Capabilities: Theory

James FosterGeorge Washington University and

OPHI, Oxford

Guide

Formalization 28 29 30

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 functioningsBeing adequately nourishedBeing free from avoidable diseaseBeing able to take part in the life of the communityHaving 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 personWhich 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 themselvesMeans instrumental for other ends and means

ExBeing 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 understandEasy to measureSingle dimensionalComparable across peopleUnderlies most evaluations of wellbeingFungible and policy relevant

Motivation

Sen’s answerMeans, 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 comparisonsHello multidimensional inequality (and poverty and wellbeing analysis)?

Motivation

Why not utility?Not cardinally measurableNo basis of comparison across personsSubject 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 functionsHowever 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 conditionsBut largely reflect past investments

And may be more predictive of future prospects Especially for childrenThe “pre-distribution” set

MotivationOne could argue that this is the shape of the newest version of welfare economicsRegularly 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 ChoiceThere are two versions of the same theory – one verbal-descriptive the other formal-symbolicNeed both

Plan

Review the capability approachOriginsDefinitionsImplications

Explore two extensionsExternal capabilitiesFreedom as flexibility

Discuss applicationsPoverty RobustnessCapability creation

Origins

The capability approach can trace its origins through the ages and across many countriesLet’s have a quick look round

SourcesBasu 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 waysExercising choice and practical reasonParticipating in the political life, etc.

What is “the good”?Where all are able to flourish

Eudaimonia (or makarios)

Egalitarian in space of capabilities

OriginsMarx and Engels

Define a commendable human life:Material (biological) needs are satisfied

Eating, drinking, dwelling, clothing

Human needs (to exercise reasoning) are satisfiedCorrespond to functionings

A liberated society requires freedom in both spheresEnhanced 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 shelterBut 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 people1983 “Poor, Relatively Speaking” Absolute poverty standard in capabilities1984 Commodities and Capabilities Brief and clear presentation of CA1992 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

Origins

Sen 1993 Quality of Life (with Nussbaum) outcome of WIDER project (philosophers and economists)1999 Development as Freedom synthesis following Nobel2009 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

OriginsNussbaum

1990 “Aristotelian Social Democracy”1993 Quality of Life (Edited with Sen)1995 Women Culture and Development 2000 Women and Human Development: The Capabilities Approach2011 Creating CapabilitiesMany other authors

OriginsNussbaum

Includes list of categories of capabilities1. Life: not dying prematurely2. Bodily health: good health; adequately nourished; shelter3. Bodily integrity; mobility; free from violence; choice in sex and reproduction4. Senses, imagination, and thought: education, religion, art5. Emotions: attachments, love6. Practical reason: form conception of the good, planning of life7. Affiliation: social interaction; respect and dignity8. Other species: concern and relation to animals, plants, nature9. Play: laugh, play, enjoy recreational activities10. Control over one’s environment: political participation; property, employment.

Origins

SenProduces no list (reasons)Critique

Unfinished theory (Romer, Blume)

Sen would argue flexibleThis 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

SourcesAlkire (2013)Foster and Sen (1997)Sen (1999)Foster and Handy (2008)Basu and Lopez Calva (2011)

Description

What is it?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.

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

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.

Description

FunctioningsThe 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

Description

FunctioningsExamples

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

Description

Robeyn’s (2005) schematic (with social influences)

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.

Description

FreedomNot 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.

Description

Freedom has two aspects

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)

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.

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).

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

Capability Approach: Formalization

The approach has been formalized by Sen and othersWe now take a quick look at this version and its implications

SourcesSen (commodities and capabilities)Foster and Sen (1997)Basu and Lopez Calva (2011)

FormalizationNotation

xi is a vector of commodities for person ic(xi) is the vector of characteristics from xi

Gorman or Lancaster

fi is i’s personal utilization functionConverting vector of characteristics into vector of functioningsNote: Sen assumes is a choice; we will assume given

bi = fi(c(xi)) is i’s vector of functioningsXi is the set of vectors of commodities are feasible for iQi = { 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 soLet’s briefly explore some practical barriers to using this approach

SourcesFoster and SenSen Development as FreedomFoster, MacGillivray, Seth “Robustness”Allison and Foster

Practical Considerations

Is the theory implementable?Review of Inequality Re-examinedMain 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?

Practical Considerations

The challenge of measuring freedomsFreedom has two elements

Agency and empowermentBroadly configured in Sen’s workUsually more narrowly confined to personal agency

OpportunityRange of real opportunities

Both are difficult to infer from observed choicesWithout 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?

