The increasing role of practical reason in the Human Development Reports

Ricardo F. Crespo During the last 15 years I have been insisting on the necessity of reinserting practical reason in economics.1 Practical reason is engaged with values. ilary Putnam!s boo" on The Collapse of the Fact/Value Dichotomy #$%%$& has been an influential hallmar" in the increasing recogni'ing of this necessity. In fact( new currents considering human ends( such as the Capability approach and sub)ective well*being analysis( begin to more or less consciously using practical reason in their arguments. +nother economic up to now atypical concepts( such al reciprocity( altruism( gift( also begin to be considered which also imply the use of practical reason. In this line of thought( +nthony +t"inson in a recent article suggestively entitled ,-conomics as a .oral /cience0 #$%%12 314& maintains that economists have never ceased in ma"ing welfare statements( whereas not limiting themselves to positive statements. 5ne of the e6amples he put is the uman Development Inde6 # DI&( constructed and published by the 78 Development Program #78DP& in its +nnual Development Report # DR&. 9he DI has epistemic( technical and a6iological aspects. 9here is a logical way of "nowing and building the Inde6 as well as a better way of achieving the decided ends( and also a #sometimes ,under*defined0 or ,under*argued0& rationale for defining these ends and their relative weights. 9he DI is then an occasion to discuss whether economists( should intervene :and how to do so: in the definition of the ends or if( ; la Robbins( they should limit to indicate the best way of see"ing the ends decided in other stages. In this paper I will first define( classify and characteri'e practical reason. 9hen( I will show how it applies in -conomics #/ections $ and <&. 9hen( I will note the relative presence of this use of reason in the building of the uman Development Inde6 #/ection 4&. Finally I will hold that the 78DP is increasingly using it #/ection 5&. 1. Practical Reason and Practical Science uman reason has different uses and( accordingly( human rationality has different applications. 5ne of these uses is pointed out by Philippa Foot #$%%<2 5<& when she asserts that ,human beings are rational creatures( in being able to act on reasons.0 In effect( human beings decide what to do by using their reason. 9his use of reason( ordered to action( is called practical reason. Instead( the use of reason only for the sa"e of "nowledge is called theoretical reason. Practical reason deals with the field of that that is feasible or possible for human beings to perform. 9heoretical reason may deal theoretically both with the previously mentioned field along with the field of things that we
1

/ee( for e6ample( my boo" 1113and my papers 1113( $%%1 and $%%3.

cannot change. 9heoretical reason originates beliefs about matter of facts while practical reason originates actions. =y theoretical reason we "now an order #or rationale& of reality( including actions( while by practical reason we "now for the sa"e of impressing an order to actions. Practical reason entails a normative intention about actions. In this way( human reason adopts a normative function. 9his normative character is the specific structure of human action. +s R. >ay ?allace #$%%@2 1& e6plains( ,practical reason is the general human capacity for resolving( through reflection( the Auestion of what one is to do.0 Furthermore( practical reason thin"s not only about what one ought to do( but also for what reasons and how one could achieve it2 it is about action and for action( it is thought in action and from the action itself. For +ristotle( a founder of the notion of practical reason( every action aims at a ,good0 that is the end or reason of this action # Nicomachean Ethics I 1&. 9his is why for him reasons for actions are provided by goods or values. +ccording to this position( we can establish an intrinsic lin" between moral goodness and practical reason #see Foot $%%<2 B4&. Practical truth is the good of man. 9his good might be universal or conte6tual depending on the matter. +ristotle!s ethical program was to determine the specific content of human good. For him( there are some goods that are common to every man because they derive from the function of the human being and other goods that are relative to societies( persons and situations. In addition( he distinguished two levels2 the theoretical "nowledge about these ends( and the practical "nowledge( decision and action in real life by reasoning ,practically0. +ccording to him( both theoretical "nowledge and practical reasoning deals with a constellation of ends of human or social life and also with means inasmuch as they fit or conform to this constellation. +dditionally( the contributions of means to each individual!s end is a matter of another "ind of rationality( i.e.( technical or poietical rationality. 9he Auestion of the allocation of means in order to achieve a specific end #that may be the formal end of utility or value& is different from the Auestion of the decision on ends and of the conformity of those means to the complete set of ends of society or man. 9he first Auestion is a matter of technical #later called instrumental& reason( while the second is a matter of practical reason. 9his is why for the +ristotelian theory of practical reason the statement ,the end )ustifies the means0 is unacceptable2 practical reason does not concentrate in only one end( but considers a ,hori'on of totality0 #-vandro +ga''i2 <<&. 9echnical rationality has more to do with the ,how*Auestion0 of achieving an end and practical rationality with the ,why*Auestion0 of means and ends. Finally( within the frame of the first Auestion :the technical: we may consider how to best allocate those means in order to achieve the specific end2 this is a matter of instrumental ma6imi'ing rationality( broadly used by standard economics. 9his e6position( focused on the +ristotelian notion of practical reason( leaves aside two relevant positions on practical reasoning( the Cantian and the umean. +ccording to Cant practical reason is separated or autonomous from theoretical reason. +s Cullity and Daut #11132 $%& affirm( this involves relying on foundamental claims concerning practical reason that are un)ustified. For Immanuel Cant( there is not a theoretical science dealing with the practical $

