Amartya Sen, Unwrapped

January 03, 2019

Economics Class
Posted on January 03, 2019

Amartya Sen was born in Bengal in 1933 and is an economist and philosopher. Some of his key works include contributions to welfare economics, social choice theory, economic and social justice, and economic theory of famines.

Motivation

Sen’s interest in famines in particular stemmed from personal experience – at the age of just nine, he witnessed the notorious Bengal famine of 1943, in which three million people perished. This personal experience was what later drove Sen to write his 1981 book: Poverty and Famines: An Essay on Entitlement and Deprivation. Here, he argued that famine occurs not only from a lack of food, but also from inequalities built into mechanisms for distributing food. Sen argued that the driver behind the Bengal famine was caused by the raising of food prices whilst wages remained stagnant, unable to keep up. This, tragically, caused millions of workers to starve to death. Importantly, Sen presents data that there was adequate food supply in Bengal at the time, but that because of panic buying, hoarding and price gouging (when a seller spikes the price of their goods), due to the ongoing war in the region, particular groups of people such as labourers and urban service providers did not have the means to buy food. Sen positions these facts within the concept of “positive” and “negative” freedom; positive freedom being freedom to do something, usually with the aid of the state; negative freedom being freedom from, i.e. the freedom to live one’s life without fear of arbitrary interference. He argues that in the Bengal famine, rural labourers’ negative freedom to buy food was not affected. Theoretically, there was no physical force preventing them from buying goods. However, their positive freedom, freedom to, was affected. The workers still starved, as they were not positively free to do anything. They had no capability to actually buy food in practice, as they did not possess the money. Hence, they were unable to gain the functioning of nourishment.

Morality and Economics

Sen’s analysis of the Bengal famine is just one example of the interest that he took with social justice and development economics. Sen’s revolutionary contribution to development economics was that of the “capabilities” approach. This is a moral, paradigmatic framework of thought, a way of thinking about moral issues. The capabilities approach focuses on the information that we need to make judgements about individual well-being, social policies and so on. Importantly, this approach rejects the notion that these judgements can be made solely through monetary terms, as this is regarded as normatively inadequate at assessing individual advantage and social arrangements. Crucially, a solely utility-based analysis of human wellbeing may fail to take into account a person’s physical state, or physical needs due to disability, as well as social and moral evaluations. Essentially, the capabilities approach argues that it is impossible to assess human well-being through monetary calculations alone.

Austerity

Continuing his focus on social justice, Sen has also come under the spotlight for his assessment of the economic consequences of austerity – that is, government policies that aim to reduce government budget deficits through spending cuts, tax increases, or a combination of both. Sen, like John Maynard Keynes, is against austerity. He argues that austerity’s inefficiency has led to the unfavourable consequences that Keynes himself feared. These consequences include high levels of unemployment, internal strife, and at austerity’s very worst, risk of total economic collapse. Yet, if austerity is as detrimental as Sen believes, then why is it that it seems to deliver electoral victories, especially in Britain?

“Common-sense”

This is the question that Sen seeks to answer. He argues that the popularity of austerity amongst governments soared after the 2008 financial crash, as the overstretched role of the state was scapegoated for the crisis, rather than the clear failure of the market economy. Given the extent of intervention and public borrowing that was required of the state to alleviate the crisis, the state soon had large debts to repay. The demand for smaller government was in this way heightened, as politicians were successfully able to convince the general public that the economy would be doomed to collapse under the burden of such heavy public debt. Turning to the management of such debt, austerity therefore suddenly became favoured as a way out, among leaders of depressed and indebted economies within Europe. Yet, Sen argues, what financial leaders in Europe failed to see was the fact that expanding, rather than cutting public expenditure, could potentially “do a much better job” of expanding employment and activity in an economy with “unused capacity and idle labour”. That is, pumping money into the economy could get people into work who were capable, but currently not working, thus increasing output and hence avoiding economic collapse under heavy debt. Austerity, in contrast, can “do little”, as reducing public expenditure only adds to the inadequacy of private incomes and market demands in a failing economy, thereby tending to put even more people out of work. This is precisely the argument that was ushered in by Keynes, in his General Theory, in the midst of the Great Recession of the 1930s. It is a theory which Amartya Sen, too, advocates, arguing that it is simply “common-sense”.Amartya Sen’s dedication to evaluating economic policies in terms of their impact on the welfare of the communities has not gone unnoticed. Indeed, he has had a profound impact and is frequently referred to as the “conscience”, or “Mother Teresa” of economics. In 1998, Sen was awarded the Nobel Prize for Economic Sciences – an enormous achievement. Since coming to critical acclaim, he has served in a variety of senior positions within the economic world, including that of President of the Development Studies Association and the Human Development and Capability Association. Sen currently serves as an honorary director, within the Centre for Human and Economic Development Studies, at Peking University, in China.

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