1999 DevelopmentAsFreedom

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Subject Headings: International Development, Development, Personal Freedom, Unfree Person, Economic Growth Rate.

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2015

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Book Overview

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THE PERSPECTIVE OF FREEDOM

It is not unusual for couples to discuss the possibility of earning more money, but a conversation on this subject from around the eighth century B.C. is of some special interest. As that conversation is recounted in the Sanskrit text Bribadaranyaka Upanishad, a woman named Maitreyee and her husband, Yajnavalkya, proceed rapidly to a bigger issue than the ways and means of becoming more wealthy: How far would wealth go to help them get what they want ? - Maitreyee wonders whether it could be the case that if " the whole earth, full of wealth " were to belong just to her, she could achieve immortality through it. " No," responds Yajnavalkya," like the life of rich people will be your life. But there is no hope of immortality by wealth. " Maitreyee remarks," What should I do with that by which I do not become immortal?"

Maitreyee's rhetorical question has been cited again and again in Indian religious philosophy to illustrate both the nature of the human predicament and the limitations of the material world. I have too much scepticism of other worldly matters to be led there by Maitreyee's worldly frustration, but there, is another aspect of this exchange that is of rather immediate interest to economics and to understanding the nature of development. This concerns the relation between incomes and achievements, between commodities and capabilities, between our economic wealth and our ability to live as we would like. While there is a connection between opulence and achievements, the linkage may or may not be very strong and may well be extremely contingent on other circumstances. The issue is not the ability to live forever on which Maitreyee - bless her soul - happened to concentrate, but the capability to live really long without being cut off in one's prime) and to have a good life while alive (rather than a life of misery and unfreedom) - things that would be strongly valued and desired by nearly all of us. The gap between the two perspectives (that is, between an exclusive concentration on economic wealth and a broader focus on the lives we can lead) is a major issue in conceptualizing development. As Aristotle noted at the very beginning of the Nicomachean Ethics (resonating well with the conversation between Maitreyee and Yajnavalkya three thousand miles away), “wealth is evidently not the good we are seeking; for it is merely useful and for the sake of something else.",

If we have reasons to want more wealth, we have to ask: What precisely are these reasons, how do they work, on what are they contingent and what are the things we can " do " with more wealth? In fact, we generally have excellent reasons for wanting more income or wealth. This is not because income and wealth are desirable for their own sake, but because, typically, they are admirable general-purpose means for having more freedom to lead the kind of lives we have reason to value.

The usefulness of - wealth lies in the things that it allows, us to do -, the substantive freedoms it helps us to achieve. But this relation is neither exclusive (since there are significant influences on our lives other than wealth) nor uniform (since the impact of wealth on our lives varies with other influences). It is as important to recognize the crucial role of wealth in determining living conditions and the quality of life as it is to understand the qualified and contingent nature of this relationship. An adequate conception of development must go much beyond the accumulation of wealth and the growth of gross national product and other income-related variables. Without ignoring the importance of economic growth, we must look well beyond it.

The ends and means of development require examination and scrutiny for a fuller understanding of the development process; it is simply not adequate to take as our basic objective just the maximization of income or wealth, which is, as Aristotle noted," merely useful and for the sake of something else. "For the same reason economic growth cannot sensibly be treated as an end in. itself. Development has to be more concerned with enhancing the lives we lead and the freedoms we enjoy. Expanding the freedoms that we have reason to value not only makes our lives richer and more unfettered, but also allows us to be fuller social persons, exercising our own volitions and interacting with-and influencing - the world in which we live. In chapter 3 this general approach is more fully proposed and scrutinized, and is evaluatively compared with other approaches that compete for attention.

FORMS OF UNFREEDOM

Very many people across the world suffer from varieties of unfreedom. Famines continue to occur in particular regions, denying to millions the basic freedom to survive. Even in those countries which are no longer sporadically devastated by famines, undernutrition may affect very large numbers of vulnerable human beings. Also, a great many people have little access to health care, to sanitary arrangements or to clean water, and spend their lives fighting unnecessary morbidity, ”often succumbing to premature mortality. The richer countries too often have deeply disadvantaged people, who lack basic opportunities of health care, or functional education, or gainful employment, or economic and social security. Even within very rich countries, sometimes the longevity of substantial groups is no higher than that in much poorer economies of the so-called third world. Further, inequality between women and men afflicts-and sometime prematurely ends - the lives of millions of women, and, in different ways, severely restricts the substantive freedoms that women enjoy.

