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8/12/2019 From Income Inequality to Economic Inequality
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From Income Inequality to Economic Inequality
Author(s): Amartya K. SenSource: Southern Economic Journal, Vol. 64, No. 2 (Oct., 1997), pp. 383-401Published by: Southern Economic AssociationStable URL: http://www.jstor.org/stable/1060857 .
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Southern Economic Journal 1997, 64(2), 384-401
Distinguished Guest Lecture
From IncomeInequalityo Economic nequality
AmartyaK. Sen*
1. Introduction
I begin by recountinga truestory-a rather rivialand innocuousstory,as it happens,but
one with somethingof a lesson. Some years ago, when I went to give a lecture at another
campus,I chose "EconomicInequality"as the title of my talk.On arrival, found the campuscovered withpostersannouncing hat I was speakingon "IncomeInequality."When I grumbledaboutit slightly,I encounteredgentle,but genuine,amazement hatI wanted to fuss aboutsuch
"an insignificantdifference." Indeed, the identificationof economic inequalitywith income
inequality s fairly standard,and the two are often seen as effectively synonymous n the eco-
nomic literature. f you tell someone thatyou are workingon economic inequality, t is quite
commonlyassumedthatyou are studyingincome distribution.
This implicit dentification an be found in the philosophical iterature s well. Forexample,in his
interestingand
importantpaper "Equalityas a MoralIdeal,"
HarryFrankfurt
1987),the
distinguishedphilosopher,providesa closely reasonedcritiqueof what he calls economic egal-itarianism,definingit as "the doctrine that there should be no inequalitiesin the distribution
of money" (p. 21).The distinction,however,is important.Manyof the criticisms of economicegalitarianism
as a value or a goal appliesmuch morereadilyto the narrowconceptof income inequality han
it does to the broadernotions of economic inequality.For example, giving a largershareof
income to a personwith more needs, say due to a disability,can be seen as militatingagainstthe principleof equalizing ncomes,but it does not go againstthe broaderpreceptsof economic
equalitysince the greaterneed for economic resources due to the disabilitymust be taken into
account in judging the requirements f economic equality.Well, the subjectof this paper s preciselythe differencebetween economic inequalityand
income inequality.It will be arguedthat we ought to pay much more attentionthanwe con-
ventionallydo to economic inequalityin an appropriately roadsense, takingnote of the fact
that income inequality,on which economic analysis of inequalityso often concentrates,gives
* Department f Economics,HarvardUniversity,231 LittauerCenter,Cambridge,MA 02138, USA.ProfessorAmartyaK. Sen presented he DistinguishedGuest Lectureat the 1996 AnnualMeetingof the Southern
EconomicAssociation n Washington,D.C. ProfessorSen is the LamontUniversityProfessorandProfessorof EconomicsandPhilosophyat HarvardUniversity.Previously,he held professorships t the Delhi Schoolof Economics, he LondonSchool of Economics,and OxfordUniversity.He has served as Presidentof the EconometricSociety, the International
EconomicsAssociation,and the AmericanEconomicAssociation.The paperdraws on my work in a researchprojecton "Inequalityand Povertyin BroaderPerspectives,"with
support romthe MacArthurFoundation.Forhelpfulcomments,I am grateful o SudhirAnand,FabrizioBarca,Andrea
Brandolini,Anne Case, Angus Deaton,JamesFoster,ChristinaPaxson,and Ben Polak.
384
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AmartyaK. Sen, HarvardUniversity,1996 DistinguishedGuest Lecturer.
383
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386 Amartya K. Sen
need more income to fighther illness than a personwithoutsuch an illness would need. While
the compensationneeded for disadvantageswill vary, some disadvantagesmay not be correct-
able even with more expenditureon treatmentor care.
(2) Environmental diversities: Variations n environmentalconditions, such as climaticcircumstances temperatureanges,rainfall,flooding, and so on), can influence what a person
gets out of a given level of income.
(3) Variationsin social climate: The conversion of personalincomes and resources nto
functionings s influenced also by social conditions,includingpublic health care and epidemi-
ology, public educationalarrangements, nd the prevalenceor absence of crime and violence
in the particularocation. Aside from public facilities, the nature of communityrelationshipscan be very important,as the recent literatureon social capitalhas tended to emphasize.4
(4) Differences in relational perspectives: The commodity requirements of established
patternsof behaviormay vary between communities,dependingon conventions and customs.
For example, being relatively poor in a rich communitycan preventa personfrom achievingsome elementary functionings(such as taking partin the life of the community)even thoughher income, in absoluteterms,may be muchhigherthan the level of income at which members
of poorercommunitiescan function with great ease and success. For example, to be able to
"appear n public without shame" may requirehigherstandardsof clothing and other visible
consumption n a richersociety than in a poorerone (as Adam Smith [1776] had noted more
than two centuriesago).5The same parametricvariabilitymay apply to the personalresources
needed for the fulfillmentof self-respect.This is primarilyan intersocietalvariationrather han
an interindividual ariationwithin a given society, but the two issues arefrequentlynterlinked.
