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Seminar Paper, 2009
20 Pages, Grade: 1,0
2. What is development?
2.1 Areas of development
2.2 Goals of development
2.3 Measuring development
3. Development as freedom
3.1 Utilitarianism and libertarianism
3.2 Freedom as the principal means of development
3.3 Freedom as the primary end of development
3.4 Functionings and capabilities
3.5 Processes and opportunities
3.6 Freedom and responsibility
5. Summary and critical claim
About 2500 years ago the brilliant Greek philosopher Aristotle surveyed in his Nicomachean Ethics the ends to which our conduct should be directed. He concluded with deep insight that "wealth is obviously not the good we seek, for the sole purpose it serves is to provide the means of getting something eise [emphasis added]" (Aristotle, 1975, p. 31).
Until recent times, economists struggle for a commonly accepted primary "end' as an overall policy goal. The ideas range from income and wealth maximization (often expressed in the per capita GNP) over "the pursuit of happiness" as an "unalienable right" in the US Declara- tion of Independence of 1776 to well-known measures of "something eise" such as the Gross National Happiness in Bhutan (cf. DiTella and MacCulloch, 2008). Another, indeed very famous, proposal originates from the work of Amartya Sen. He suggests to define freedom as the primary goal for societies and to measure the achievements in the space of feasible func- tionings, the so-called capability set.
In this paper I seek to present Sen's theoretical conception of development as freedom and to provide both the background for tracing the process of origin as well as some exemplary applications to give an idea of the impact of his vision on economic problems. I will focus on the theoretical structure of his conception and will not go into details regarding empirical and historical data that can easily be found in standard literature on development economics. The theoretical background to Sen's approach, however, is not that intensively discussed and so my aim is to contribute to the understanding of the theoretical structure of his idea.
In the beginning, I will give a brief overview of development as a general conception in eco- nomics. Therefore, I will go into areas, goals and a sample of measurements of development. In the second and central section of this paper I will analyze Sen's idea of development as freedom from a theoretical perspective. In doing so, I will picture the derivation of his idea from welfare economics and then scrutinize different aspects of freedoms in Sen's thinking that are crucial for a deep understanding of the deductions emanating from his approach. Fi- nally, I will point out three exemplary applications of the conception of development as freedom on important economic problems, namely markets, poverty and democracy. Clearly, this is meant to be a mere illustration of the properties of Sen's conception as many more effects on each of the examples as well as countless further problems could be explored. I conclude my analysis with a short summary and some critical comments on Sen's vision of development as freedom.
In starting the analysis of Sen's approach to development we have to examine what concep- tions of development exist and how they emerged. The term "development" instantaneously implies change or transformation. And it comprises change for the better. But what kind of "changes" does it describe? And what is defined to be "better"? In this section I will break down different conceptions of development to provide the context for the analysis of Sen's idea of development as freedom.
Ray (1998, p. 7) claims that "economic development is the primary objective of the majority of the world's nations." The use of the term "economic" reflects the common focusing on income-related measurements of development in the 1950s and 1960s. In those times, development was essentially understood as expansion of (national and per capita) income and opu- lence. Yet, development is much more than that. As Stern et al. (2005, p. 3) define, development is about increasing people's ability „to make choices about the things that matter to them." This view features a wide area of development-related issues, such as education, health, political participation and the absence of poverty.
If we prefer to look at development as the change or progress of a society or a nation as a whole, it is obvious that the economy is only part of the social system we face - still a very important one. Hayami (2001, pp. 9ff) introduces an interesting model of dialectic social development. He distinguishes two subsystems within a society: A cultural-institutional and an economic subsystem. The first one consists of values and rules, the latter one of resources and technology. Each section of the system influences one another and development is thus com- plementary, i.e. the progress in production (resources and technology) is amplified by the cul- tural-institutional system, which itself is reinforced by the progress of the economic system. Hence, focusing on the economic subsystem would not only miss an important area of development, but also omit fundamental processes that constitute the development of a society. I will turn back to this later on as this is an important aspect of Sen's conception, too.