field( but some convictions about practical principles. ,9hese postulates0( affirms Cant( ,are not theoretical dogmas but( suppositions practically necessary0 #E13@@F 115$2 <4@&. Instead( for +ristotle a rational theoretical inAuiry about the practical field is possible. 9hat is( for him ethics is a science. Furthermore( according to David ume( practical reason is an instrumental reason which depends and obeys motivational tendencies. 9hus( while +ristotle!s view concerning the relationship between values and practical reason recognises valuable actions in themselves( CantGs view is constructivist( in the sense that the action is valuable because it has been chosen( whereas ume reduces practical reason to instrumental reason. For ume( a rational deliberation about ends is not possible and the deliberation on means is not embedded by the rational consideration of ends. is statement is very well "nown2 ,Reason is( and ought only to be the slave of passions( and can never pretend to any other office than to serve and obey them0 # ume E13<1*134%F 11B@2 415 *II( iii( <&. ?hat move volition and action are passions( not reason #415&. Passion chooses the ends and reason provides both the data on which passion is founded and the means to achieve that ends. In ume!s version of rationality( ,reason is to be seen as an instrument to achieve ends that are not themselves given by reason. ?e may say that an act is irrational if it is not the best means of achieving the ends that the actor himself had a view when choosing the act0 #Robert /ugden 11112 35<&. For +dam /mith( ume!s friend( the content of good and evil is "nown by sentiments2 reason cannot "now it # The Theory of Moral Sentiments ( HII( III( II( 3 and @( E13@1F 11@42 <$%&. 9he common idea of both authors is that ends are not "nown and determined by reason. 9he paper of reason is the allocation of means for the sa"e of those ends. 9his conception is broadly adopted by modern social sciences. Raymond =oudon #$%%42 53& very well describes the situation2 In general terms( the eAuation that assimilates rationality and instrumental rationality is so influent that social sciences! most literature on rationality almost e6clusively deals with instrumental rationality. In other words( social sciences tend to admit that the notion of rationality essentially applies to the adeAuacy of means and ends( actions and ob)ectives( or actions and preferences. +t most( they recogni'e that rationality can also ta"e the form of a reAuirement of coherence or transitivity of ob)ectives or preferences. =ut they avoid applying this category to the contents of preferences or ob)ectives themselves. 9his is the case of standard economics. owever( a strong movement of rehabilitation of the +ristotelian notion of practical reason and science has arisen in the second half of the last Century( mainly in Dermany. + collective wor" edited by .anfred Riedel #113$*4&( entitled Rehabilitierung der pra tischen !hilosophie( could be mentioned as a hallmar" for this wave of thought. .embers of this movement conceive the practical paradigm as a reaction against the modern prevailing reAuirement of value*neutrality in the realm of the social sciences. For value*freedom supporters( scientific reason <

was only applicable to means. 9he ends were a matter of private decision( which surpassed the limits of science. 9his movement of rehabilitation of practical science considers that there is an entanglement of values and facts and that thus value*free science is an impossible enterprise. -ven a descriptive list reAuires principles of selection #see Finnis 11@$2 4&. Ieo /trauss warns about a peril of denying this entanglement #11512 $1&2 It is impossible to study social phenomena( i.e.( all important social phenomena( without ma"ing value )udgments. #...& Denerally spea"ing( it is impossible to understand thought or action or wor" without evaluating it. If we are unable to evaluate adeAuately( as we very freAuently are( we have not yet succeeded in understanding adeAuately. 9he value )udgments which are forbidden to enter through the front door of political science( sociology or economics( enter these disciplines through the bac" door. If these values( which inevitably embed social thin"ing( are not rationally founded and established( we could be confronted with ideology. Fran"furt /chool also( by its critical diagnosis of modernity :a critiAue of instrumental reason: loo"s for practical reason. .a6 or"heimer #E11B3F $%%32 $1&( for e6ample( maintains that when the original idea of reason was conceived( it was aimed for much more than the mere tas" of regulating the relation between means and ends2 it was intended for the understanding of the ends themselves. ?hat is then the role of the value*free reAuirement of scienceJ ?e will have to interpret it in another way. Halue*neutrality should not be Kofficially! leaving values aside( but Kimpartially! reasoning about them. ow could we neutrally describe social factsJ 9his neutrality is only achievable through the scientific definition of the standards of practical reasonableness #see Finnis 11@$2 1$&. 9hat is( the way to manage the value*free reAuirement is not to put away values :something impossible: but to reason about them( and thus rationally determine the set that should be pursued. ?e may reason( for e6ample( the arguments for a list of universal human rights. 9his is the tas" of practical science. ?e can see then that a conception of practical reason entails a parallel conception of practical science. 9he main traits of it as conceived by +ristotle will complete this panorama. First( practical science ac"nowledges the ine6act character of its conclusions( due to the contingency of human action( which stems from human freedom and from the singularity and comple6ity of human affairs. /econdly( practical science must be closely connected to a singular case. +n adaptation to it( considering its cultural and historical environment( is necessary. + wise mi6 of adeAuately chosen scientific types and historic( cultural and empirical elements is the "ey to a correct interpretation of human action. 9hird( I mentioned the normative character of practical reason conducing to the normative character of practical science and its engagement with values. + fourth trait of practical science is its pragmatic aim. +n abusive theoretical aim has invaded the realm of social sciences. + social science may have a theoretical aim( but it is always virtually oriented to action due to the essentially practical character of its 4

