eco 11 notes

Economics Paper: XI (TYBA)

Essay on Economics of A.K. Sen

Journey of Amartya K. Sen in the field of Economics: -

A.K. Sen, won the noble prize in economics in 1990 for his contribution in economics related to poverty, capabilities and entitlements.

According t him all market outcomes and govt. should be judged in terms of valuable human ends.

Poverty is a most difficult concept to define. Many theories and research have been given in welfare economics but they have all come across several criticisms, since economics known to be beyond “Welfarism”.

As a student in Shanti Niketan in West Bengal A.K. Sen was touched by the starvation caused by famines. By studying famines in West Bengal he traced that the root of starvation and famines in most cases is a “failure of entitlements rather than scarcity of/lack of availability of food.”

Sen proved in inconsistency of Pareto Principle, with the principle of liberalism. He demonstrated that poverty exists even in a Pareto efficient system. Traditional theories treat sympathy only as externalities where as Sen suggests that welfare theories should include the role of sympathy in welfare theories. (Adam Smith also stressed this.)

[1977/1983: - Sen gives his word in economics equality in 1973. He was establishing during this time the necessitating and legitimacy of judgments regarding interpersonal welfare.]

He introduced two key concepts as an entry points into the area of inequality of human condition.

Ø The first was ‘Weak Equity Axiom’ (WEA).

Ø Second was the possibility of “being” in different person.

In 1986, Sen examined the nature of social values and social choice and made himself the most innovative successor of ‘Arrow’ in that field.

However, Sen wanted to be able to talk about inequality where it really hurts namely among people who are obviously disadvantages because of low income but also because of ill-health, illiteracy and so on.

Sen deviated from the traditional egalitarian society rout. This traditional rout talked about identifying the poor or the deprived,(the identification being poverty line), then do some aggretion exercises.

In a traditional rout was to measure the Head Count Ration (HCR), or the Income Gap (IG). HCR means the ratio of the people below poverty line and Income Gab means the deficit of the actual income of the poor from the total that they would have to receive if they were all to reach the poverty line income level.

Sen objected the dole use of these two measures. He said that If a policy lifted the people just the below the poverty line to a level just above the poverty line but increased the misery of other poorer people. The HCR would decline and give a misleading signal. On the other hand the use of IG alone would provide no improvement about the number of poor people. Sen proceeded to improve upon previous poverty measures and gave a new measure of poverty. P = H [I + (1 – I) G]

Ø ‘H’ is the Head Count Ratio.

Ø ‘I’ is the Poverty Ratio Rate.

Ø ‘G’ is the co-efficient of the distribution of incomes of poor.

This new measure of poverty has several implications and explanations the previous measures could not explain. Namely:

a) Given other things, “a reduction in a incomes of a person below the poverty ling must increase the poverty line.”

b) A big transfer of Axiom such that the transfer of income from a person below the poverty line to anyone who is richer must increase the poverty measure, provided that the transferee continuous to remain below the poverty line.

c) ‘P’ is insensitive to an increase in the income of unknown poor person.

Thus, the world has given many measures of poverty of which Sen’s measure is considered to be very inclusive and comprehensive.

The meanings of poverty explained by the world can be grouped as follows: -

1) Income poverty/consumption poverty: - This cluster talks about poverty in terms of low levels of consumption.

2) Material lack or Want: - Besides, income this includes this lack of very little wealth, lack or low quality of other assets, such as housing, losing, transport, personnel possession etc.

This measure can be applied for more for studying inequality.

3) The third cluster is derived from A.K. Sen and is expressed as capabilities, derivation.

This refers to what we can or can not do; what we can or can not be. This includes but also goes beyond the lack of Want/material, human capabilities, skills, physical abilities, and self respect in the society.

4) A multi dimensional view of deprivation with material lack of only one of the several reinforcement dimensions.

5) The fifth cluster about multiplicity of meanings. It only tries to define different words for poverty or it expresses that poverty has several meaning. Who are the poor? Who are the people, who are in bad condition described as marginalized, vulnerable, excluded, deprived and so on.