Having clarified that development from a systemic perspective is not to be narrowed to the economic area I need to mention the individual perspective. Because even if we look at a cer- tain level of income for an individual, there may be a lot of circumstances that influence his "state of development". We could ask, whether it was his own decision to gain that income in that specific way, how much risk he is taking to do so, how his well-being is influenced by his work, and so on. In recent times, even results of happiness research find their way into development economics (Todaro and Smith, 2009, p. 19, or Weil, 2005, pp. 508ff). Overall, development also incorporates needs, feelings and values of individuals - not only those of socie- ties and nations as a whole.
Development describes changes in a broad range of areas - but in which direction should we change? What basic principles are important? And what does development aim at?
A well-known proposal for elementary goals of development in literature is that of Denis Goulet (1975, as cited in Todaro and Smith, 2009, p. 20f). He defines three elementary core values of development: life-sustenance, self-esteem and freedom. Remarkably, he consciously applies them to both individuals and societies (see above). Life-sustenance means the provision of basic needs such as food, shelter, health and protection. Economic prosperity is clearly necessary in reaching this goal, yet it is not sufficient. Self-esteem describes people's and socities' longing for respect, dignity and independence. This is a severe problem, especially for low developed countries that suffer from exploitation and the aftermath of Colonialism. The third value, freedom, is concerned with the ability to choose. Lack of income, skills, secu- rity, education, etc. can restrain people's and societies' choice set, making them unfree in their decisions and compositions of life. This last value is probably the most important one, as it embodies all areas in a society as well as the processes connected (see Hayami's model above). Sen's approach is distinctly related to Goulet's values and I will come back to that when assessing Sen's idea of development.
Todaro and Smith (2009, p. 22) summarize, based on Goulet's ideas, three main objectives of development: First, to provide more basic goods and let more people benefit from them. Second, to increase "levels of living", i.e. to aim for higher income, lower unemployment and to raise non-material-related well-being. Third, to enlarge freedoms for people and society; this includes enabling people to choose (providing resources) and to widen the set of available goods and services to choose from (providing outcomes).
One should not analyze goals of development without mentioning the Millenium Development Goals (MDGs) (cf. Todaro and Smith, 2009, pp. 22ff, Stern et al., 2005, pp. 290ff, Thirlwall, 2006, pp. 11ff) that were signed by the United Nations in September 2000. They aim to halve poverty by 2015 compared to the level in 1990. In recognition of poverty being much more than income deprivation the MDGs are designed multidimensionally, including goals related to education, mortality and health, gender equality and sustainability. To assure measurability, all goals were refined into quantitative targets, for instance reducing child mor- tality by two-thirds among children under 5. Though the MDGs achieved wide spread policy commitment, they have also been criticized for not being ambitious enough. Currently, progress is being made in the reduction of poverty, improvement of education and lowering of child mortality, whereas enhancing employment rates, the war against hunger, maternal mor- tality and sustainable use of natural resources need more attention to attain the targets in 2015 (UN MDG Report 2009).
If we now know our goals in development, we still need to evaluate our progress in achieving them. So how can we measure development? Who is "developed" and who is still doing so?
Traditionally, development is measured by the gross national income (GNI) per capita in U.S. dollar. The World Bank groups all countries by their GNI per capita, separating low-income- countries ($ 875 GNI per capita or less) up to high-income-countries ($ 10,726 GNI per capita or more). The World Bank indicates, roughly speaking, those countries that are not high- income-countries as "developing countries" (Todaro and Smith, 2009, p. 41).
However, measuring development by GNI per capita entails severe problems - apart from the narrow focus examined above. First, in a poor country you are able to buy much more for one U.S. dollar than in a rich country (different purchasing powers). Second, GNI per capita does not provide any distributional information (equity of income distribution). Third, there is no direct link between GNI per capita and people's well-being (Meier and Rauch, 2005, p.12).
The first objection could easily be overcome by using PPP (Power Purchasing Parity) dollar, which is a virtual currency with specific exchange rates that ensure that a given amount of a country's currency will purchase the same volume of goods in a second country (also known as "international dollars", cf. Rose and Sauernheimer, 2006, pp. 179ff). As mentioned, purchasing power of U.S. dollar in poor countries is much greater than in rich countries. Conse- quentially, not using PPP-dollar comparisons exaggerates the gap between low and high level income countries (Todaro and Smith, 2009, p. 47).
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