sub)ect. Iast( we ought to mention the plural methodological devices of practical sciences. In his Nicomachean Ethics and in !olitics" +ristotle admirably combines a6iomatic deduction( inductive inference( dialectic arguments( rhetoric suggestions( imagination( e6amples( and topics. In a prudential science( all these methodological instruments contribute to its purpose. 9heoretical reason "nows the ends and means but does not move into action. 5n the contrary( practical reason moves to action. In addition( practical science is the critical reflection on values in order to rationally discover or defining them and to show them to practical reason. Preferences and tastes must be regulated by practical reason. 9hey are ob)ects of rational inAuiry and debate. 9he collapse of the factLvalues dichotomy #see Putnam $%%$& reAuires the wor" of practical reason in order to achieve a rational discover or determination of the ends of actions( which are based on values. 2. Practical Reason in Economics Philosopher supporters of the e6istence of the practical reason!s field would never put in doubt the practical character of economic activity and( therefore( that economics is a practical science. +martya /en remar"s the long tradition of this conception of economics( called by him ,ethics*related0( from +ristotle to our days :although it is not the most usual #/en 11@32 $*4&. In this /ection( I will briefly consider some authors belonging to this tradition2 +ristotle( /mith( Ceynes and /en. I will also mention a philosopher( ilary Putnam and an economist that might cause surprise in this conte6t2 Iionel Robbins. +ristotle refers to the economic life in dealing with oi onomi e( a Dree" ad)ective that means ,economic0. e considers that oi onomi e is the use of the things necessary for Dood life( i.e.( the life of virtues. For him( it is more than household management( as many economic historians believe2 it deals with the house and also with the polis #cf. !olitics( I @( 1$5Bb 1$*4M I 1%( 1$5@a 11*$1M I 11( 1$51a <<*B&. #i onomi e( for him( is subordinated to Politics because the things it uses are necessary for the very e6istence of the polis #cf. !olitics III( 1( 1$@%b <1*$&. For +ristotle( oi onomi e can only be aimed at the goodM it is essentially moral. e distinguishes it from another related concept( chrematistics( which is a techniAue subordinated to oi onomi e dealing with the acAuisition of those things used by it. 9his techniAue( on the contrary( is not essentially oriented towards the good. 9herefore( while for +ristotle a harmful oi onomi e is not thin"able two "inds of chrematistics can be considered2 a subordinated( limited and natural one( and a wic"ed( unnatural( unlimited one. 9a"ing into account the whole conte6t of the treatment of oi onomi e into the !olitics( +ristotelian scholars have usually interpreted that it is a practical science #see( for e6ample Reeve $%%B( p. $%B( 8atali 11@%( p. 113( =erti 111$( p. @1( 8ewman 1151( p. 1<< and .iller 1115( pp. B*11&. In sum( for +ristotle oi onomi e is a "ind of human action regulated by practical reason and studied by a practical science.

+ccording to +dam /mith political economy is ,EaF branch of the science of the statesman0 #E133BF 115$2 1@$ :=oo" 4( Introduction&. Recent literature on /mith!s philosophy stresses the moral character of his conception of economics. >effrey Noung( for e6ample( in his boo" on /mith!s thought( Economics as a Moral Science #1113&( states that for /mith the mar"et is a social arena for actions in which "nowledge of the sympathetic feelings of the impartial spectator is an operative factor in understanding mar"et activity( price and distribution #11132 5B&. 9he role of the impartial spectator in depersonali'ed societies and mar"ets is that of ,a bond of union and friendship0 #B1&. ,?ealth and virtue are complementary in /mith0 #153& in the frame of a Kbenevolent model! #B1( 3B& and a Kvirtuous seAuence! #1@4&. It is very well "nown that Iionel Robbins in his Essay on the Nature and Significance of Economic Science defines economics as an activity of allocating means in order to achieve given ends. e supported value neutrality e6cluding ends of scientific "nowledge2 ,-conomics is not concerned at all with any ends as such. It is concerned with ends in so far as they affect the disposition of means. It ta"es the ends as given in scales of relative valuation0 #E11<5F 11@42 <%&. 9hroughout the years( however( he finally maintained the need of a normative "nowledge of economic reality. In his $utobiography Robbins tells that he had studied economic theory but that he Auic"ly had reali'ed that ,all this was in a very high plane of abstraction #O& 9here was another level( however( on which economic analysis was con)oint with assumptions about the ultimate desirable ends of society which( #... & had no less a hold in my attention0 #11312 15%&. is historical studies of classical -nglish economists gave him )ustification to pursue his new point of view. ?e can trac" through Robbins! wor"s the evolution of this concept during the years. $ I will only refer to his 11@% Richard 9. -ly Iecture at the +merican -conomic /ociety +nnual Conference( ,-conomics and Political -conomy0 #11@1&. Robbins e6plains that since classical political economy included value )udgments( this term :political economy: was left aside and the term economics began to be used. is suggests reviving the term ,political economy0 in order to emphasi'e a "nowledge that overtly deals with political suppositions and value )udgments. .any economic matters correspond to this new and old "nowledge. ,In the application of -conomic /cience to problems of policy(0 Robbins affirms( ,I urge that we must ac"nowledge the introduction of assumptions of value essentially incapable of scientific proof0 #11@12 1&. 9he re)ection of the scientific character of an investigation is still present in Robbins( but he admits the necessity of considering them. It is interesting to see that it was precisely against Robbins view of economics that Ceynes reacts and sustains that it is a moral science. 9his contention was included in two letters to Roy arrod from 4 and B >uly 11<@2 In the second place as against Robbins( economics is essentially a moral science and not a natural science. 9hat is to say( it employs introspection and )udgments of value. #113<2 $13& I also want to emphasise strongly the point about economics being a moral science. I mentioned before that it deals with introspection and with
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/ee my paper 111@.

