Thursday, July 26, 2012

Amartya Sen And The Second Phase Of The Classical Revival

Adam Smith and David Ricardo exemplify classical economics. Economists lost and forgot many good ideas in classical economics with the advent of marginalism.

The first phase of the classical revival clarified the classical theory of value and distribution. Scholars achieved this clarification by building on Piero Sraffa's work. Amartya Sen, a student of Maurice Dobb, Piero Sraffa, and Joan Robinson, has commented (e.g., Sen 1974, Sen 2003) a couple of times on Sraffa. He's even had something appreciative to say of the labor theory of value.

Ricardo and Smith have different writing styles, with Ricardo more formal and Smith treating a wider range of material. Furthermore, the theory of value and distribution is only a component, albeit an essential one, of classical economics. In Smith, individuals are not exclusively self-interested utility-maximizers. They exhibit a variety of types of motivations, including sympathy and a regard to social conventions. Furthermore, Smith's statements cannot be partitioned into statements of facts and statements of values. Smith's judgements on what is desirable are multidimensional, not based solely on increasing, for example, income per head.

I have been reading Sen's Development as Freedom and related literature. Like Smith, Sen treats a wider ranges of ideas than are dealt with in the classical theory of value. Sen argues that economic development must be considered along many dimensions, not just income per head. Some of the goals he considers, such as the empowerment of women, are good in themselves. But his consideration of the interconnected instrumental roles of many of these goods provides a rich empirical research program. As examples, I cite the role of decreased income inequality in raising life expectancy, the role of democracy of preventing famine even when crops fail, and the role of increased female literacy in decreasing infant mortality for girls.

Vivian Walsh, while drawing on Hilary Putnam, points out that facts, values, and conventions are, as in Smith, impossible to separate in Sen's work. He looks to Sen as exemplifying the "second phase" of a revival of classical economics. This second phase is less formal than the first, and it treats a wider range of issues.

Perhaps a historian of ideas would find it of interest to research Wittgenstein's role in all of this. Putnam drew on the later Wittgenstein in developing his pragmatic anti-dualism. And, of course, Wittgenstein acknowledges Sraffa's influence. Perhaps a study along these lines would strengthen claims of the complementary nature of Sraffa's and Sen's economics.

(I want to recall that I have commented before on a limited amount of Sen's early work on choice. I also want to recall Daniel Little's post on the second phase of the classical revival.)

(It seems to me that Sen's work already answers the concerns raised in some recent discussions of propertarian confusions about freedom.)

  • Nuno Martins (2011). "The Revival of Political Economy and the Cambridge Tradition: From Scarcity Theory to Surplus Theory" Review of Political Economy, V. 23, N. 1 (January): pp. 111-131
  • Hilary Putnam (2004). The Collapse of the Fact/Value Dichotomy and Other Essays, Harvard University Press. [To read.]
  • Hilary Putnam and Vivian Walsh (2009). "Entanglement through Economic Science: The End of a Separate Welfare Economics", Review of Political Economy, V. 21, N. 2 (April): pp. 291-297.
  • Hilary Putnam and Vivian Walsh (editors) (2011). The End of Value-Free Economics, Routledge. [To read; a collection that includes some of my other references.]
  • Amartya Sen (1974). "On Some Debates in Capital Theory", Economica, V. 41, Iss. 163 (August): pp. 328-335.
  • Amartya Sen (1997a). "Maximization and the Act of Choice", Econometrica, V. 65, N. 4 (July): pp. 745-779.
  • Amartya Sen (1997.) "Dobb, Maurice Herbert", in The New Palgrave: A Dictionary of Economics (ed. by J. Eatwell, M. Milgate, and P. Newman), Macmillan Press.
  • Amartya Sen (1999). Development as Freedom, Alfred A. Knopf.
  • Amartya Sen (2003). "Sraffa, Wittgenstein, and Gramsci", Journal of Economic Literature, V. 41 (December): pp. 1240-1255.
  • Amartya Sen (2005). "Walsh on Sen after Putnam", Review of Political Economy, V. 17, N. 1 (January): pp. 107-113
  • Amartya Sen (2010). "Adam Smith and the Contemporary World", Erasmus Journal for Philosophy and Economics, V. 3, Iss. 1 (Spring): pp. 50-67.
  • Vivian Walsh (2000). "Smith After Sen", Review of Political Economy, V. 12, No. 1.
  • Vivian Walsh (2003). "Sen After Putnam", Review of Political Economy, V. 15, No. 3 (July).
  • Vivian Walsh (2008). "Freedom, Values and Sen: Towards a Morally Enriched Classical Economic Theory", Review of Political Economy, V. 20, N. 2 (April): pp. 199-232.


