A Broader View on Sustainable Human Flourishing
In order to facilitate the multiplicity of dimensions along which a person’s well-being can be judged, Sen proposes an alternative view that evaluates human progress in terms of people’s capabilities to achieve various functionings. Shifting the focus from utility to capability has several benefits related to overcoming the welfarist limitations discussed in the previous section, as we shall shortly see.
But first and more generally, this shift is motivated by an alternative and, I would argue, more fitting philosophy of what it means for humans to flourish. People do not lead their lives trying to maximize utility. Living is not a strictly individualistic and subjective affair in which our satisfaction is all that matters and a good life is not a life maximally satisfied. Instead, it seems more adequate to describe living as a combination of various ‘doings an beings’. The notion of functionings captures the various things that people have reason to value and thus want to do and be in life. Having shelter and being in good health are examples of elementary functionings, likely to be strongly valued by everyone. Other functionings can be much more complex and differently weighted by different individuals, like having self-trust or being recognized by one’s fellow citizens. Furthermore, our lives are not only flourishing to the extent that we manage to achieve various functionings. The freedom to choose how we live matters greatly for our well-being too. This is captured by the notion of capability: the combinations of valuable functionings that we can choose from and achieve.16
Sen and other capability scholars have already produced an impressive body of work on the capabilities approach, but to date, it remains predominantly applied in the context of poverty, inequality and human development.17 This rich body of literature is instructive for anyone interested in the ins and outs of this approach, but I cannot addressed it here. For the remainder of this essay, I will argue why I believe that the broader capabilities evaluative framework can help us to overcome the immense challenge that the ecological crisis and ecological limits to growth offers to the conventional view that economic growth contributes to human flourishing.
Confronted with the realization that planetary boundaries pose insurmountable natural limits to growth,18 economists faced a dilemma: economic growth (the increase of exchanges in goods and services, measured in GDP) is at the expense of the environment, but reducing growth, according to mainstream economic theory, would be at the expense of societal progress. The debate on whether or not economic growth is still feasible in the 21st century is surely interesting.19 Underneath it however lies the even more pressing discussion about how we should maintain the conditions for human flourishing now that we are confronted ecological limits. For example, both the authors of ‘Prosperity Without Growth’ and ‘Prosperity With Growth’ (written as a response to the former) describe the primary societal challenge we face respectively as deciphering how we can “find higher levels of well-being”20 and “sustain increases in well-being” given ecological limits. 21 Sen has forcefully argued that real human development is better captured by the broader evaluative framework of the capabilities approach than by the narrow welfarist framework. I argue that the same holds for real sustainable development. To illustrate this, I will follow the same three-point structure as in the previous section.
(1) Welfarism only evaluates our well-being in terms of utility gains and losses.
If there is anything that the past 50 years of environmental research has taught us, it is that this welfarist perspective poorly reflects the real dynamic relationship that we have with nature.22 For environmental scientists and ethicists alike, it is absolutely clear that if we want to resolve the ecological crisis we are already in, we can no longer perceive of our natural environmental only as a source of natural capital for us humans. Nature is in many ways fundamental to our well-being and is not just the background condition that supports our human actions.23 We are fundamentally part of nature and this complexity is far from adequately captured by the instrumental utility we derive from the subjective satisfaction provided by nature’s goods and services. An analogy might be useful here. Employees are a vital source of (human) capital to their organization. Leaders however cannot treat their employees solely as a source of capital.
To be a leader is to be in a dynamic relationship with other people – otherwise one would simply be a capitalist. Similarly, the natural environment is a crucial source of capital to society, but to be human is to be in a more complex relationship with nature. Thinking about human life in terms of capabilities to function facilitates shifting the focus in the sustainability debate away from solely thinking in terms of consumer sustainability (increasing levels of income or consumption)24 towards a broader understanding of our dynamic relationship with nature and the conditions required for both flourishing ecology and flourishing human lives.
(2) Welfarism not only is an arbitrarily restrictive view on what matters for well-being, it also supposes that ‘being well off’ is all that matters.
As lessons from communities around the world who will be or have been hit hard by ecological disaster teach us, much more is at stake than merely the extent to which people are well off. Ecological disasters such as extreme draught or floods lead to social dislocation and people facing a sure threat of future ecological disaster, such as the inhabitants of the sinking pacific island states, lose their ability to plan for the future.25 A welfarist rescue plan could perhaps theoretically ensure that these people are made equally well off somewhere else, via other means than that they were used to at home, but this misses the fundamental agency-component to well-being; the extent to which people have well-being. People are not variables, they are actors. Sustaining increases in people’s individual well-being in an era where humanity has become a geological force strongly increases the need to evaluate individuals’ well-being in terms of their ability to still shape their own lives.
(3) Welfarism evaluates advantages in human flourishing only in terms of outcome or achievement.
Last but not least, the idea of sustainable development is especially relevant for our well-being in terms of non-consequentialist considerations that welfarism ignores. Sustainable development is commonly defined as “development that meets the needs of the present without compromising the ability of future generations to meet their own needs”.26 It in effect asks of us to what extent the freedom of the people living now can be restricted in order to provide for equal opportunities for future generations.27 Given that collective human activity is already transgressing several environmental limits and is bound to transgress many more,28 we will have to consider future restrictions of individual freedom arising due to collective effects from acting on freedom. Not only is this a matter of justice towards future generations, it also affects the freedom and thus the well-being of the people living today. In the global politics of sustainable development, we will have to navigate this delicate trade-off between sufficient conditions for human flourishing now and in the future. It is essential that we take into account the freedom that the people living now and in the future have to choose valuable functionings, but the economist who only focusses on well-being achievement is so focused on its own conception of growth that he ignores those who choose to flourish in other directions.