(5) Distribution within the family: Incomes earned by one or more members of a family
are sharedby all, nonearnersas well as earners.The family is, thus, the basic unit for consid-
erationof incomes from thepointof view of their use. The well-beingor freedomof individuals
in a family will dependon how the family income is used in furtheranceof the interests and
objectivesof differentmembersof the family.Thus,intrafamilydistribution f incomesis quitea crucial parametricvariable in linking individual achievements and opportunitieswith the
overall level of family income. Distributional ules followed within the family (e.g., related to
genderor age or perceivedneeds) can make a majordifference to the attainmentsandpredic-amentsof individual members.6
3. Illustrations of Contrasts
I have presentedelsewhere empirical examples of differenttypes that illustratethe vari-
ability of the relation between incomes and achievements(Sen 1981, 1985a, 1995a, 1998). I
shall take the libertyof dwelling on a few such illustrations o indicate what kind of contrasts
may be involved.
Figure 1 presentsthe gross nationalproduct(GNP) per head and life expectancyat birth
of six countries(China,Sri Lanka,Namibia, Brazil, SouthAfrica,andGabon)and one sizeable
4See particularlyColeman(1986) andPutnam,Leonardi,and Nanetti(1993).5 See also Runciman 1966) and Townsend(1979) for sociological analysesof the relativistaspectsof well-beingand
achievements.6See Sen (1990) andthe literature ited therein.
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Distinguished Guest Lecture 387
8000
- 747000 -
e 1. GP pr C a (S $) adeE a B 19.- 72
- 706000
68
5000 -- 66
GNP
er apta4000 64 Lifexpectancyo(US)Brazil, , andat Nbiarth (yeariis),
1994 Sen 1981; Dreze and Sen 1989). In terms of inequality analysis, eve1994
3000 -
- 60
2000 58
- 56
1000
0 52UKerala China Sri Lanka Namibia Brazil South Africa Gabon
Figure 1. GNPper Capita US $) andLife Expectancyat Birth,1994. Sources:Countrydata, 1994, WorldBank(1996);
Keraladata,life expectancy,1989-1993, sample registration ystemreported n Goverment of India(1997a); domestic
productper capita,1992-1993, Goverment of India(1997b).
state (Kerala)within a country (India). The income-poorpeople of Kerala or China or Sri
Lankaenjoy enormouslyhigherlevels of life expectancythan do the muchricherpopulations
of Brazil, South Africa, and Namibia,not to mention Gabon. Since life expectancyvariationsrelate to a varietyof economic influences,including epidemiological policies, healthcare,ed-
ucationalfacilities, and so on, the reach of economic opportunitiess much broader han that
of income alone. I have had the occasion to discuss elsewhere how publicpolicies in particularhave been quitecrucialin influencing he qualityof life and longevityof differentpopulations
(see Sen 1981; Dreze and Sen 1989). In terms of inequalityanalysis,even the direction of the
inequality points oppositelywhen we compareKerala, China,and Sri Lankaon one side with
Brazil, SouthAfrica,Namibia,and Gabonon the other.Figures2 and 3 make a related,but differentlyfocused, comparison,bringingin the U.S.
itself. Even thoughthe income per capitaof AfricanAmericans s considerably ower than that
of the American white population,African Americansare of course a great many times richer
in income terms than the people of China or Kerala(even after correctingfor cost-of-living
differences).In this context,it is interesting o compare he survivalprospectsof AfricanAmer-
icans vis-a-vis the immenselypoorerChinese or Indiansin Kerala. Americanblacks do much
betterin terms of survivalat low age groups(particularlyn terms of infantmortality),but the
picturechangesover the years.It turnsout that, in fact, the Chinese and the Keralitesdecisively outlive Americanblack
men in terms of surviving to older age groups.Even Americanblack women end up having
7While Kerala s merely a state rather han a country,nevertheless,with its populationof 29 million, it is largerthan
the majorityof countries n the world.
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388 Amartya K. Sen
0.v
c-
a)
n
.>
cnJ
15 25 35
Age (Years)
45 55 65 75
Figure 2. Variations n Male Survival Rates by Region. Sources:U.S., 1991-1993, U.S. Departmentof Health and
HumanServices (1996); Kerala,1991, Government f India(1991); China, 1992, WHO(1994).
similar survival patterns for high ages as the Chinese and decidedly lower survival rates than
the Indians in Kerala. So it is not only the case that American blacks suffer from relative
deprivation in the income space (vis-a-vis American whites), they are absolutely more deprived
than the much poorer Indians in Kerala and the Chinese (in the case of men) in terms of living
to ripe, old ages. In explaining these differences between living standards judged by income
per head and that judged by the ability to survive to higher ages, a number of causal issues are
relevant (including medical insurance, public health care, elementary education, law and order,
etc.) that are not unrelated to economic policies and programs.8
Figure 4 compares, for different states within India, the values of gross domestic product(GDP) per capita, literacy (female and male), life expectancy at birth (female and male), and
total fertility rate. The last has eventual importance for population growth, but its inclusion here
is mainly for its immediate role, at high levels, as a major restraint on the freedom and well-
being that young women can enjoy when battered by continual bearing and rearing of children.