Capability Approach:

In capability approach/capability deprivation definition of poverty, Sen brought together a range of ideas that were until then excluded or inadequately formulated in the traditional approaches to the economics of welfare.

The capability approach began life in welfare economics only in 1980s. The approach was first fully articulated by Sen in 1985, and was further discussed by Sen & Nussbaum.

Initially Sen began referring to freedom. He referred to five instrumental freedoms as essential to a life dignity namely:

· Economic facilities.

· Social opportunities.

· Political freedom.

· Security.

· Transparency guaranties.

Sen emphasized on the following:

• The importance of real freedom in the assessment of a person’s advancement.
• Individual differences in the ability of transform resources into valuable activities.
• The centrality of the distribution of welfare within the society.
• The multivariate nature of activity that give rise to happiness.
• Sen argued against excessive materialism in the evaluation of human welfare.

Sen has helped to make the Capability Approach predominant as a paradigm for policy debate in human development where it inspired the creation of the UN’s Human Development Index (HDI).

The HDI is a preferred frame work for discussing equality of opportunity especially with respect to gender equality.

Further more, since the creation of human development and capability assessment association in the early 2000, this approach has been much discussed by political theories, philosophers and the range of social sciences.

Thus, we can differentiate the various approaches is:

Capability Approach	Utility approach	Accesses to resources
Emphasis on functional capabilities “Substantive freedoms”. Such as ability to live till old age, engage in economic transactions, participation in political activities, social choice….	Happiness, desires, fulfillment of choices	Income, commodities assets.

Nussbaum in 2000 “frames the following basic principle in terms of 10 capabilities, i.e. real opportunities based on personal and social circumstances. These have highly influential in the developing country i.e. based on HID.

Q. Can Capabilities be measured?

Experts are brought together to research economic, philosophy, psychology and their work demonstrate that capability indicators can be found in standard data set and more significantly their work emphasis that it is possible to develop new survey instruments which operational zed Nussbaum’s list mentioned above.

The main capabilities measurement instrument has over 60 indicators and is being used by number of reach groups.

Individual Entitlement

Sen’s “Entitlement Approach” provides a frame work for analyzing the relationship between right, interpersonal obligation and individual entitlement to things.

A person’s “Entitlement Set” is a way of characterizing his/her “overall command over things” …….. taking note of all relevant of all rights and obligation where as rights are generally characterized as relationship that holds between distinct between one person and another/between one person and the state; a person’s entitlements are the totality of things that he can have by the virtue of his rights.

Sen has hypothesized that, “most cases of starvation and famines across the world arise not from people being deprived of things to which they are entitled, - but from people not being entitled in the prevailing legal system of institutional rights, to adequate means for survival.”

His empirical works suggests that in many famines in which millions of people have died, there was no overall decline in food availability; and starvation occurred as a consequence of shift in entitlement resulting from exercising rights that were legitimate in legal terms.

Thus, he said, that there is an Asymmetry in the incidence of starvation death among the ………. population group. With entitlement failure arising not only because of overall food shortages but because people are unable to trade their labour power or skills.

Thus, Sen tried to strategize or make headless simplification of complex issues of poverty; capabilities etc over a period of more than 20 years gave measurements of these.

The Nobel Award for Sen in 1998 represented a break in a two decade trend of a boarding works in techno-economics in the field of free market; private property and foot lop finance.

The Nobel for Sen recognized “the central role of Human Development in the professional endeavor of economists”, and “the human development of the third world occupies a central position in his book.”

The Role of Civil and Political Rights in Promoting (1999): -

Sen also gathered on ………of international attention argument that Civil and Political rights can reduced the risks of major social and economic disaster by empowering individuals to complaint ensuring that there uses are disseminated, keeping govt. informed and precipitating a policy response. Sen’s empirical research illustrates the ways in which the denial of civil and political rights can function as an obstacle to human development.

His analysis of the phenomenon of excesses morality and artificially lower survival rate of women in many parts of the world, “The Missing Women”, demonstrates that this becomes a disadvantage of survival women in infancy and childhood.