43. Relating to Sen, Galbraith and Cox & Alm
Sen: “Development as freedom”
When Amartya Sen writes a book, it is likely a useful one. Sen (1999a) will help economists to refocus on freedom instead of income, as Hayek once tried but failed to convince. Sen admits that his message is not new (see p289). But when it has been forgotton, or told unconvincinly, then it sounds pretty new.
One of the prime reasons why Sen is convincing, is that he makes the connection with Adam Smith’s ‘sympathy’ argument. Sen is both liberal and social, and presents freedom as a private and social goal. Hayek often got out of touch with ‘sympathy’, or at least allowed that reputation to grow.
One of the prime reasons why economists have been seduced to put income before freedom is pure pragmatism. Income is a quick and dirty variable - and by itself already hideously complex to properly administrate and monitor. Income tax laws and the execution of them require huge bureaucracies. Price index measurements are a monk’s paradise. Maintenance of fair incomes requires extensive labour relations and social security laws. And this is just simple income.
If we would look at the freedoms, then we get unobserved variables, their unobserved shadow prices, and a proliferation of equity questions. While we seem to have gotten used to a concept like the ‘income distribution’, we draw a blank with a ‘freedom distribution’. The issue of the (im)possibility of utility comparison comes strongly to the fore again - and the question again arises whether ‘utility’ is a proper concept in the first place anyway.
The fact that income is such a pragmatic variable however does not absolve economists from their task of thinking about the proper meaning of, and means for, The Good Life. While it certainly may take some centuries more to solve most of the Grand Problems of the ‘freedom distribution’, in the short run economists still need to think on the matter.
One of the most powerful arguments in Sen’s book is that he shows that some policies are clearly misguided from a freedom point of view: So that we don’t need Grand Solutions to start correcting some errors already. Where developing countries experience problems providing for basic freedoms, there we find that many of these already have been solved to some extent, namely in the Western nations.
Sen slowly but systematically demolishes the ‘different cultures’ arguments, and shows that these cannot be used to withhold basic freedoms. The idea, so popular in the West - and a reference is Barro (1996) - that poor countries first need to develop up to a certain income level, before they can afford e.g. democracy, is a contradiction in terms, a serious error of judgement, and a disaster for the billions of paupers concerned: for they are denied their freedoms and thus will remain poor and underdeveloped for much longer. The pitfall for (regression) analysts like Barro (1996) is that they take income as the prime target, and investigate whether ‘more freedom’ correlates with ‘more income’, presuming that the latter is the most interesting. But when the true variable is The Good Life - also defined by a low infant mortality or the absence of famines - and when it can be shown that it requires a certain level of democracy if such horrors as famines are to be prevented, then such (regression) analyses are terribly misguided.
Perhaps this summary does injustice to the intentions of these researchers, but the point is true that there exist such views, and that Sen is only one of the few academics to seriously oppose them.