Since the last is viewed as a negative influence on the quality of life, it is measured in the
opposite (downward) direction from the zero line.
It is readily seen (as can also be confirmed by standard measures of statistical relations)
that the relative values of GDP per capita figures are much at variance with the nonincome
indices of aspects of quality of life (female literacy, male literacy, female life expectancy, male
8On this, see Sen (1993) and also the medical literature ited therein.See also the discussionthatAmericanblack men
from the Harlem districtof rich New Yorkfall (in termsof survival)not only behind the Chinese or the Indians n
Keralabutalso behind the famishedpopulationof Bangladesh.
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Distinguished Guest Lecture 389
105 -
100
. 85 -
E~~~~~~~~~~~~~~~~~~80-
>~~~~~~~,,Kerala, India
-O-U.S. (Black)75 China75 -
70 -
6 5 I I I I I I I
0 5 15 25 35 45 55 65 75
Age (Years)
Figure 3. Variations n Female SurvivalRatesby Region. Sources:U.S., 1991-1993, U.S. Departmentof Healthand
HumanServices (1996); Kerala,1991, Government f India(1991); China, 1992, WHO(1994).
life expectancy, and low fertility rate), which all move very closely together. For example, the
GDP figures would put Haryana and Punjab very much higher than Tamil Nadu and Kerala,
but in terms of aspects of quality of life, exactly the opposite is the case.
As these illustrations exemplify (Figures 1-4) and as can be confirmed by other statistics
(see, e.g., Sen 1985a, 1995a, 1998, and literature cited there), there are substantial differences
between the income-based view and the nonincome indicators of quality of life. Inequality
comparisons will yield very different results depending on whether we concentrate only on
incomes or also on the impact of other economic and social influences on the quality of life.
A further issue, which I shall not take up in this paper (but that I have addressed elsewhere,
particularly in Sen [1997]), concerns the severely negative impact of unemployment, especially
persistent unemployment, on the lives that people can live.9 This is an especially important
issue for the assessment of quality of life and inequality in contemporary Europe. Even though
unemployment benefits and social security may reduce the impact of the extraordinary levels
of high unemployment on European income inequality in particular, the persistence of unem-
ployment leads to many other kinds of deprivation (see Sen 1997 and literature cited therein)
that are not reflected at all in the income statistics. An over-concentration on income inequality
alone has permitted greater social and political tolerance of unemployment in Europe (and even
some economic smugness vis-a-vis the achievement of low unemployment levels in the U.S.)that cannot be justified if a broader view of economic inequality is taken.
9See DarityandGoldsmith 1993), Goldsmith,Veum,andDarity(1996), and the literature ited therein.
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390 Amartya K. Sen
10000- - 100
800050
6000
per
capita,
Rs/year 4000
aaco ao co a B
<: a
IF '2
Per-capitanetstate GDP at current rices,1991-2(Rs/year)-+- Lifeexpectancyat birth, 990-2(years):Female
-+- Lifeexpectancyat birth, 990-2(years):Male -o-- Literacyate,age 7+, 1991(%):Female
-0- Literacy ate,age 7+, 1991(%):Male -,- Total ertilityate,1991
Figure 4. Selected Indicators for Indian States. Source: Dreze and Sen (1995, Table A.3)
4. Interpersonal Utility Comparisons and Inequality
The illustrations ust presentedof contrast between income and achievementdeal with
particular lasses of indicatorsof qualityof life (longevity, survival,literacy, fertility,employ-ment status).'? llustrations an also be providedto exemplifyvariability n the relationbetween
income and other substantiveachievementssuch as being healthy, being well-nourished, aking
partin the life of the community,and so on.
Theacceptanceof variabilitybetween income andachievement s not, however,anadequate
groundfor a definitiverejectionof income inequalityas the center of our attention n inequalityassessment-without consideringwhether an alternativeapproachwould be workable and sat-
isfactory. Practicaleconomics, no less than politics, is the art of the possible, and that issue
remains,even when the need for going beyond income inequalityis well accepted.Can we
really get an alternative,practicallyusable approachbased on the broader concentrationon
functioningsrather han incomes?
Before takingon this issue fully, I would like to examine a relatedquestion, proposinga
different alternative o the focus on incomes. Are we not likely, it may be sensibly asked, to
be servedbetterby optingfor a more familiarnotion,like utility,in shifting away from income
inequality? Why not the inequalityof utilities as the central focus of attentionfor inequality
analysis?Indeed,just such a focus has been proposedandelegantlyexplored alreadyby James
10These variables have played substantial roles, under the visionary leadership of Mahbub ul Haq (and now Richard
Jolly), in Human Development Reports of the United Nations (see, for example, UNDP 1990, 1995, 1997), with which
I have been privileged to be associated; see also Anand and Sen (1995, 1997).
