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On Economic Inequality$

Amartya Sen

Print publication date: 1973

Print ISBN-13: 9780198281931

Published to Oxford Scholarship Online: November 2003

DOI: 10.1093/0198281935.001.0001

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A.7.1 Inequality, Welfarism, and Justice

A.7.1 Inequality, Welfarism, and Justice

On Economic Inequality
Oxford University Press

Much of this annexe has been concerned with inequality of incomes, but income is only one factor among many that influence the real opportunities people enjoy. For example, person A may be richer than person B in terms of income, and yet be more ‘hard up’ than B if a big part of her income has to go for medical attention she needs because of some chronic illness. The real opportunities that different persons enjoy are very substantially influenced by variations of individual circumstances (e.g., age, disability, proneness to illness, special talents, gender, maternity) and also by disparities in the natural and the social environment (e.g., epidemiological conditions, extent of pollution, prevalence of local crime). Under these circumstances, an exclusive concentration on inequalities in income distribution cannot be adequate for an understanding of economic inequality.

The importance of interpersonal variations in converting income into utility did receive some attention in OEI‐1973. Indeed, this consideration was used in criticizing utilitarianism for its exclusive concentration on the sum total of utilities, ignoring the distribution of utilities (pp. 15–23, 43–6, 77–87). It was also the basis of the ‘weak equity axiom’ proposed there. But the interpersonal variations are important even if we do not try to judge equity or justice through the utility space (i.e., even if we do not adopt what is called a ‘welfarist’ approach). There is indeed an important general problem, central to the theory of justice, of interpersonal variations in converting incomes (and other external resources) into individual (p.196) advantage—whether or not that advantage is judged by the level of utility of the person (on this see Sen 1980, 1992).

At the time OEI‐1973 was being written, some basic principles of the theory of justice were under active reconsideration, following the lead given by the pioneering work of John Rawls (1958, 1971).122 One aspect of the Rawlsian move was extensively pursued in OEI‐1973, to wit, the egalitarian arguments reflected in Rawls's ‘maximin’ criterion (and in the ‘lexicographic’ version of it, proposed in Sen 1970a and accepted by Rawls 1971).123 The valuing of equality in the utility space led to systematic departures from the sum‐ranking tradition of utilitarian welfare economics.124 There was an attempt in OEI‐1973 to combine the consideration of efficiency issues with a concern for inequalities in the distribution of utilities.

However, the fuller structure of Rawls's theory of justice also involved:

  1. (1) a foundational reasoning that invoked the idea of ‘fairness’, related to the procedure of the ‘original position’ used by Rawls;125 and

  2. (2) a denial of the unique status of utilities in judging individual advantage, which was a shared characteristic of utilitarian ethics and traditional welfare economics.

Even though Rawls himself did not put it this way, his arguments (p.197) amounted to a fundamental critique and rejection of welfarism (going much beyond the spurning of the utility sum as the basic criterion of decisions, as under utilitarianism, which is only one specific form of welfarism).126

Rawls's ‘difference principle’ entailed giving priority not necessarily to the least happy, but to the least advantaged, and in the Rawlsian way of reckoning, least advantage was identified with having the lowest index value of ‘primary goods’.127 Primary goods are general‐purpose means that help anyone to promote their ends, and include ‘rights, liberties and opportunities, income and wealth, and the social bases of self‐respect’ (Rawls 1971, pp. 60–5). The concentration on primary goods in the Rawlsian framework related to his view of individual advantage in terms of the opportunities the individuals enjoy to pursue their respective objectives. Rawls saw these objectives as the pursuit of individual ‘conceptions of the good’, which would vary from person to person. If, despite having the same basket of primary goods as another (or having a larger basket), a person ends up being less happy than the other person (e.g., because of having expensive tastes), then no injustice need be involved in this inequality in the utility space. A person, Rawls argued, has to take responsibility for her own preferences.128

The choice of ‘space’ in which to judge inequality has been (p.198) a matter of some active discussion in recent years.129 In a paper called ‘Equality of What?’ (Sen 1980), it has been argued that for many purposes, the appropriate space is neither that of utilities (as claimed by welfarists), nor that of primary goods (as demanded by Rawls). If the object is to concentrate on the individual's real opportunity to pursue her objectives, then account would have to be taken not only of the primary goods the person holds, but also of the relevant personal characteristics that govern the conversion of primary goods into the person's ability to promote her ends.130 For example, a person who is disabled may hold a larger basket of primary goods and yet have less chance to pursue her objectives than an able‐bodied person with a smaller basket of primary goods. Similarly, an older person or a person more prone to illness can be more disadvantaged in a generally accepted sense even with a larger bundle of primary goods.131

