Table of Contents

The Elgar Companion to Social Economics, Second Edition

The Elgar Companion to Social Economics, Second Edition

Edited by John B. Davis and Wilfred Dolfsma

Social economics is a dynamic and growing field that emphasizes the key roles social values play in the economy and economic life. This second edition of the Elgar Companion to Social Economics revises all chapters from the first edition, and adds important new chapters to reflect the expansion and development of social economics. The expert contributions explain a wide range of recent developments across different subject areas and topics in the field, mapping out possible directions of future social economic research. Social economics treats the economy and economics as embedded in a web of social and ethical relationships. It considers economics and ethics as essentially connected, and adds values such as justice, fairness, dignity, well-being, freedom, and equality to the standard emphasis on efficiency. This book will be a leading resource and guide to social economics for many years to come.

Chapter 10: Capabilities and wellbeing

Irene van Staveren

Subjects: business and management, business ethics and trust, economics and finance, institutional economics, methodology of economics, public sector economics, social policy and sociology, economics of social policy


The capability approach (CA) has been initiated and guided by Amartya Sen since the 1980s as an alternative to neoclassical welfare economics. The approach emerged gradually out of his rich critique of mainstream economics, in particular his dissatisfaction with conventional notions of rationality (e.g. in Rational Fools, Sen, 1977), efficiency (e.g. in Impossibility of a Paretian Liberal, Sen, 1970), utility (e.g. in On Ethics and Economics, Sen, 1987), wellbeing (e.g. in Development as Freedom, Sen, 1999), and justice (e.g. in The Idea of Justice, 2009). Arising out of this critique, the CA can be characterized as an alternative approach to the analysis of poverty and wellbeing, one that has tried to find a middle ground between purely subjective theories of wellbeing on the one hand, such as the preference-based neoclassical paradigm, and, on the other hand, purely objective theories focusing on goods or, a bit less objective, needs. In the CA, it is people’s capabilities to function that is the central focus of wellbeing analysis – in other words, what people are able to be or do, rather than what they have in terms of income or commodities. This chapter will show that, methodologically, the CA differs from neoclassical economics in some important ways. Most basically, the CA replaces utility with capabilities as the relevant informational space for analysis, and it substitutes a conception of rationality as utility maximization with the notion that people choose ‘what they have reason to value’ in order to lead a flourishing life.

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