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DistinguishedGuest Lecture 391
Meade (1976) in his explorationof "the just economy." So the utility-basedevaluation of
inequality should be examined first, before stepping on to the less tried, and perhapsmore
hazardous, ield of functionings(or the freedomto function).
The possibility of interpersonalcomparisonsof utilities was, of course, famously chal-
lenged by Lionel Robbins (1938) and others in the high days of simple positivist criticismof
utilitarianwelfare economics. Certainly, he claim to a high scientificstatus of utility compar-isons is compromisedby many practicaldifficultiesin relatingobservationsto firm and indis-
putableconclusionsregarding nterpersonal ankingsof utilities andutility differences. On the
otherhand,comparisonsof pleasuresandhappinessare made in ourday-to-dayreflectionsand
discourse,and there is considerablediscipline in the makingof such comparisons.Indeed,as
Donald Davidson (1986) has pointedout, the natureof our understanding nd communication
regarding ntrapersonalomparisonsof states of happinessand desires are notradicallydifferent
fromthecorresponding nterpersonal
xercises. Also,interpersonal omparison
of utilities need
not take an all-or-nothingorm,andit is possible to have "partial nterpersonal omparability"with a rigorousanalyticalstructure see Sen 1970a,b).
The difficult issue in basing inequality analysis on interpersonalcomparisons s not so
much the impossibilityof makingsuch comparisonsbut the possibilityof being misledby such
comparisons(particularlyabout importantdifferencesin the substantivedeals that people getand the real predicamentsrom which they suffer).Ourabilityto takepleasure n very adverse
circumstancesends to adapt o thehardshipof circumstances o thatthebadlyplacedunderdogsdo not typically spendtheir lives weeping over what they have missed. People learnto make
the most of small opportunitiesand to cut desires to size, that is, to levels that are realistic
underthe circumstances.Thus, in the scale of pleasuresand desire fulfillment,the deprivationof the persistentunderdog inds rathermuffledandmutedexpression.Deprivedpeople,varyingfrom subjugatedhousewives in sexist societies to the hopelessly poor in strongly stratified
economies, come to terms with theirdeprivation,and the psychological indicatorsof pleasureor desire fulfillmentmay fail to reflect the extent of real deprivation hat these people suffer.11
Thereis, I believe, force in this criticism of relyingon interpersonal omparisonof pleas-ures and desire fulfillmentfor makingjudgmentsabout inequalityor injustice.However,this
critiquedoes not touchat all the more modem definitionof utilityas a numericalrepresentationof individualchoice behavior.In this interpretation,o say thata person gets moreutility from
x than from y is not essentially different from saying that, given the straightforwardhoice
betweenx andy, the personwould choose x.12The malleabilityor adaptation f pleasure-taking
abilityneed not compromise heperspectiveof utilityas real-valued epresentationf preference.
However, if we see utility only as a numericalrepresentationof each person's choice
behavior, here s, then,no basis here forinterpersonalomparisonsof utilitysince eachperson'schoice behavior is a distinct and separate entity. My choices may well reveal that I prefera
banana o an apple,but no choice of mine would, in any obvious sense, reveal whetherI preferto be someone else. Interpersonal omparisonsdeal with objects of comparisonthat are not
objects of actual choice.13
1 I have discussedthis issue morefully
in Sen(1984, 1985a,b).12The formulation an be made more complex throughconsideringnonbinarychoices, but the basic understanding f
utilityas preferred hoice remains similar(see Sen 1982).13 t is, of course, possible to think of hypotheticalchoices in which becoming someone else may be imaginatively
involved (see, e.g., Harsanyi 1955). Such comparisonsmay be enlighteningas a thought experiment,but they are
unlikelyto become practicalmethods for interpersonalomparisons.
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392 AmartyaK. Sen
This point is often missed when it is presumedthat similarityof choice behaviorover
commodity space must reveal a congruenceof utilities. It is often presumedthat, when two
personsare observedto have the same demandfunction,thenthey must be seen as havingthe
same level of interpersonally omparableutilityfor any given commoditybundle.Indeed,muchof real-incomecomparisonproceedson the basis of identifyingindividualadvantageswith the
commoditybasketenjoyed,evaluatedby a sharedpreferencerelation,and thatprocedures not
illegitimatefor makingsituationalcomparisonsof differentpersons'opulence.14 But to interpretthem as utility comparison, going beyond opulence, would be a complete non sequitur.'5If
insteadof assuming hat eachperson gets the sameutilityas othersdo from the samecommodity
bundle, it were assumed that one gets exactly one tenth of the utility that anothergets from
each respective bundle, then that too would be perfectly consistent with all the behavioral
observations includingthe shareddemandfunction).Congruentdemandfunctionstell us noth-
ingaboutthe
congruenceof
utility functions,and this follows
generallyfrom the fact that the
observationson which demandfunctions are based do not lend themselves to any presumptionaboutinterpersonal omparisonsof well-being (only of commodityholdingsand opulence).
