Development As Freedom

Sen believes people can change the world through rational choices. This requires a framework to evaluate options, institutions to further goals and values, and behavioral norms that fit these ends. Yet, many skeptics challenge the possibility of rationally shaping the world in this way. Some question the possibility of society agreeing on a common evaluative framework. Kenneth Arrow has mathematically demonstrated this in his “impossibility theorem” that a ranked-choice voting system—in which people decide between more than two options by ranking preferences—always has the possibility of leading to inconsistent outcomes with decreased happiness. To simplify, the preference of the majority may come at the expense of the minority, like two people deciding to split a cake between themselves while giving nothing to the third. However, Arrow’s theorem doesn’t account for decision-making that incorporates a different informational base beyond simple ranked preferences—that is, concerns about poverty and equality. More generally, diverse opinions can be overcome by gradually building social consensus. Many rational decisions can be implemented even with imperfect consensus.

Other skeptics point to the pervasive influence of unintended consequences. Sen says that people have learned from failures and accomplished many things they did intend, such as improving literacy. China’s economic and social planning has spawned some negative unintended and unforeseen consequences, such as a rise in the deaths of female children; but the fact that they did not foresee these consequences does not mean they could not have anticipated them. Such unintended consequences can be remedied as they arise. On a more theoretical plane, Adam Smith, who was an ardent critic of the rich, famously noted that people’s selfish economic decisions had effects they did not directly intend on others, but the sum of these effects could lead to greater efficiency and prosperity. Carl Menger and Friedrich Hayek have made this principle central to economics, and some critics argue that this shows rational planning is impossible. The basis of economic analysis, however, is that these unintended consequences are rationally predictable, and therefore, people can shape their choices in light of that knowledge.

The Smithian market assumes that people act out of self-interest, and a final group of skeptics insist that idealistic appeals to values or the common good—even if based in reason—ultimately will not alter people’s naturally selfish behavior. Sen disagrees, arguing that a wide range of scholarship has demonstrated that ideas of justice are already rooted in society and do influence behavior. Even capitalism works in part because people accept norms about negotiations and contracts that do not need to be litigated in every deal; it relies on a degree of trust and transparency. Regions that are newly adopting capitalism—such as Eastern Europe—have struggled to build up those behavioral norms in business. Capitalist values are not sufficient in themselves to deal with some public goods, such as clean air and water; but they may be compatible with it, especially when taking Adam Smith’s call for regulation to rein in “prodigals,” or the rich who waste wealth rather than investing it in socially or economically useful ways.

“Rational choice” should not be reduced to self-interest. A person may rationally choose to help others out of sympathy or out of commitment to principles such as justice. Adam Smith himself acknowledged the importance of these higher motivations that may lead someone to choose an action that requires sacrifice: That is, to act against their apparent self-interest. People may follow values due to several factors: their own reasoning, social convention, or the influence of public discussion. Evidence also suggests behavioral systems that value justice lead to greater economic prosperity, and therefore, may be more likely to survive and spread in a kind of evolutionary selection. Corruption, for example, can be fought by trying to remove the economic incentive to accept bribes or increasing punishments for doing so. However, the most effective way of eliminating corruption and its negative effects on economic growth is changing behavioral norms. Countries with low rates of corruption have established norms of behavior in their culture, and as a result, many officials do not even consider selling their power. Creating such established norms is no easy task, but the appearance of these norms in countries where they did not previously exist proves that they can grow over time. Refusing bribes, in these cases, comes out of cultural values rather than self-interest, and it rationally leads to a better society and economy. Self-interest does not explain all behavior.