Economic Man

Amartya Sen

Introduction

Throughout the history of economics, there has existed a debate regarding the concept of the economic man (homo economicus). According to this concept, human beings are unwaveringly rational and self interested economic actors. The goal of the economic man is to maximize his or her own utility. We began the class with a debate over slavery and an economists’ opposition to slavery, based on a violation of the notion of an economic man.

Some thinkers, notably Thomas Carlyle, believed that some groups did not possess the intelligence or reasoning abilities necessary to govern themselves. Therefore, other more “advanced” races should be in charge in order to ensure their wellbeing and to maximize world productivity. In opposition to this line of thinking was J.S. Mill and a long list of abolitionists who believed that Thomas Carlyle’s desire to create a ruling race to subject all “sub-human” races was a direct violation of the principle of the economic man. Mill's belief was that regardless of race or education level, people have the ability as economic actors to make the rational decisions that will maximize their own utility and thereby ensure their well-being.

The Economic Man

The homoeconomicus is a term that was first used by Adam Smith during his well known pieces, Theory of Moral Sentiments and the Wealth of Nations. The homoeconomic man is defined as “rational and narrowly self-interested actors who have the ability to make judgments toward their subjectively defined ends.” (citation needed)

Capabilities Approach

First developed by Amartya Sen in the 1980s as part of welfare economics, capabilities is described by Sen as a "reflection of the freedom to achieve valuable functionings."<ref name="Reexamined">Inequality Reexamined, Amartya Sen, Harvard University Press, 1992.</ref> The theory assesses:

1. well-being
   1. This measure of well-being includes being healthy, well-fed, clothed, and housed.
2. freedom to pursue well-being
   1. This measure examines the influence that the the capability to pursue well-being may have on the person's well-being. For example, a person may be healthy, fed, clothed, etc, but barred from pursuing education, such as is the case for females in some cultures. If the economic actor does not have the freedom to pursue his or her desired goal, well-being suffers.<ref name="Reexamined">Inequality Reexamined, Amartya Sen, Harvard University Press, 1992.</ref>

According to the theory, this freedom can be limited by a variety of factors, including government intervention, accessibility of education, economic situations, etc. Using Sen's capabilities approach, we can deduce that Sen believes that as economic actors, human beings have the theoretical ability to make the decisions that will bring them to whatever state of being they regard as wellbeing. However, humans require freedom to make the aforementioned decisions. However, Sen is unclear about what freedom entails.

Sen on Capabilities

Sen developed the capabilities approach with the goal of developing a framework that could assess and measure poverty in terms of well-being, in the hopes of ultimately influencing governments to introduce policy specifically designed to rectify the pinpointed issues. However, the theory has proven difficult to translate into actual policy.

In his writings, Sen talked a lot about the advantages of human capabilities. In the Capabilities and Resources chapter of his book Idea of Justice, he pointed out that everyone is capable of making rational choices in the economy. These rational choices that actors make will lead to the well-being of society as well as the individual <ref name="IdeaOfJustice">Sen, Amartya. Idea of Justice. Penguin Group, 2009.</ref> According to Sen, there are four sources of variation within the conversion of income, leading to different lives actors will lead.

1. Personal heterogeneities- In relation to physical characteristics of age, gender, disability, proneness to sickness and etc. This variation entails that a sick person will need more income than the ordinary person.

What's wrong with the Rational Agent?

Bounded Willpower/Bounded Rationality

1. People may not choose the rational choice due to the fact that they have an inability to be focused in seeking information that allows for an accurate pursuit of rationality.
2. “The failure of people to act in a fully rational way, but these departures … idea of rationality or its demands should themselves be modified” <ref> Sen, Amartya. Idea of Justice. Penguin Group, 2009 </ref>

According to both of these subjects, an individual’s focus on information may be due to the lack of resources they are given based on life circumstances. These resource factors include many different things. Factors such as sickness, access to education, gender, and most importantly time constraint. Essentially variations of these capabilities stunt the growth of an individual from making certain rational choices. In much simpler terms, if a man has no time to gain certain kinds of information then it will be hard for him to make such rational choices. However, on the contrary, Sen does mention another form of rationality behavior. The sense of rationality may appear to be irrational for some. Inside this idea, Sen discusses the notion of irrationality and how it may appear to others. For instance “what appears to others as hugely irrational and even downright stupid might not actually be so inane” <ref>Sen, Amartya. Idea of Justice. Penguin Group, 2009</ref> The idea is that if someone displays imprudent behavior based on reasoning of their consensus, then it may be rational according to them; but it may be considered irrational to others. This display of rational behavior is due to the lens of the impartial spectator (a term used by Adam smith in the early 1700’s) <ref>Smith, Adam. Theory of Moral Sentiments. n.d.</ref>. The nature of these conclusions is to understand that these lenses either stem from personal expectations or through acceptance by the institutions.

What are the demands of Rational Choice?