This must not be seen as just a fussy difficultyof theoretical nterest; t can make a very
big difference in practiceas well. Even if a personwho is disabled or ill or depressedhappensto have the same demand function as anotherwho is not disadvantagedn this way, it would
be quiteabsurd o assumethat she is having exactly the sameutilityor well-beingfroma given
commoditybundleas the other can get from it. To attribute he same utility function to each
and to treat hatas the basis of interpersonalomparison or the analysisof inequalityorinjusticewould be both epistemologicallyunsound and ethicallyunfair.
Utility cannot, therefore,serve as a satisfactorybasis for interpersonalcomparisonforinequalityanalysis,and this holds no matterwhetherwe interpretutilityas pleasureor as desire
fulfillmentor as a numerical epresentationf choice behavior. ndeed,as I have triedto discuss,
attempts o make that use arbitrarilyan be perniciousfor judgmentsof equityandjustice.
5. Quality of Life, Functionings, and Capabilities
The choice of nonutilityvariables n termsof which inequalitycan be judged has been a
matterof some interestin recent years, and such conceptsas the qualityof life or freedom of
living and other such notions have been invoked.16 It is, however,important o emphasizethat
focusing on the qualityof life rather han on income or wealth or on psychologicalsatisfaction
is not new in economics. Indeed,the originof the subjectof economics was stronglymotivated
by the need to studythe assessmentof and causal influenceson the conditions of living.17 The
motivation is statedexplicitly, with reasonedjustification,by Aristotle,but it is also stronglyreflectedin the early writingson national accounts and economic prosperityby WilliamPetty,
Gregory King, FrancoisQuesnay,AntoineLavoisier,JosephLouisLagrange,and others.While
the national accounts devised by these pioneers established the foundations of the moder
141
have discussed the welfare-economic easoningunderlying uchcomparisonsn Sen (1976, 1979).15Explanations s to why this is an errorhave been helpfullydiscussedby severalauthors, ncludingSamuelson 1947),Graaff(1957), Gintis (1969), and FisherandShell (1972). Evidently,this has not preventedregularrecurrence f the
error.16See the literature onsidered n Nussbaumand Sen (1993).17See Sen (1987).
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DistinguishedGuestLecture 393
concept of income, the focus of their attention was never confinedto this one concept. Theywere also very aware of the basic issue that the importanceof income is instrumentaland
circumstantially ontingentrather han intrinsic and categorical.'8In traditionalwelfareeconomics, there has been interest both in individualutilities and in
individual incomes. When individuals are taken to be symmetrical, he two are closely linked.
JohnRawls has pointedto the importantssue that income is not the only versatile meansthat
facilitates a person's pursuitof his or herrespective objectives.He has focused instead,as was
statedearlier,on the broadercategoryof primarygoods, which aregeneral-purposemeans that
help anyone to promotehis or her ends (including "rights,liberties and opportunities,ncome
and wealth,and the social bases of self-respect").The concentrationon primarygoods in the Rawlsianframeworkrelates to his accounting
of individual advantagein terms of the opportunitiesthey enjoy to pursue their respective
objectives.19Rawls's Difference Principle,which is part of his theory of justice as fairness,assesses efficiency as well as equity in terms of the respective holdings of primary goods,
representedby an index.
The broadeningof the narrow concentrationon incomes alone involved in this move is
significant,but this wideningof the informational ocus from incomes to primarygoods is not
adequateto deal with all the relevant variations in the relationshipbetween resources and
functionings.Primarygoods themselvesaremainly varioustypes of generalresources,and the
use of these resources to generatethe capabilityto do things is subject to distinct types of
variations(as has been alreadydiscussed), including personalheterogeneities,environmental
diversities,variations n social climate, and differences in relationalperspective.We can have
complete equalityof the chosen index of primarygoods, andyet somepeople maybe immenselymore deprivedthan others because of age, disabilities,pronenessto illness, epidemiological
conditions,and so on.
I have triedto arguefor sometime now (Sen 1980, 1985a, b, 1992)that,formanypurposes,the appropriate pace is neitherthat of utilities (as claimedby welfarists)nor that of primary
goods (as demandedby Rawls). If the object is to concentrateon the individual'sreal oppor-
tunityto pursueher objectives, then accountwould have to be taken not only of the primary
goods the personholds but also of the relevantpersonalcharacteristics hatgovernthe conver-
sion of primarygoods into the person'sability to promoteher ends.20For example, a personwho is disabledmay have a largerbasketof primarygoods andyet have less chance to lead a
normallife (or to pursueher objectives) than an able-bodiedperson with a smaller basket of
primary goods. Similarly, an older person or a person more prone to illness can be more
disadvantagedn a generally acceptedsense even with a largerbundle of primarygoods.21
18On these and relatedmatters,see Sen (1987). The focus of attentionof WilliamPetty, who had experimentedboth
with the income methodand the expendituremethod in estimatingnational ncome, included "the CommonSafety"and "each Man'sparticularHappiness."Petty's explicitly statedobjectivefor undertaking is studyrelateddirectly o
the assessment of the conditionof living of people and combined scientific investigationwith a motivatingdose of
17thcenturypolitics ("to show" that "the King's subjectsare not in so bad a conditionas discontentedMen would
makethem").