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TWO ROLES OF FREEDOM

The analysis of development presented in this book treats the freedoms of individuals as the basic building blocks. Attention is thus paid particularly to the expansion of the " capabilities " of persons to lead the kind of lives they value-and have reason to value. These capabilities can be enhanced by public policy, but also, on the other side, the direction of public policy can be influenced by the effective use of participatory capabilities by the public. The two-way relationship is central to the analysis presented here.

There are two distinct reasons for the crucial importance of individual freedom in the concept of development, related respectively to evaluation and effectiveness. First, in the normative approach used here, substantive individual freedoms are taken to be critical. The success of a society is to be evaluated, in this view, primarily by the substantive freedoms that the members of that society enjoy. This evaluative position differs from the informational focus of more traditional normative approaches, which focus on other variables, such as utility, or procedural liberty, or real income.

Having greater freedom to do the things one has reason to value is (1) significant in itself for the person's overall freedom, and (2) important in fostering the person's opportunity to have valuable outcoines. Both are relevant to the evaluation of freedom of the members of the society and thus crucial to the assessment of the society's development. The reasons for this normative focus (and in particular for seeing justice in terms of individual freedoms and its social correllates) is more fully examined in chapter 3.

The second reason for taking substantive freedom to be so crucial is that freedom is not only the basis of the evaluation of success and failure, but it is also a principal determinant of individual initiative and social effectiveness. Greater freedom enhances the ability of people to help themselves and also to influence the world, and these matters are central to the process of development. The concern here relates to what we may call (at the risk of some oversimplification) the " agency aspect " of the individual.

The use of the term “agency” calls for a little clarification. The expression “agent” is sometimes employed in the literature of economics and game theory to denote a person who is acting on someone else's behalf (perhaps being led on by a “principle"), and whose achievements are to be assessed in the light of someone else's (the principal's) goals. I am using the term “agent” not in this sense, but in its older - and "grander" - sense as 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. This work is particularly concerned with the agency role of the individual as a member of the public and as a participant in economic, social and political actions (varying from taking part in the market to being involved, directly or indirectly, in individual or joint activities in political and other spheres).

This has a bearing on a great many public policy issues, varying from such strategic matters as the widespread temptation of policy bosses to use fine-tuned " targeting " (for " ideal delivery " to a supposedly inert population), to such fundamental subjects as attempts to dissociate the running of governments from the process of democratic scrutiny and rejection (and the participatory exercise of political and civil rights).

EVALUATIVE SYSTEMS: INCOMES AND CAPABILITIES

On the evaluative side, the approach used here concentrates on a factual base that differentiates it from more traditional practical ethics and economic policy analysis, such as the " economic " concentration on the primacy of income and wealth (rather than on the characteristics of human lives and substantive freedoms), the " utilitarian " focus on mental satisfaction (rather than on creative discontent and constructive dissatisfaction), the " libertarian " preoccupation with procedures for liberty (with deliberate neglect of consequences that derive from those procedures) and so on. The overarching case for a different factual base, which focuses on substantive freedoms that people have reason to enjoy, is examined in chapter 3.

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Self-interest is, of course, an extremely important motive, and many works on economic and social organization have suffered from not paying adequate attention to this basic motivation. And yet we also see actions — day in and day out — that reflect values which have clear social components that take us well beyond the narrow confines of purely selfish behavior. The emergence of social norms can be facilitated both by communicative reasoning and by evolutionary selection of behavioral modes. There is, by now, quite a vast literature on this subject, and I shall not dwell on this at great length.15 The use of socially responsible reasoning and of ideas of justice relates closely to the centrality of individual freedom. This is not to claim that people invariably invoke their ideas of justice, or utilize their powers of socially sensitive reasoning, in deciding on how to exercise their freedom. But a sense of justice is among the concerns that can move people and often do. Social values can play — and have played — an important part in the success of various forms of social organization, including the market mechanism, democratic politics, elementary civil and political rights, provision of basic public goods, and institutions for public action and protest.

Different persons may have very different ways of interpreting ethical ideas including those of social justice, and they may even be far from certain about how to organize their thoughts about it. But the basic ideas of justice are not alien to social beings, who worry about their own interests but are also able to think about family members, neighbors, fellow citizens and about other people in the world. The thought experiment involving the “impartial spectator” that Adam Smith beautifully analyzed (beginning with the powerful question: What would an “impartial spectator” make of it?) is a formalization of an informal — and pervasive — idea that occurs to most of us. Space does not have to be artificially created in the human mind for the idea of justice or fairness — through moral bombardment or ethical haranguing. That space already exists, and it is a question of making systematic, cogent and effective use of the general concerns that people do have.