Sen answers this question in a more careful way than most economists. Sen noted the popular answer that most people think of, which is the sole motive of self-interest. However, Sen states that the rational choice theory can arise due to self-interest maximization, but also reason beyond the rational choice. For example, agents may not act self interested if there is no actual choice, because an actual choice is not a rational choice. So, it must be that agents can arrive at a choice even going through the motions of rationality. The following scenario represents an easier way to understand this concept:

Team A is down by two points in a basketball game with five seconds on the clock. Team A has one timeout left and if they call it they will advance the ball into the half court to save time running up the full court length. However, Team A decides to skip out on the timeout and rush the ball up the full court length to throw off the defense of Team B.

The rational choice in this scenario will be to call the timeout to advance the ball into the half court because there will be a better shot selection given the fact that two seconds will be saved from running it up through the full court. In this case, the rational choice has a self interest for Team A because this gives them time to intelligently draw up a play and execute it. The actual choice for Team A was to skip the timeout, but because of that choice this has less of a self-interest motive to it because the chances of winning the game or tying it are very slim compare to taking a timeout. This actual choice differs from rational choice by the lack of benefits team A can gain from their actual choice.

J.S. Mill and Sen

J.S. Mill

J.S. Mill (May 20, 1806 – May 8, 1873) was a British economist who, in addition to making significant contributions to the field of political economy, focused on the liberties of the individual versus the control of the state.<ref name="MillAndSen">MOZAFFAR QIZILBASH (2006). Capability, Happiness and Adaptation in Sen and J. S. Mill. Utilitas, 18, pp 20-32</ref>.

Differences Between Mill and Sen

While both Sen and Mill are both strong proponents of individual liberties, differences do exist between their works. To Mill, happiness plays a central role in determining the degree of liberty that an individual possesses. Happiness is defined as a the degree to which one enjoys "pleasure and the absence of pain" and unhappiness as the degree to which one suffers "pain and the privation of pleasure"<ref name="MillAndSen">MOZAFFAR QIZILBASH (2006). Capability, Happiness and Adaptation in Sen and J. S. Mill. Utilitas, 18, pp 20-32</ref>. Mill believes happiness to be a key measure of quality of life. While Sen is also concerned with quality of life as a measure of capabilities, he places little emphasis on happiness as a useful measure of capability.

Similarities Between Mill and Sen

Mill and Sen are both proponents for the improvement of capabilities - that is, the power of human beings to improve their lives and pursue the lifestyles and careers that they desire. Both Mill and Sen have written extensively on the issue of inequality impacting the capabilities of women. In a paper titled Missing Women - Revisited, Sen argued that up to 100 million "missing women" had disappeared due to glaring inequalities regarding access to resources such as healthcare and education as well as employment opportunities. In the article, he posits that "sex selective abortions" have played a significant role in the disappearance of women in his native India.<ref name="MissingWomenRevisited">Missing Women-Revisited: Reduction In Female Mortality Has Been Counterbalanced By Sex Selective Abortions, Amartya Sen, BMJ: British Medical Journal, Vol. 327, No. 7427 (Dec. 6, 2003), pp. 1297-1298</ref>. Similarly, Mill noted in The Subjection of Women that women are disadvantaged in terms of their accessibility to "higher social functions" that are made accessible by education. He was clearly dissatisfied with the inequalities existing between the capabilities of men and women, and expressed a desire for women to be "brought up equally capable of understanding business, public affairs, and the higher matters of speculation, with men." While is it clear that Mill is cocnerned with women's capabilities, he is addressing the inequality in terms of education-given abilities as opposed to Sen's focus on accessibility of opportunities<ref name="MillAndSen">MOZAFFAR QIZILBASH (2006). Capability, Happiness and Adaptation in Sen and J. S. Mill. Utilitas, 18, pp 20-32</ref>. Specific focuses aside, both Mill and Sen are clearly concerned with the capability of human beings to pursue freedom and success. Neither thinker believes that one race, sex, or ethnicity is any more "capable" than another, simply that socioeconomic conditions often prevent economic actors from realizing their full potential.

Adam Smith and Sen

Adam Smith

Carlyle v Sen

Thomas Carlyle

References

<references/>

<ref>Inequality Reexamined, Amartya Sen, Harvard University Press, 1992.</ref>

Poverty, inequality and health : an international perspective Leon, David A.

The political economy of hunger : selected essays Drèze, Jean.

On ethics and economics Sen, Amartya Kumar. Specifically on Welfare and Human choice.

The Secret History of the Dismal Science Series Leavy, David M, Peace, Sandra J

Robeyns, Ingrid, "The Capability Approach", The Stanford Encyclopedia of Philosophy (Summer 2011 Edition), Edward N. Zalta (ed.), forthcoming URL = <http://plato.stanford.edu/archives/sum2011/entries/capability-approach/>.

generate citations:

http://www.unicef.org/socialpolicy/files/Human_Rights_and_Capabilities.pdf