- Alkire, S. Deneulin S. (2009). The Human Development and Capability Approach. In: Deneulin & Shahani (ed.). An Introduction to the Human Development and Capability Approach. Earthscan.
- Boumans, M., Davis, J.B. (2010). Economic Methodology: Understanding Economics as a Science. Palgrave Macmillan.
- De Mooij, R., Van den Bergh, J.C.J.M. (2002). Growth and the Environment in Europe: A Guide to the Debate. Empirica, 29, 71-91.
- Elster, J. (1983). Sour Grapes: Studies in the Subversion of Rationality. Cambridge University Press.
- Hepburn, C., Bowen, A. (2013). Prosperity With Growth: Economic Growth, Climate Change and Environmental Limits. Grantham Research Institute on Climate Change and the Environment Working Paper No.93.
- Jackson, T. (2017). Prosperity Without Growth: Foundations for The Economy of Tomorrow. New York: Routledge.
- Latour, B. (2017). Oog in oog met Gaia: Acht lezingen over het Nieuwe Klimaatregime. Amsterdam: Octavo. Original Title: Huit conferènces sur le Nouveau Régime Climatique.
- Mace, G. (2014). Whose Conservation? Science, 345(6204), 1558-1560.
- Mazzucato, M. (2018). De Waarde van Alles: Onttrekken of Toevoegen aan de Wereldeconomie. Nieuws Amsterdam. Original Title: The Value of Everything.
- Milonakis, D., Fine, B. (2009). From Political Economy to Economics: Method, the social and the historical in the evolution of economic theory. Routledge: London.
- Neumeyer, E. (2012). Human Development and Sustainability. Journal of Human Development and Capabilities, 13(4), 561-579.
- O’Neill, D.W., Fanning, A.L., Lamb, W.F., Steinberger, J.K. (2018) A good life for all within planetary boundaries. Nature Sustainability, 1, 88-95.
- Robeyns, I. (2006). The Capability Approach in Practice. The Journal of Political Philosophy, 14(3), pp. 351-376.
- Rockström, J. Steffen, W., Noone, K., et al., (2009). A Safe Operating Space for Humanity. Nature, 461, pp. 472-475.
- Sen, A. (1985). Well-Being, Agency and Freedom. The Journal of Philosophy, 82(4), 169-221.
- Sen (1991). On Ethics and Economics. Blackwell Publishing.
- Sen (1993). Capability and Well-Being. In Nussbaum, M. & Sen, A. (ed.). The Quality of Life. Oxford University Press.
- Sen (1999). Commodities and Capabilities. Oxford University Press.
- Schultz, E., Christen, M., Voget-Kleschin, L., Burger, P. (2013). A Sustainability-Fitting Interpretation of the Capability Approach: Integrating the Natural Dimension by Employing Feedback Loops. Journal of Human Development and Capabilities, (14)1, 115-133.
- Steffen, W., Broadgate, W., Deutsch, L., et al. (2015). The trajectory of the Anthropocene: The Great Acceleration. The Anthropocene Review, 2(1), 81-98.
- Stigliz, J.E. (2019). People, Power, and Profits. Allen Lane.
- Tielemans, J., De Muijnck, S., Kavelaars, M., Ostermeijer, F. (2018). Thinking like an economist? A quantitative analysis of economics bachelor curricula in the Netherlands. Rethinking Economics NL.
- Williams, B. (1985). Ethics and the Limits of Philosophy. Routledge Classics.
- World Commission on Environment and Development (1987). Our Common Future. Oxford University Press.
- The famous article by Rockström et al. (2009) elucidates the threats of transgressing planetary boundaries.
- Steffen et al. (2015)
- See Mazzucato (2018)
- See Stigliz (2019)
- Tieleman et al. (2018).
- Milonakis and Fine (2009) provide an elaborate account of this historical development.
- Boumans and Davis (2010) have written a comprehensive handbook on the methodology of economics that elucidates why it is fundamentally a normative science. Hausman & McPherson (2006) provide perspicuous practical examples of how normative ideas underpin allegedly ‘objective’ economic rationale.
- The annual Human Development Report by the United Nations (starting in 1990) for instance draw extensively from the capability framework.
- See note 6.
- Sen (1991, p.29)
- First set out by Elster (1983)
- Sen (1991, p.46).
- Sen (1985, p.200; 1993, p.35)
- Williams (1985, p.8-11)
- Sen (1999, p.8)
- Sen (1993, p.31-33)
- See Alkire and Deneulin (2009) for an introduction. For practical applications of the capabilities approach see Robeyns (2006)
- These limits were first convincingly reported by the Club of Rome’s ‘Limits to Growth’ report (see Meadows et al., 1972). Also see note 1.
- See De Mooij and Van den Bergh (2002)
- Jackson (2017, p.48). Note that the first edition was published in 2010.
- Hepburn & Bowen (2013, p.18)
- Mace (2014)
- See Latour (2017).
- Neumayer (2012)
- O’Neill et al. (2017).
- World Commission on Environment and Development (1987)
- Schultz et al. (2013)
- See note 1