Practical Considerations

Data on agency?OPHI questionnaires

Subjective assessmentsWomen’s Empowerment in Agriculture Index (discussed later)

Questions on inclusion in decision making

Practical Considerations

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 setsCan observe functioningsBut how do we know the shape and size of a capability set?

Direct questionsInference (need models)

Analogous to inferring treatment effectObservations over time

Ramadan vs ordinary time

Practical Considerations

Measuring Opportunity FreedomSeveral lines of thought in literature (mostly over abstract sets)

Traditional indirect utility valuationSen’s “elementary” evaluationNo value for unchosen options

Pattanaik and XuCounting approachAxiomatically derivedBut depends on inability to discern the relative quality of optionsBasically assumes options have value without explaining why

Practical Considerations

Measuring Opportunity FreedomKreps (1979), Foster(1993, 2010), Arrow (1995)Provide answer to why “unchosen” options have value

Freedom as flexibilityGood choices for every contingencyA kind of options value

Discussed at greater length below

Practical Considerations

How to measure achieved functionings?Why important?

They miss out on freedom, but:Functionings describe what is, not what could beThe real conditions people are experiencing

Whether due to their own choice or imposedWhether a result of an irrational choice mechanism or mistakesAgency and opportunity (freedom) also matter, but taking stock of functionings is very relevant.

Most applications of the capability approach do this

Practical Considerations

Using functionings as a basisSeries of issues noted in Foster and Sen

Many dimensions How to make coherent?Incompleteness Possible outcome is no evaluationWeights and measures Deciding on weightsRank robustness Sensitivity to choice of weights

Foster, MacGillivray, Seth

Practical Considerations

Example 1 Human Development Index (for countries)

Living standard, education, healthVariables transformed and normalizedThen averaged

Many assumptions and possible criticismsInequality Adjusted HDI

Practical Considerations

Example 2 Multidimensional Poverty IndexAlkire-Foster (2011)Avoids many problems

Of ordinal and incommensurate variablesEtc.

Will discuss later

Capability and Opportunity Freedom

From practical to the theoreticalQ1 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

SourcesPattanaik and Xu (1990)SenFoster (1992, 2011)Arrow (1995)

Measuring FreedomNotation

X is the (finite) set of functions or alternativeAn opportunity set is a nonempty subset of X

A, B typical setsZ 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?R is a quasiordering

reflexive and transitiveNote

Completeness not assumedAssociated P and I are transitive

Which R?

Freedom Counts

Candidate 1 Cardinality rankingPattanaik and Xu, Suppes, Sugden, others

Define RC by: A RC B iff |A| > |B|

Measures using number of functioningsCharacterized 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 elementsS-Anonymity #A = #B implies A I B when A singletonS-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 elementsS-Anonymity #A = #B implies A I B when A singletonS-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 elementsS-Anonymity #A = #B implies A I B when A singletonS-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 singletonS-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 singletonSemi-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 Xand has full agency to select best element.How does this change our view of freedom?

Preference and 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 rankingStudied by Pattanaik and Xu and many others

Preference and Freedom

Note: RU is a complete ordering satisfyingMonotonicity (not strict)Semi-Independence (not independence)

but not singleton anonymity (unless Ra is trivial)

Preference and Freedom

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)

NoteCares 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

TimelineSelect 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

Plural Preferences and Freedom

Suppose agent has a collection of potential preference orderings = {R1,…,Rn} on X

Must rank opportunity sets before specific Ri is knownWhen Ri revealed, will get best element according to Ri

Idea: Could feel vegetarian or non veg on a given dayMarx: “…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

Plural Preferences and Freedom

Suppose agent has a collection of potential preference orderings = {R1,…,Rn} on X

Must rank opportunity sets before specific Ri is knownWhen Ri revealed, will get best element according to Ri

Idea: Could feel vegetarian or non veg on a given dayMarx: “…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

Plural Preferences and FreedomDefinition 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 Ri

U B for all Ri.Interpretation

A is as good as B no matter which Ri obtains, strict if one is strict

NoteR* is quasiordering as intersection of complete orderings over ZSo incomplete (exactly when Ri

U disagree)Kreps, Arrow complete R* via subj probs and exp utility for ui

Plural Preferences and Freedom

Example 1: (Sen) Agreement

A = {g, t, w} “great, terrific, wonderful”B = {b, a, d} “bad, awful, dismal”

RC is indifferentR* has A P* B

Plural Preferences and Freedom

Example 2: Utter DisagreementX 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* AIndeed some scope for comparisons under R*

Overview

Examined the capability approachOriginsDescriptionFormalizationPractical ProblemsMeasuring Freedom

NextApplications