values. I might have added that it deals with motives( e6pectations( psychological uncertainties. 5ne has to be constantly on guard against treating the material as constant and homogeneous #113<2 <%%&. I want to remar" that Ceynes! characteri'ation of economics fits with the mentioned traits of practical science. It deals with values( reasons and uncertainties. 9his leads him to sustain that economics needs to consider the conditions of the specific situations that it is dealing with. e also considers the methodological pluralism of practical sciences( including ,theory and fact( intuitive imagination and practical )udgment0 #113<2 <<5& Finally( ilary Putnam has powerfully sustained the collapse of the factLvalue dichotomy #$%%$&. e tries to ,e6plain the significance of the issue particularly for economics0 #$%%$2 vii&. e argues that ends matters in economics and that they can be discussed rationally. -nds cannot be separated from economics because description and evaluation are interwoven and interdependent #$%%$2 <&. Putnam!s e6ample of the recognition of his position in economics is +martya /en!s capability approach. /en #$%%$2 51& complains about the arbitrarily narrow current formulations of rationality. e asserts that ,rationality is interpreted here( broadly( as a discipline of sub)ecting one!s choices :of actions as well as of ob)ectives( values and priorities :to reasoned scrutiny0 #$%%$2 4&. For him( ,rationality includes the use of reasoning to understand and assess goals and values0 #$%%$2 4B&. /uppose then that we have accepted that economics is a practical or moral science. ?hat does this actually imply for the behaviour of economistsJ 9his will be the topic of the ne6t /ection. 3. The economists role +ctual human actions are not mere allocations of scarce means given some ends to achieve. -nds are not only gi%en but are also generated in the %ery process of action& 'ames (uchanan maintains that )*e must also ac no*ledge that men can choose courses of action that emerge only in the choice process itself+ ,11@32 3@-& Means and ends mutually interact and determine& Eli.abeth $nderson has considered De*ey/s thought on this point& She notes" ,0- the character and %alue of means and ends *as reciprocally determined& 1e do not first already ha%e an end in %ie*" *ith the only 2uestion ho* to achie%e it& 1e lac a complete conception of our end until *e ha%e a complete grasp of the course of action that *ill ta e us there ,34456 7-& ence( the mere consideration of the ends as given( reflects a truncated action which is not human. ,+cting on such radically truncated )udgments would be cra'y0( +nderson affirms #ibid.&. -nds and means interplay often conducing to a re*definition of ends. Diven these characteristics of human action( what is the role of the economistJ 3

First( we can consider a reflection about some absolute ends #universal human rights& that are une6ceptionable. ere we find a first role of the economist2 he must only try to allocate means in order to achieve them. =ut then the turn arrives for reflection on a second set of ends which are e6ceptionable( beginning with designing a rough s"etch( and following with an ad)ustment to the real possibilities of achieving them with the given means. ere the economist must intervene and point out the limits of plans. < 9he contribution of the economist is needed for this process of matching means and ends. #I am supposing the possibility of an interdisciplinary discussion about the ends.& owever( although I held that instrumental rationality must obey practical rationality( I do not devalue its possible contributions. +s noted by +nderson( ma6imi'ation has a local role within practical reasoning #11132 45&. 9here are fantastic e6amples of how much -conomics contributes to diverse fields such as health and education( transportation and industries( regulations( privati'ations( and integration( only to mention a few( provided that the practical constraints were also defined2 for e6ample( that basic education( or a number of medical interventions will be prioritised. -conomics may also wor" with a set of ends which singular specifications could be appraised by cost* benefit analysis #Finnis 11132 $1@*1&. owever( the interplay between practical and instrumental rationality often becomes more than necessary. 9his stems from a variety of aspects of these ends which do not have strict economic value. +ll actions are performed by men and can affect men. 9he impact is not only appraisable in terms of cost* benefit analysis and( thus( practical rationality must enter into a game which continually engenders constraints. + possible e6ample is deciding on whether to assign budget to the so*called First Deneration Reforms or to /econd Deneration ones which cannot be assessed only through monetary returns. For instance( the reforms in )ustice and education are difficult to be assessed in economic terms and may thus be unfairly delayed. 9his is a political decision that( once ta"en( becomes a given for the economist who will then locally apply cost*benefit analysis. In the ne6t /ection( I will put the e6ample of the uman Development Inde6 # DI&. +gain( as asserted( there are occasions in which the relevant criteria to decide on ends are only strictly economic2 this is the appropriate field of economics wor"ing alone. =ut as soon as the matter losses this specificity( economic calculation becomes more complicated due to the difficulties of e6pressing non*economic values in economic terms. /umming up( the role of the economist will be( first( to be engaged and actively participate in interdisciplinary discussions concerning problems needing an interaction of means and ends. /econd( the economist( as usual( will contribute with local cost*benefit analysis that must be included in any practical decision.

