The Elgar Companion to Social Economics
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The Elgar Companion to Social Economics

Edited by John B. Davis and Wilfred Dolfsma

As this comprehensive Companion demonstrates, social economics is a dynamic and growing field that emphasizes the key role that values play in the economy and in economic life. Social economics treats the economy and economics as being embedded in the larger web of social and ethical relationships. It also regards 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. The Elgar Companion to Social Economics brings together the leading contributors in the field to elucidate a wide range of recent developments across different subject areas and topics. In so doing the contributors also map the likely trends and directions of future research. This Companion will undoubtedly become a leading reference source and guide to social economics for many years to come.
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Chapter 9: Capabilities and Well-being

Irene van Staveren


Irene van Staveren Introduction The capability approach (CA) was 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’, 1977), efficiency (e.g. in ‘The impossibility of a Paretian liberal’, 1970), utility (e.g. in On Ethics and Economics, 1987), and well-being (e.g. in Development as Freedom, 1999). Arising out of this critique, the CA can be characterized as an alternative approach to the analysis of poverty and well-being, one that has tried to find a middle ground between purely subjective theories of well-being 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 well-being 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. Hence the whole utilitarian basis of neoclassical analysis is...

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