19 n a related ine of argument,Dworkin(1981) has argued or equalityof resources,broadeninghe Rawlsiancoverageof primarygoods to includeinsuranceopportunitieso guardagainstthe vagariesof brute uck.
20A persondoes have some opportunity f changingthe conversionrelations,for example, by cultivatingspecialtastes
or by learning o use resourcesbetter.But, nevertheless, hereare limits that constrain he extentto which such shifts
can be broughtabout.21On the nature and pervasivenessof such variability,see Sen (1980, 1985b, 1992). The problemof differentneeds
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394 AmartyaK. Sen
Functioning
I
'K '-, 1,--
Functioning
Figure 5. FunctioningVectorsandthe PreferenceMap
The concept of functionings,which has distinctlyAristotelianroots, reflects the various
things a personmay value doing or being. The valued functioningsmay vary from such ele-
mentaryones as being adequatelynourishedand being free from avoidable disease to very
complexactivitiesor
personalstates,suchas
beingable to take
partn the life of the
communityandhaving self-respect.22The extentof each functioningenjoyed by a person may be representedby a realnumber
and,when this is the case, a person'sactual achievement s given by a functioningvector in an
n-dimensionalspace of n functionings(presumingfiniteness of distinct functionings).When
numericalrepresentation f each functioningis not possible, the analysis has to be done in
terms of the more generalframeworkof seeing the functioningachievementsas a functioning
n-tupleand the capabilityset as a set of such n-tuplesin the appropriate pace (this will, then,not be a vector space). The set of alternative unctioningvectors availableto her for choice is
called her capabilityset. While the combination of functionings (strictly, n-tuples) a person
undertakes eflects her achievements,the capabilityset represents he freedom to achieve:thealternative unctioningcombinations rom which this personcan choose.
Figure 5 illustratesa functioningspace (two dimensional),with the capabilityset of a
personbeing given by region K, and from this capabilityset K, the personchooses one func-
tioningvectorx (thoughthis need not necessarilybe unique).It maybe useful to think of choice
in this space in terms of an indifferencemap of valued living defined over the functioning
considered n OEI-1973 relatesto this generalissue. On the relevance of takingnote of disparateneeds in resource
allocation,see also Doyal andGough(1991), Ebert 1992, 1994), Balestrino 1994, 1997),ChiapperoMartinetti1994,
1997), Fleurbaey(1994, 1995a, b), Granaglia 1994), Balestrino and Petretto(1995), Shorrocks 1995), Nolan and
Whelan(1996), amongother contributions.22See Sen (1984, 1985a, 1987, 1992).This approachhas clearlinkageswith Adam Smith's(1776) analysisof necessities
(see Sen 1981, 1984) and with Aristotle's discussions of well-being in Nicomachean Ethics and in Politics (seeNussbaum1988, 1993). See also Mill (1859) and Marx(1875). The conceptualbroadeninghas powerful mplicationson practicalprocedures or assessing advantageanddeprivation; ee also Crocker 1992), Nussbaumand Sen (1993),Nussbaumand Glover(1995), andNolan and Whelan(1996).
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Distinguished Guest Lecture 395
vectors, and x can then be seen as belonging to the highest reachable indifference curve (as
indicated).23 The focus of this capability approach could be either on the realized functionings
(what a person is actually able to do) or on the set of alternatives she has (her real opportunities).
I shall not go into the details of the approach here (which I have tried to present elsewhere
[Sen 1985a, 1992, 1993]). But it is useful to ask whether the focus on capability is likely to be
very different from that on functionings. The capability approach can be used either with a
focus on what options a person has-given by the whole capability set-or on the actual func-
tioning combination she chooses-given by the chosen functioning vector. In the former pro-
cedure, what may be called the options application, the focus can be on the entire K, whereas
in the latter, the choice application, the concentration is more narrowly on x. The options
application is directly concerned with the freedom to choose over various alternatives, whereas
the choice application is involved with the alternative that is actually chosen. Both the versions
of the capability approach have been used in the literature, and sometimes they have beencombined.24
By a well-established tradition in economics, the real value of a set of options lies in the
best use that can be made of them and, given maximizing behavior and the absence of uncer-
tainty, the use that is actually made. The use value of the opportunity, then, lies derivatively
on the value of one element of it (to wit, the best option or the actually chosen option).25 In
this case, the focusing on chosen functioning vector coincides with concentration on the capa-
bility set. With this type of elementary evaluation, the two uses of the capability approach share
not only the identification of a relevant space (that of functionings) but also the focal variable
in that space (the chosen functioning vector).26
However, the options application can be used in other ways as well since the value of a
set need not invariably be identified with the value of the best, or the chosen, element of it. It
is possible to attach importance to having opportunities that are not taken up. This is a natural
direction to go if the process through which outcomes are generated is of significance of its
own. Indeed, choosing itself can be seen as a valuable functioning and having an x when there
is no alternative may be sensibly distinguished from choosing x when substantial alternatives
exist.27 The importance of this type of consideration lies more in drawing attention to broader
concerns than in offering a quick resolution of interpersonal comparison of freedoms (and thus
of overall individual advantages that take note of the significance of freedom).