Matias Vernengo said...

I've read awhile ago Sen's book (Development as Freedom). Not sure I would classify it as being part of the surplus approach, as say Bharadwaj's writings on Indian development (or Bhaduri's), to suggest someone that was more directly influenced by Sraffa. Also, the capabilities approach seem to be directly connected to the mainstream preoccupation with "human capital." I tend to be more interested in the problems of transforming the structure of production in backward countries, and the role that income distribution, and demand expansion, in the context of late capitalism (meaning technologically backward that must import capital goods and faces external constraints).

Robert Vienneau said...

Matias, I almost always agree with you. I'm still mulling over Sen.

I agree that "human capital" is not a good metaphor. I think Sen talks more about "social capital", also not a good metaphor.

I assume you would agree that value theory is only a part of classical economics. And that, if the surplus approach is to continue, broader issues must be addressed by those working in that tradition.

In addition to, say, Bharadwaj, I would cite Paolo Syls Labini as an economist who worked in an applied field and was strongly influenced by Sraffa.

Matias Vernengo said...

Yes, you are correct about social capital. A great book, and very critical of the social capital concept, is Ben Fine's "Social Capital versus Social Theory." And sure I agree that other things are essential for a broader surplus approach view of development issues. Some structuralists are essential, and I would argue that Celso Furtado, in particular (he wrote his classic book on Brazilian growth, while on sabbatical at Cambridge and was good friend with Kaldor, Sraffa and Garegnani), is an example of that broader perspective on development.

Nuno Martins said...

Note that Sen also writes that "We must go beyond the notion of human capital" (Development as Freedom, OUP, page 296), since it focuses only on the instrumental role of freedom, and not on its constitutive role (that is, it misses that freedom is also constitutive of human well-being, and not just an instrument to reach it). I think Sen's point is actually to go beyond the notion of "human capital" towards the broader notion of "human capability". As for the relation of Sen to the surplus approach, I think we have to separate between what Pierangelo Garegnani called the "core", and Luigi Pasinetti called "pured theory", from what he called "institutional analysis", in order to then see how each stage of the revival of classical political economy fits into surplus theory. I try to argue this in more detail in the last issue of the Journal of Economic Methodology (an issue which has an article by Sen as the leading article, and is entirely on Sen's approach to justice). By the way, congratulations to both for your excellent blogs.

Robert Vienneau said...

Thanks for the comments.

windwheel said...

Putnam's anti-dualism has the unfortunate effect of erasing the distinction between instrumental or heuristic values and absolute values. Thus, though a Mathematician may feel a conjecture is right because it is elegant, he abandons it if it is shown to be wrong. A dandy, however, who prizes elegance absolutely, is prepared to die rather than protect himself properly from inclement weather.
Sen distinguishes between meta-preferences and ordinary revealed preference, and also distinguishes second order from first order public goods but does not have a theory to explain why the one should not crowd out the other with perverse effects. Similarly his distinction between instrumental and constitutive capabilities does not prompt him to consider how the latter may perversely crowd out the latter.
Rawls has said that his sort of analysis only becomes relevant above some threshold of prosperity. India has not passed that threshold.
Indian disappointment with Sen, Bharadway et al arises from the manner in which they collaborated with a corrupt hypocritical power elite from some imaginary holier-than-thou vantage point of greater empathy for the suffering masses.
Sen, actually a right wing High Caste male disguised as Mother Theresa, blamed the Bengal famine on factory workers using their high wages to buy and eat ten times as much rice as the poor peasants- something which is physically impossible. Sen couldn't blame the elected Govt. of Bengal because it happened to be Muslim League and Sen is a Hindu.
Sen's work- showing things like
the role of decreased income inequality in raising life expectancy, the role of democracy of preventing famine even when crops fail, and the role of increased female literacy in decreasing infant mortality for girls- is entirely specious in the Indian context for those who actually live and work there. What it does is breed an outrageous type of complacency and give rise to corrupt Credentialized Rent seeking by a vocal-all-too-vocal High Caste elite.