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9his interaction between instrumental and practical rationality gives us a hint of the limited scope of ma6imi'ing instrumental rationality. -nds may be modified2 thus( the independent variables become dependent. ow could we manage thisJ

4. Practical Reason in the Human De elopment !nde" #HD!$ 9he aim of this /ection is to show that practical rationality and values are embedded in building the DI :as an e6ample of an economic instrument: and to stress the relevance to show clearly these values2 we need an established process for reasoning practically about them. 9he DI has a lot of prudential underlying assumptions that are technical and practical. 5ne may wonder( however( whether they are sufficiently e6plained or argued by theoretical( technical and practical reasons. 9heoretical reason should enter into play in order to define the terms involved in the DI( technical reason is needed to solve its technical problems( and practical reason to )ustify prudential decisions and simultaneously appraise the impact of those technical solutions on the values. /pecifically when dealing with inde6 numbers limitations appear which are originated in that they are being composed of heterogeneous variables. Different values of variables of different categories :let!s say comfort( velocity and security: are transformed into a dimensionless inde6 with values from % to 1( to obtain a ran"ing :let!s say( of the attractiveness of cars. ?e calculate the ratio among the values assigned to each category and their e6treme values( and then we calculate the average of the obtained ratios. 8ow( we do not have a measurand of comfort( "mLh and a measurand of security( but ,na"ed0 numbers that can be added and that supposedly represent the attractiveness of cars. owever( one reali'es that this is a highly conventional ran" based on many assumptions.4 ?hat is incommensurable is made commensurable by adopting a conventional unit for each incommensurable variable( calculating the value of the variables according to these units( and adding a weighted proportion of the values of these variables #=oumans $%%12 <$B and .organ $%%12 $4%&. 9his means that we are accepting inter alia the assignment of weights for each variable indicated in the inde6 formula. 9his is a "ey for this conflation. 9he weight must be the ,due0 weight #.organ $%%12 $4%&. 9his is not easy when the categories weighted are Aualitatively different #see =an'haf $%%1&. It is actually useful to do this e6ercise( but we are all conscious that little changes in the composition of the inde6 might drastically change the ran"ing results. 9his capacity to manage inde6 numbers might become a manipulation. 9he way of avoiding it is to clearly show the decisions made together with their arguments. I thin" that this clearly shows how the technical aspects are intermingled with )udgmental practical aspects2 beliefs and values affect technical decisions. +llen #11512 1%%ff.& considers technical problems concerning the choice of items( the choice of formula and the choice of base periods. owever( these technical problems also involve values. .orgenstern( for e6ample( after e6pressing his concern about the accuracy of data( considers technical problems( but he also recogni'es ,that we are here confronted with a political as well as an economic problem0 #11B<2 11$&. +s posed by /en( capabilities are incommensurable. Incommensurability is often found in the practical realm. ?e can obtain an ordinal ran"ing by comparison of incommensurable categories( but a numerical ratio among the
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9hey are non*additive Aualities2 see( e. g.( Cohen and 8agle #11<42 $1B&.

components will be only an ine6act way of illustrating the ran"ing. 5 ?e cannot commensurate income( longevity and literacy because they are measured by different units. ?e can only compare and ran" them for a specific situation( and say( for instance( #in a very simplistic way& that for this country today it is more relevant to increase its income than to put effort on educationM or instead that( having reached a determined level of income( the most relevant is to increase education. 9he DI decides a uniAue ran" stemming from a comparison( ma"es it legitimate for any country( time and situation and assigns numbers in order to commensurate the corresponding variables and to achieve results. In the case of the DI one third is assigned to each variable. ?e are in fact applying a ratio to an ordinal category #see =oumans and Davis $%%12 15$M Fin"elstein 11@$2 11&. It can be done( but the result cannot be considered as an e6act number( but only as a general indication( mainly based on the weights assigned to each variable. +s the first D Report affirms( ,9he inde6 is an appro6imation for capturing the many dimensions of human choices. It also carries some of the same shortcomings as income measures0 #78DP 111%2 1&. 9his is also asserted by /en who spea"s of the DI as a ,measure with the same level of crudeness as the D8P0 #11112 <1@( nt. 41&. 9here is also the possible danger noted by Iudwi" Fin"elstein #11@$2 11&2 ,that once a scale of measurement is established for a Auality( the concept of the Auality is altered to coincide to the scale of measurement.0 9hat is( for e6ample( that we come to thin" that development consists in a combination of longevity( literacy and income( which is a poor concept of development. Further problems of the Inde6 8umbers are other technical problems and also problems related with the accuracy and homogeneity of data. Recently ?olf( Chong and +uffhammer #$%11& have held that( due to data error( <4P of the countries are misclassified in the DI. 9he need of simplicity may go against realism. ?e cannot argue against using inde6 numbers from these problems because they could be overcome. owever( we must also consider that technical decisions might have an impact over practical aspects because different technical alternatives might imply different stresses on the results : eAuality or difference among countries in the case of the DI. 9he limitations of the DI have been recogni'ed and( however( the Inde6 has been defended on practical grounds. +nand and /en #11142 $& recogni'e that there is a loss of information when using an aggregate number #a ,scalar0& for a set of numbers representing individual circumstances #a ,vector0&. In the same vein( they #$%%%& affirm that the domain of the uman Development Report is much wider than what is captured by the DI. For sure( the three variables chosen are not the only three. =ut as more variables are added( they will all decline in significance. 9hen( ,the income component of the DI has been used as an indirect indicator of some capabilities not well reflected( directly or indirectly( in the measures of longevity and education0 #$%%%2 @BM see also 11 and 1%%&. Regardless of all these limitations( the DI is a worthy tas". 9his is very well e6pressed by Paul /treeten #11142 $<5&2
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/cales of measurement in the social and behavioral sciences are nominal or ordinal #Fin"elstein 11@$2 $B&.

