Capability Approach

The capability approach (also referred to as the capabilities approach) was initially conceived in the 1980s as an approach to welfare economics. In this approach, Amartya Sen brought together a range of ideas that were hitherto excluded from (or inadequately formulated in) traditional approaches to the economics of welfare. The core focus of the capability approach is on what individuals are able to do (i.e., capable of).

Initially Sen argued for five components in assessing capability:

1. The importance of real freedoms in the assessment of a person's advantage
2. Individual differences in the ability to transform resources into valuable activities
3. The multi-variate nature of activities giving rise to happiness
4. A balance of materialistic and nonmaterialistic factors in evaluating human welfare
5. Concern for the distribution of opportunities within society

Subsequently, and in collaboration particularly with political philosopher Martha Nussbaum, development economist Sudhir Anand and economic theorist James Foster, Sen has helped to make the capabilities approach predominant as a paradigm for policy debate in human development where it inspired the creation of the UN's Human Development Index (a popular measure of human development, capturing capabilities in health, education, and income). In addition, the approach has been operationalised with a high income country focus by Paul Anand and colleagues. Furthermore, since the creation of the Human Development and Capability Association in the early 2000s, the approach has been much discussed by political theorists, philosophers and a range of social sciences, including those with a particular interest in human health.

The approach emphasizes functional capabilities ("substantive freedoms", such as the ability to live to old age, engage in economic transactions, or participate in political activities); these are construed in terms of the substantive freedoms people have reason to value, instead of utility (happiness, desire-fulfillment or choice) or access to resources (income, commodities, assets). Poverty is understood as capability-deprivation. It is noteworthy that the emphasis is not only on how human beings actually function but also on their having the capability, which is a practical choice, to function in important ways if they so wish. Someone could be deprived of such capabilities in many ways, e.g. by ignorance, government oppression, lack of financial resources, or false consciousness.

This approach to human well-being emphasizes the importance of freedom of choice, individual heterogeneity and the multi-dimensional nature of welfare. In significant respects, the approach is consistent with the handling of choice within conventional microeconomics consumer theory although its conceptual foundations enable it to acknowledge the existence of claims, like rights, which normatively dominate utility-based claims (see Sen (1979)).