23The use of such an indifferencemapin explainingvaluationof functioningsmay be of considerablepedagogicvalue,
especially in moving from the familiarityof the commodity space to the unaccustomedunctioningspace.It is, nev-
ertheless,important o recognizethatthe natureof the indifferencemap in the functioningspace may not altogethermirrorwhat we standardly resume n the case of commodityspace. In particular,heremay be considerableareas of
incompletenessas well as fuzziness(see Sen 1985a).The recent iterature n fuzzy settheorycan behelpful n analyzingthe valuationof functioningvectors and capabilitysets (see particularlyChiapperoMartinetti1994, 1997; Delbono
1989;Cerioli andZani 1990;Balestrino1994;BalestrinoandChiapperoMartinetti1994;Ok 1995;Casini andBeretti
1997; amongothercontributions).24See the rather xtensive literature n this referred o in Foster and Sen (1997).25This approachs called elementaryevaluationof the capabilityset; on the natureandscope of elementaryevaluation,
see Sen (1985a).26Cohen's(1989, 1990, 1995) arguments or concentratingon what he calls midfare also lead to this particularocus;see also Areson (1989, 1990).
27See Sen (1985a, b). There remains the more difficult issue of determininghow this processconsideration houldbe
incorporated.For various alternativeproposalsand also axiomatized ormulas,see Suppes(1987), Pattanaikand Xu
(1990), Sen (1991a), Foster(1993), Arrow(1995), Herrero 1995), Puppe(1995), amongothers.
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396 Amartya K. Sen
6. Weights, Valuations, and Explicitness
I turnnow to a crucial methodologicalissue that has received much attention n recent
discussionsinvolving the capabilityapproachand relatedproposals.The heterogeneityof func-tioningsinvolves the need to weighthemagainstone another.This wouldapplyto all approaches
gearedto functionings,whetherthe concentrations on realizedfunctioningvectors x (as with
the choice application)or on the capabilitysets K (as with the options application).28Is this weighting requirementa specialdifficultyassociated with the capabilityapproach?
This cannotbe the case since heterogeneityof factorsthat influence individualadvantage s a
pervasivefeatureof actual evaluation.While we can decide to close our eyes to this issue by
simplyassuming hat there s somethinghomogeneous(e.g., income orutility)in termsof which
everyone'soverall advantagecan be judged and interpersonally ompared(andthat variations
of needs, personalcircumstances,etc., can be, correspondingly,assumedaway), this does not
resolve the problem-it only evades it.
Comparisonsof real income involve reduction of bundles of different commoditiesinto
points on a real line and, in judging comparative ndividualadvantages,there is the further
problemof interpersonal omparisons taking note of variations of individual conditions and
circumstances.As was discussed earlier(see section4), even when each person'spreference s
taken to be the ultimatearbitrator f well-being for thatpersonand even when, to take a very
special case, everyone has the same demand function or preference map, the comparisonof
marketvaluations of commoditybundles(or their relativeplacingon a sharedsystemof indif-
ferencemapin the commodity space) may tell us rather ittle aboutinterpersonal omparisons
of well-being.In evaluative traditions nvolving fuller specification,considerableheterogeneity s explic-
itly admitted.For example, in Rawlsiananalysis, primarygoods are taken to be constitutivelydiverse (including "rights, iberties and opportunities,ncome andwealth,and the social bases
of self-respect"),and Rawls (1971) deals with themthroughan overall index of primarygoods
holdings.29While a similarexercise of judgingover a spacewithheterogeneitys involvedboth
in the Rawlsianapproachand in the use of functionings,the former s informationallypoorer,for reasons discussed already,because of the parametricvariationof resourcesand primary
goods vis-a-vis the opportunityof achieving high qualityof living.The problemof valuation s not, however,one of an all-or-nothingkind. Somejudgments,
with incompletereach,follow immediately rom the specificationof a focal space.When somefunctioningsare selected as significant,such a focal space is specified, and the relation of
dominance tself leads to a partialorderingover the alternative tatesof affairs. If personi has
more of a significantfunctioningthanpersonj and at least as much of all such functionings,then i clearly has a higher valued functioningvector thanj has. This partialorderingcan be
extendedby furtherspecifying the possible weights. A unique set of weights will, of course,
28 n the lattercase, there is the further ask of comparingsets rather han points in this space, and it involves the
additional ssue that the importanceof freedom can stretch well beyond the value of the particular lement that is
chosen (exceptin the specialcase of elementaryevaluation).