THE ROLE OF VALUES IN CAPITALISM While capitalism is often seen as an arrangement that works only on the basis of the greed of everyone, the efficient working of the capitalist economy is, in fact, dependent on powerful systems of values and norms. Indeed, to see capitalism as nothing other than a system based on a conglomeration of greedy behavior is to underestimate vastly the ethics of capitalism, which has richly contributed to its redoubtable achievements.

The use of formal economic models to understand the operation of market mechanisms, as is the standard practice in economic theory, is to some extent a double-edged sword. The models can give insight into the way the real world operates.16 On the other hand, the structure of the model can conceal some implicit assumptions that produce the regular relations that the models build on. Successful markets operate the way they do not just on the basis of exchanges being “allowed,” but also on the solid foundation of institutions (such as effective legal structures that support the rights ensuing from contracts) and behavioral ethics (which makes the negotiated contracts viable without the need for constant litigation to achieve compliance). The development and use of trust in one another’s words and promises can be a very important ingredient of market success.

That something other than the unleashing of greed is involved in the emergence and development of the capitalist system was, of course, clear to the early defenders of capitalism. The Manchester liberals did not fight just for the victory of greed and self-love. Their concept of humanity incorporated a broader domain of values. While they may have been overly optimistic about what human beings (when left to themselves) can — and will — do, they were right to see some spontaneity in the feelings that people have for one another, and to entertain the possibility of an enlightened understanding of the need for mutually beneficial behavior (without constant prodding by the state).

The same applies to Adam Smith, who considered a variety of values involved in economic, social and political relations. Even those early commentators (such as Montesquieu and James Stuart) who saw capitalism as a kind of replacement of “passions” by “interest” tended to draw attention to the fact that the pursuit of interest in an intelligent and rational way can be a great moral improvement over being driven by fervor, craving and tyrannical propensities. “Interest,” James Stuart thought, was the “most effective bridle” against “the folly of despotism.” As Albert Hirschman has beautifully analyzed, the early champions of capitalism saw a great motivational improvement in the emergence of capitalist ethics: “it would activate some benign human proclivities at the expense of some malignant ones.”17 Despite its effectiveness, capitalist ethics is, in fact, deeply limited in some respects, dealing particularly with issues of economic inequality, environmental protection and the need for cooperation of different kinds that operate outside the market. But within its domain, capitalism works effectively through a system of ethics that provides the vision and the trust needed for successful use of the market mechanism and related institutions.

BUSINESS ETHICS, TRUST AND CONTRACTS

Successful operation of an exchange economy depends on mutual trust and the use of normsexplicit and implicit.18 When these behavioral modes are plentiful, it is easy to overlook their role. But when they have to be cultivated, that lacuna can be a major barrier to economic success. There are plenty of examples of the problems faced in precapitalist economies because of the underdevelopment of capitalist virtues. Capitalism’s need for motivational structures that are more complex than pure profit maximization has been acknowledged in various forms, over a long time, by many leading social scientists, such as Marx, Weber, Tawney and others.19 That nonprofit motives have a role in the success of capitalism is not a new point, even though the wealth of historical evidence and conceptual arguments in that direction is often neglected in contemporary professional economics.20 A basic code of good business behavior is a bit like oxygen: we take an interest in its presence only when it is absent. Adam Smith had noted this general tendency in an interesting remark in his “History of Astronomy”: [[ ]] … an object with which we are quite familiar, and which we see every day, produces, though both great and beautiful, but a small effect upon us; because our admiration is not supported either by Wonder or by Surprise.21 What may not cause wonder or surprise in Zurich or London or Paris may, however, be quite problematic in Cairo or Bombay or Lagos (or Moscow), in their challenging struggle to establish the norms and institutions of a functioning market economy. Even the problem of political and economic corruption in Italy, which has been much discussed in recent years (and has also led to radical changes in the political equilibrium in Italy), relates a good deal to the somewhat dualist nature of the Italian economy, with elements of “underdevelopment” in some parts of the economy and the most dynamic capitalism elsewhere in the same economy.

In the economic difficulties experienced in the former Soviet Union and countries in Eastern Europe, the absence of institutional structures and behavioral codes that are central to successful capitalism has been particularly important. There is need for the development of an alternative system of institutions and codes with its own logic and loyalties that may be quite standard in the evolved capitalist economies, but that are relatively hard to install suddenly as a part of “planned capitalism.” Such changes can take quite some time to function — a lesson that is currently being learned rather painfully in the former Soviet Union and in parts of Eastern Europe. The importance of institutions and behavioral experiences was rather eclipsed there in the first flush of enthusiasm about the magic of allegedly automatic market processes.