1%

It is clear that the concept of human development is much deeper and richer than what can be caught in any inde6 or set o indicators. 9his is also true of other indicators. =ut( it might be as"ed( why try to catch a vector in a single numberJ Net( such inde6es are useful in focusing attention and simplifying the problem. 9hey have a stronger impact on the mind and draw public attention more powerfully than a long list of many indicators combined with a Aualitative discussion. 9hey are eye*catching. 9hat is( the aim of the DI is mainly practical. 9hen( the DI has to be ta"en as an orientation that has to be handled with care( and refined through technical improvements( theoretical and practical reasons. 9he policy ma"er should go beyond the simple inde6 and analy'e its components in order to detect the fields which need improvement. .y main claim is that the theoretical definitions and practical decisions supposed in the DI might not be sufficiently e6plicit or argued( and that a better definition of concepts and practical arguments should probably be made in order to improve the Auality of the Inde6( and for the sa"e of a ,fairer play0. B ?hat are these theoretical definitions and practical decisionsJ 9he first practical decision is the election of the capabilities :education( health and a decent standard of life: and the corresponding measurable variables :life e6pectancy( literacy and income #this last as a pro6y of the other capabilities&. It sounds as a reasonable decision but the argument for this decision is not developed in the uman Development Reports. References to this decision appear in the first DR2 uman development is a process of enlarging people!s choices. 9he most critical of these wide*ranging choices are to live a long and healthy life( to be educated and to have access to resources needed for a decent standard of living. +dditional choices include political freedom( guaranteed human rights and personal self*respect #78DP 111%2 1 and 1%&. Oat all levels of development( the three essential ones EchoicesF are for people to lead a long and healthy life( to acAuire "nowledge and to have access to resources needed for a decent standard of living. If these essential choices are not available( many other opportunities remain inaccessible #78DP 111%2 1%&. People are the real wealth of a nation. 9he basic ob)ective of development is to create an enabling environment for people to en)oy long( healthy and creative lives. 9his may appear to be a simple truth. =ut it is often forgotten in the immediate concern with the accumulation of commodities and financial wealth #78DP 111%2 1( my italics in the three Auotations&. +s it says( the definition of these goals appears as a simple truthM but however this is not trivial( it has to be argued. ?hy are these choices( and not others(
B

9hese theoretical and practical insights are part of the so*called by .a"i"o #$%%$2 <3& ,outside criteria0 needed to operationali'e a theory of well*being.

arrison

11

essentialJ ?hat is a decent standard of livingJ +re life e6pectancy( literacy( enrollment and per capita Income a good way of measuring those choicesJ 9he 111< Report #78DP 111<2 1%5& adds2 9he three dimensions of the DI relate to one or many capabilities that they are e6pected to capture. 9hus( longevity captures the capability of leading a long and healthy life. -ducational attainments capture the capability of acAuiring "nowledge( communicating and participating in the life of the community. +ccess to resources needed for a decent standard of living captures the capability of leading a healthy life( guaranteeing physical and social mobility( communicating and participating in the life of the community #including consumption&. 9hese( however( are utterances( not arguments. Iet us see if they are more clarifications about each dimension. Concerning life e6pectancy( the DR 111% e6plains2 9he use of life e6pectancy as one of the principal indicators of human development rests on three considerations2 the intrinsic value of longevity( its value in helping people pursue various goals and its association with other characteristics( such as good health and nutrition. 9he importance of life e6pectancy relates primarily to the value people attach to living long and well #78DP 111%2 11&. 9his intrinsic value of longevity is evident. 9o obtain these other goals as well as those mentioned characteristics would probably need more development. Concerning "nowledge( the uman Development Report #111%2 1$& argues that literacy is the person!s first step in learning and "nowledge*building( but it recogni'es that other variables should be ta"en into account #as in fact future reports did adding enrollmentM the $%1% Report actually considers only current and e6pected enrollment&. Concerning the third "ey component of human development( ,command over the resources needed for a decent life0( it is first recogni'ed that ta"ing per capita income as indicator has strong limitations( because it leaves aside non tradable goods and services and the distorting effects stemming from e6change rates anomalies( tariffs and ta6es #78DP 111%2 1$&. +dditionally( the use of logarithm for the scale of incomes has two effects2 firstly( it decreases the weight of the highest incomesM secondly( the average of the logarithm tends to increase when the income is more eAually distributed. 9he first effect entails the decision of lowering the impact of the highest incomes on development #+nand and /en $%%%2 @3&. 9he second effect entails a preference for eAuality #+nand and /en 11142 <&. 9he assumption that income is an indirect indicator of other capabilities #than life e6pectancy and literacy& is a strong assumption because it means that income can ,buy0 these capabilities :which are surely a lot: and that their values are uniform and proportionally lower than education and life 1$