29In analogywith Arrow's 1951) impossibility heoremand its single-profile xtensions,various mpossibility heoremshave been presented n the literature boutthe existenceof satisfactoryoverall ndicesof Rawlsianprimarygoods (seePlott 1978;Gibbard1979;Blair 1988). Informationalimitationsplay a crucialpart n precipitatingheseresults(as in
the case of Arrow'stheorem).The case against imposingsuch informational imitations s discussedin Sen (1991b),which reducesthe rub of these allegedimpossibilityresults,appliedto Rawlsianprocedures.
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Distinguished Guest Lecture 397
0 F1
Figure 6. FunctioningVectorsand Dominance
be sufficient to generate a complete order, but it is typically not necessary. Given a range of
weights on which there is agreement (i.e., when it is agreed that the weights are to be chosen
from a specified range, even without any agreement as to the exact point on that range), there
will be a partial ordering based on the intersection of rankings (see Figure 6). This partial
ordering will get systematically extended as the range is made more and more narrow. Some-
where in the process of narrowing the range, possibly well before the weights are unique, the
partial ordering will become complete.30 But even with an incomplete ordering, many decision
problems can be adequately resolved, and even those that are not fully resolved can be sub-
stantially simplified (through the rejection of dominated alternatives).
It is thus crucial to ask, in any evaluative exercise of this kind, how the weights are to be
selected. This judgmental exercise can be resolved only through reasoned evaluation. For agiven person who is making his or her own judgments, the selection of weights will require
reflection rather than interpersonal agreement or a consensus. However, in arriving at an agreed
range for social evaluation (e.g., in social studies of poverty), there has to be some kind of a
reasoned consensus on weights or at least on a range of weights. This is a social choice exercise
and requires public discussion and a democratic understanding and acceptance.31 It is not a
special problem that is associated only with the use of the functioning space.
30Analyticalcorrespondencesbetween systematic narrowingof the range of weights and monotonic extension of the
generatedorderingshave been explored n Sen (1970a, b, 1982),Blackorby 1975), Fine (1975), andBasu(1980). The
use of the intersectionapproach see Sen 1973;Foster and Sen 1997) relatesdirectlyto this procedure.The approachof intersectionquasi-orderings an be combinedtogetherwith "fuzzy" representation f the valuation as well as
measurement f functionings see Casini and Beretti 1997; ChiapperoMartinetti1994, 1997).31This issue and its connection with both social choice theoryandpublicchoice theoryare discussed n my presidential
address o the AmericanEconomicAssociation(Sen 1995b).
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398 Amartya K. Sen
7. A Concluding Remark
The argumentfor shifting our attention from income inequalityto economic inequality
relatesto the presenceof causal influences on individualwell-being and freedomthatareeco-nomic in naturebut that are not capturedby the simple statisticsof incomes and commodity
holdings. The case for such broadeningof informational ocus also entails the need to payevaluativeattention o heterogeneousmagnitudesand calls for the derivationof partialorderingsbased on explicit or implicit public acceptance.The normative force of this acceptancerests
substantiallyon the qualityand reach of publicdiscussions on mattersof centralsocial concern.
The subjectof this essay, though nominallyaboutinequality, s ultimatelyas much about the
natureandimportanceof public discussionon social evaluation.
In mattersof publicjudgment,there is no real escape from the evaluativeneed for publicdiscussion.The work of public valuationcannot be replaced by some "superclever" assump-tion. Some assumptions hatgive the appearanceof working very well operatethroughhidingthe choice of values andweightsin some constructedopaqueness.Forexample,theassumption,often implicitly made, that two persons with the same demand function must have the same
relation betweencommoditybundles andwell-being (no matterwhetherone is ill andthe other
not, one disabled and the other not, etc.) is basically a way of evading the considerationof
significant nfluenceson well-being.Thatevasion becomes transparent,s I have tried to illus-
trate,when we supplementncome andcommoditydataby informationof othertypes(includingmattersof life anddeath).
The exercise need not, however,be as exacting as it may first appearand as it certainly
would be if we were not to settle for anythingless thangetting complete orderingsof inter-personaladvantagesand inequalities.Ourvalues aboutinequalityaversion are not typicallyof
the fine-tuningvariety, getting the level of inequality "just right," taking note of all its prosand cons. Rather, he engagement s mainlyaboutthe avoidanceof substantialnequalitiesand
serious injustice.As materialfor public discussion and for informedconsensus or acceptance,the need is
not so much for a complete orderingof interpersonaladvantagesand of levels of inequality
(which would be inevitablybased on some crude assumptionsand evasions) but for usable
partial orderingsthat capturethe big inequalitiesin a clear way, taking note of the various
significantconcerns thatgo well beyondthecommodity space.The focus has to be on the reach
and relevance of partialorderingsthat can be cogently derived and used. Insistenceon com-pletenesscan be an enemy of informedand democraticdecision making.
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