It is important to emphasize that focusing on the quality of life, rather than on income or wealth, or on psychological satisfaction, is not new in economics. Indeed, as argued in Sen (1987a, 1987b), the origin of the subject of economics was strongly motivated by the need to study the assessment of, and causal influences on, the conditions of living. The motivation is stated explicitly, with reasoned justification, by Aristotle (both in Nicomachean Ethics and in Politics), but it is also strongly reflected in the early writings on national accounts (p.199) and economic prosperity by William Petty, Gregory King, François Quesnay, Antoine Lavoisier, Joseph Louis Lagrange, and others. While the national accounts devised by these pioneers established the foundations of the modern concept of income, the focus of their attention was never confined to this one concept. Nor did they see importance of income to be intrinsic and uniform, rather than being instrumental and circumstantially contingent.132


(122) Aside from Rawls's works, there were strong influences from the writings on justice of a number of contemporary authors, in particular Harsanyi (1955), Hart (1961), Hare (1963), Suppes (1966), and Kolm (1969). Sen (1970a), which preceded OEI‐1973, was also much concerned with the theory of justice.

(123) Different types of axiomatizations of ‘lexicographic maximin’ (sometimes called ‘leximin’) and alternative forms of the underlying ‘equity preference’ can be found in Hammond (1976, 1979), d'Aspremont and Gevers (1977), Arrow (1977), Sen (1977), Gevers (1979), Maskin (1979), Roberts (1980), Blackorby, Donaldson, and Weymark (1984), and d'Aspremont (1985).

(124) Phelps (1973) presented a valuable set of economists' responses to the Rawlsian theory of justice, concentrating particularly on the departure from sum ranking to maximin and its lexicographic version.

(125) The ‘original position’ is an imagined state in which people choose the basic structure of the society without knowing who they were going to be (thereby avoiding bias in favour of their own vested interests), and this primordial equality helps to make the chosen rules ‘fair’.

(126) The denial of welfarism was reflected both in Rawls's (1958, 1971) first principle of justice, which gave priority to liberty, and in his second principle, including the requirement that the maximin formula be applied not to individual utilities, but to individual holdings of ‘primary goods’. In fact, the non‐welfarist foundations of the Rawlsian system also differentiate it sharply from John Harsanyi's earlier derivation of utilitarianism from a thought experiment rather similar to the ‘original position’ (on this see Harsanyi 1955, 1976). See also Vickrey (1945).

(127) An alternative approach to assessing inter‐individual inequality is to utilize the notion of ‘envy’ that one person may have reasons to feel vis‐à‐vis another, owing to the latter's more advantageous circumstances. On this basic approach and on the concept of ‘envy free‐ness’, see Foley (1967), Varian (1975), Baumol (1986), and Young (1994), among other contributions.

(128) In a related line of argument, Dworkin (1981) has argued for ‘equality of resources’, broadening the Rawlsian coverage of primary goods to include insurance opportunities to guard against the vagaries of ‘brute luck’.

(129) See Sen (1980, 1985a, 1992), Dworkin (1981, 1985), Rawls (1982, 1993), Roemer (1982, 1986, 1993, 1996), Streeten (1984, 1995), Griffin (1986), Erikson and Aberg (1987), Nussbaum (1988, 1993), Arneson (1989, 1990), Cohen (1989, 1990, 1995), Griffin and Knight (1990), Dasgupta (1993), Desai (1994), Crocker (1996), Walsh (1996), among other contributions.

(130) A person does have some opportunity of changing the ‘conversion’ relations, for example by cultivating special tastes, or by learning to use resources better. But nevertheless there are limits that constrain the extent to which such shifts can be brought about (e.g., in the case of disability or illness or old age).

(131) On the nature and pervasiveness of such variability, see Sen (1980, 1985b, 1992). The problem of different ‘needs’ considered in OEI‐1973 relates to this general issue. On the relevance of taking note of disparate needs in resource allocation, see also Ebert (1992, 1994), Balestrino (1994, 1996), Chiappero Martinetti (1994, 1996), Fleurbaey (1994, 1995a, 1995b), Granaglia (1994), Balestrino and Petretto (1995), Shorrocks (1995b), among other contributions.

(132) For example, the focus of attention of William Petty, who had experimented both with the income method and the expenditure method in estimating national income, included ‘the Common Safety’ and ‘each Man's particular Happiness’. Petty's explicitly stated objective for undertaking his study related directly to the assessment of the condition of living of people, and combined scientific investigation with a motivating does of seventeenth century politics (‘to show’ that ‘the King's subjects are not in so bad a condition as discontented Men would make them’). That robust tradition has been systematically pursued in the contemporary economic literature on ‘minimum needs’, ‘basic needs’, and related concepts; see Pigou (1952), Adelman and Morris (1973), Sen (1973b), Herrera (1976), Grant (1978), Morris (1979), Streeten et al. (1981), Streeten (1984, 1994, 1995), Stewart (1985), UNICEF (1987), UNDP (1990, 1995), Desai, Sen, and Boltvinik (1992), Dasgupta (1993), Desai (1994), and Haq (1995), among others. UNDP's Human Development Reports in particular provide regular coverage of important aspects of ‘human development’ in many countries of the world.