e6pectancy. For e6ample( it is not clear that there is a necessary correlation between income and democracy. +s the first D Report recogni'es( ,there is no automatic lin" between income growth and human progress0 #78DP 111%2 1%&. /umming up( pragmatic reasons indicate that a decision has to be made about the variables to ta"e into account when building the Inde6. 9his decision might not be the best2 +s /abina +l"ire #+l"ire $%%$2 33& asserts( a ,heroic specification is reAuired.0 8evertheless( she also states that ,EiFn the spirit of the capability approach the assumptions on the basis of which this specification ta"es place should be collaborative( visible( defensible( and revisable0 #+l"ire( ibid.&. 9hat is( we need to establish a process of decision. If not( we are ma"ing an under*illustrated practical decision2 a practical decision without practical science. 9he second practical decision is to assign an eAual weight to the three variables. It also sounds reasonable but( this is not argued. 3 9he only reference to this is the utterance that all three of the DI components are eAually important and that thus deserve eAual weight #78DP 11112 @@&. owever( for e6ample( people from a strong religious culture might consider that education or income( and even longevity( are not so relevantM and that they value religious faith :which cannot be bought: over the other varibles. 9hey might consider the Inde6 as -uropeani'ing. ?ithin "nowledge the decision of assigning two thirds of the specific Inde6 to adult literacy and one third to the combined gross enrollment is also a practical decision. Diven that enrollment implies literacy( the assignment of two thirds to adult literacy entails assigning more relevance to the present than to the future. Concerning enrollment( the decision of ta"ing into account with the same weight primary( secondary and tertiary education( is not e6plained. =esides( the $%%1 Report #78DP $%%12 $%5*$%B& recogni'es that combined gross enrollment ratios can hide important differences among countries given differences of Auality( of grade repetition and dropout rates. 9his is why the $%1% Report #78DP $%1%& adds e6pected enrollment. @ 9o ta"e practical decisions without )ustifying them is not a good practice. If values are not rationally found and established( we could be accused of being ideological. 9he DR has e6plicitly declared in its first Report that its orientation ,is practical and pragmatic #O&. Its purpose is neither to preach nor to recommend any particular model of development0 #78DP 111%2 iii&. owever( the DR continuously uses the verbs ,should0 and ,must02 values
3

For Iucio -sposito and -nrica Chiappero*.artinetti #$%%@2 <& ,the act of not giving weights :eAuivalent indeed to the assignation of identical weights to each dimension: is itself a sub)ective decision motivated by the value )udgment that those dimensions are eAually valuable. #O& In the literature #O& the possible meanings of the statement Kdimension h is more important than dimension have not critically been searched for.0 @ 9his new Report undertoo" a ma)or revision on the inde6es. It added new inde6es as the IneAuality*ad)usted uman Development Inde6 #I DI& and the .ultidimensional Poverty Inde6 #.PI&( and revised the old inde6es in the way we are suggesting here. I will e6pand on this changes in /ection 5.

1<

are then entering through a bac" door. 9he way to resolve this is to reason and to decide about them. 9here is a trade*off between the idiosyncratic and individual nature of capabilities and the establishment of a common inde6 based on common values. 9hat is( there is a trade*off between accuracy and universality* operativeness #see De Ianghe $%%1&. =ut surely it must e6ist a proceeding for reaching a prudential agreement among reasonable people about the content of the ,heroic specification0. 1 +s Flavio Comim #$%%@2 1B4& affirms( we need to establish ,procedures for solving the trade*offs( conflicts and inconsistencies between different options0. ?e have to determine who( when and how should intervene in the process of acceptance or re)ection of values2 philosophers( economists( politicians of different colors and countries( general public. 9hese proceedings should be stable( or at least the criteria for their change must be stable. I am conscious of the difficulties involved in this claim. owever( although it is not an easy tas"( we must try to loo" for a reasoned consensus about values. It is not only or always a matter of voting. In most cases we need previous research and development of theory. Diven that values are involved we have to put them over the tableM if not( they will always be reasons for criticism and disconformities. +s /en #11112 @%& contends( ,the implicit values have to be made more e6plicit.0 Finally( we also need to get a technical device or some form of measurement which guarantees an accurate measure of the observable variables. +dditionally( there is a lot to improve about the Auality of data. 9he economist must intervene in all the processes2 the definition of factors and of their weights( the construction of the Inde6( and the solution to their problems related with the accuracy of calculus and data. 9his should be an interdisciplinary wor" of people especially prepared for this type of dialogue. In the ne6t /ection I will show that this is actually the process that is increasingly being underta"en in the last uman Development Reports. %. The increasing role of practical reason in the Human Development Reports /ome shortcomings of the DI signaled in the last /ection have been overcome by the $%1% uman Development Report( published in last 8ovember. In the Introduction to the report( +martya /en maintains that( although being a ,crude0 inde6( the DI did what it was e6pected to do2 to go beyond commodities and income in the evaluation of development. e adds that ,new tables continue to appear in the steady stream of uman Development
1

/en #111$2 113& affirms2 ,It is not unreasonable to thin" that if we try to ta"e note of all the diversities( we might end up in a total mess of empirical confusion. 9he demands of practice( as well as reasonable normative commitments( indicate discretion and suggest that we disregard some diversities while concentrating in the more important ones.0 9he problem would be to decide what are important and what are not. It needs to be reasoned.

14

Reports( and new indices have been devised to supplement the our evaluation0 #78DP $%1%2 vi&.