The need for institutional developments has some clear connection with the role of codes of behavior, since institutions based on interpersonal arrangements and shared understandings operate on the basis of common behavior patterns, mutual trust and confidence in the other party’s ethics. The reliance on rules of behavior may typically be implicit rather than explicit — indeed so implicit that its importance can be easily overlooked in situations where such confidence is not problematic. But wherever it is problematic, overlooking the need for it can be quite disastrous. The emergence of Mafia-style operations in the former Soviet Union has recently received some attention, but to deal with this issue we have to examine its behavioral antecedents, including Adam Smith’s analysis of the far-reaching role of “the established rules of behaviour.”

VARIATIONS OF NORMS AND INSTITUTIONS WITHIN THE MARKET ECONOMY

Behavioral codes vary even among the developed capitalist economies, and so does their effectiveness in promoting economic performance. While capitalism has been very successful in radically enhancing output and raising productivity in the modern world, it is still the case that the experiences of different countries are quite diverse. The successes of East Asian economies (in recent decades), and most notably of Japan (stretching further back), raise important questions about the modeling of capitalism in traditional economic theory. To see capitalism as a system of pure profit maximization based on individual ownership of capital is to leave out much that has made the system so successful in raising output and in generating income.

Japan has frequently been seen as the greatest example of successful capitalism, and despite the longish period of recent recession and financial turmoil, this diagnosis is unlikely to be completely washed away. However, the motivation pattern that dominates Japanese business has much more content than would be provided by pure profit maximization. Different commentators have emphasized distinct motivational features in Japan. Michio Morishima has outlined the special characteristics of the “Japanese ethos” as emerging from particular features of the history of Japan and its tendency toward rule-based behavior patterns.22 Ronald Dore and Robert Wade have identified the influence of “Confucian ethics.”23 Masahiko Aoki has seen cooperation and behavioral codes in terms that are more responsive to strategic reasoning.24 Kotaro Suzumura has emphasized the combination of commitment with a competitive atmosphere and reasoned public policy.25 Eiko Ikegami has stressed the influence of Samurai culture.26 There are other behavior-based accounts as well.

Indeed, there is some truth even in the apparently puzzling claim made in The Wall Street Journal that Japan is “the only communist nation that works.”27 That enigmatic remark points to the nonprofit motivations underlying many economic and business activities in Japan. We have to understand and interpret the peculiar fact that one of the most successful capitalist nations in the world flourishes economically with a motivation structure that departs, in some significant spheres, from the simple pursuit of self-interest, which — we have been told — is the bedrock of capitalism.

Japan does not, by any means, provide the only example of a special business ethics in promoting capitalist success. The merits of selfless work and devotion to enterprise in raising productivity have been seen as important for economic achievements in many countries in the world, and there are many variations in these behavioral codes even among the most developed industrial nations.

INSTITUTIONS, BEHAVIORAL NORMS AND THE MAFIA

To conclude the discussion of different aspects of the role of values in capitalist success, we must see the system of ethics underlying capitalism as involving a good deal more than sanctifying greed and admiring cupidity. The success of capitalism in transforming the general level of economic prosperity in the world has drawn on morals and codes of behavior that have made market transactions economical and effective. In making use of the opportunities offered by the market mechanism and greater use of trade and exchange, the developing countries have to pay attention not only to the virtues of prudential behavior, but also to the role of complementary values, such as the making and sustaining of trust, avoiding the temptations of pervasive corruption, and making assurance a workable substitute for punitive legal enforcement. In the history of capitalism there have been significant variations within the basic capitalist behavioral codes, with divergent achievements and experiences, and there are things to be learned there as well.

The big challenges that capitalism now faces in the contemporary world include issues of inequality (especially that of grinding poverty in a world of unprecedented prosperity) and of “public goods” (that is, goods that people share together, such as the environment). The solution to these problems will almost certainly call for institutions that take us beyond the capitalist market economy. But the reach of the capitalist market economy itself is, in many ways, extendable by an appropriate development of ethics sensitive to these concerns. The compatibility of the market mechanism with a wide range of values is an important question, and it has to be faced along with exploring the extension of institutional arrangements beyond the limits of the pure market mechanism.

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References

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 AuthorvolumeDate ValuetitletypejournaltitleUrldoinoteyear
1999 DevelopmentAsFreedomAmartya SenDevelopment As Freedom1999
AuthorAmartya Sen +
titleDevelopment As Freedom +
year1999 +