DI and enrich

In this /ection I present the innovations introduced by this last report relevant to our purposes. 9hey are contained in two new inde6es and in a small modification of the DI2 i. 9he IneAuality*ad)usted uman Development Inde6 #I DI&. 9he lac" of consideration of ineAualities is considered as a serious defect of the DI. 9his new Inde6 remedies this defect. +s the Report asserts( ,the DI can be viewed as an inde6 of ,potential0 human development #or the ma6imum level of DI& that could be achieved if there was no ineAuality& while the I DI is the actual level of human development #accounting for ineAuality&. 9he difference between the DI and the ID I measures the ,loss0 in potential human development due to ineAuality0 #P87D $%1%2 @3( see also $13&. It is indeed interesting to analy'e these losses and their differences among countries and dimensions. ii. 9he .ultidimensional Poverty Inde6 #.PI&. 9his inde6 ta"es into account multiple deprivations at the individual level in the same dimensions of the DI2 health( education and standard of living. 9he data for this inde6 come from household surveys. 9he .PI establishes thresholds for the three dimensions( introducing new indicators. It combines the multidimensional headcount ratio #the proportion of the analy'ed population that is under the threshold& and the intensity or breadth of poverty #the proportion of indicators in which the population is deprived&. ,9he basic intuition is that the .PI represents the share of the population that is multidimensionaly poor( ad)usted by the intensity of the deprivations suffered0 #78DP $%1%2 $$$&. 9his inde6 uses 8utrition and child mortality as indicators of health( years of schooling and children enrolled as indicators of education and a series of access to services and assets #coc"ing fuel( toilet( water( electricity( floor( etc.& as criteria for determining the threshold of the standard of life. 9he uman Development Research Paper $%1%L11 e6pands on the reasons for choosing the new indicators and their weights. Concerning dimensions( it asserts #+l"ire and /antos $%1%2 1*1%&2 the selection of the $%1% DR dimensions has relied on the following mechanisms2 a. 9he first is the literature arising from participatory e8ercises( which engage a representative group of participants as reflective agents in ma"ing the value )udgments to select focal capabilities. +ll of the dimensions for the .PI have been regularly identified as important elements of ill*being by communities. b. 9he second is the use of some enduring consensus" particularly surrounding human rights and the .illennium Development Doals #.DDs&.

15

c. 9he third is theory based( as in the many philosophical or psychological accounts of basic needs( universal values( human rights( and so on. d. 9he fourth and the binding constraint is *hether the data e8ist . Due to data constraints #as well as( perhaps( interpretability& we have had to severely limit the dimensions. For e6ample( we do not have sufficient data on wor" or on empowerment. Net each of these dimensions should arguably be considered in a human development* based multidimensional poverty measure. 9he .PI includes three dimensions2 health( education( and the standard of living. 9he dimensions mirror the DI. ?hy is thisJ 8ow( as then( data form the binding constraint. #O& owever there are several arguments in favor of the chosen dimensions. First( parsimony2 having only three dimensions simplifies comparisons with income poverty measures. /econd( consensus2 while there could be some disagreement about the appropriateness of including wor"( empowerment( or physical safety in a poverty measure( the value of health( education( and basic standard of living variables is widely recogni'ed. 9hird( interpretability2 there are substantial literatures and fields of e6pertise on each of these topics( which will ma"e analysis of the .PI easier. Fourth( data2 while some data are poor( the validity( strengths( and limitations of various indicators are well documentedM such documentation is not as developed in domains such as empowerment. Fifth( inclusivity2 human development appreciates both the intrinsic and the instrumental value of these dimensions. 9hese same dimensions are emphasi'ed in human capital approaches that see" to clarify how each dimension is instrumental to income growth. In sum( there are good reasons for releasing the first version of the .PI with these three dimensions. First( it is clear that this Research paper assumes that values are involved in the election of the dimensions. /econd( the procedures for the election are typical of practical science. In the same vein( the paper sufficiently argues( based in a Kreasoned consensus!( for the election of indicators and the determination of weights. 9he procedures are participatory processes( e6pert opinion informed by public debate and survey Auestions. It e6plicitly asserts that ,the relative weights on different capabilities or dimensions that are used in society*wide measures are value )udgments0 #+l"ire and /antos $%1%2 1B&. I celebrate this initiative which responds to some of the critiAues and suggestions e6posed along /ection 4. I thin" that this conclusion( far from invalidating the critiAues( validates them because it means that the 78DP is actually doing what I was claiming for. iii. ?ithin the traditional DI specification( a change of the dimension ,education0( now called ,"nowledge0 has been introduced. Instead of literacy and enrollment as the indicators( it uses the mean and the e6pected years of 1B

schooling. 9his seems to be closer to the actual situation of education because it implicitly considers the possibility of desertion. +ll these improvements in the Inde6es presented in the DRs entail a greater use of theoretical reason in the definition of concepts and of practical reason in the value*relevant decisions involved in the construction of them. &. Short 'onclusion 9he paper conclusion trusts in a promissory future about the ac"nowledgement of practical reason!s role because the relevant Institutions are conscious of the need of improving the indicators and they are wor"ing in this line. 9hese are good news( but they are not enough. 9he Report recogni'es it #78DP $%1%2 11@&2 fully reali'ing the human development agenda reAuires going much further. Putting people at the centre of development is more than an intellectual e6ercise Qit means ma"ing progress eAuitable and broad*based( enabling people to become active participants in change and ensuring that achievements are not attained at the e6pense of future generations. .eeting these challenges is not only possible but necessary Qand more urgent than ever. 9his sense of urgency reinforces my optimistic feeling about the future of economics. References +ga''i( -vandro( 111$. ,Per una ricondu'ione della ra'ionalit; tecnologica entro l! ambito della ra'ionalit; pratica0( in /ergio Dalvan #a cura di&( Forme di Racionalita !ratica( Franco +ngeli( .ilan( 13*<1. +l"ire( /abina( $%%$. Valuing Freedoms& Sen/s Capabilities $pproach and !o%erty Reduction( 56ford 7niversity Press( 56ford. +l"ire( /abina and .arRa -mma /antos( $%1%. ,+cute .ultidimensional Poverty2 + 8ew Inde6 for Developing Countries0( uman Development Research Paper $1%1L11. +llen( R. D. D.( 1151. Statistics for Economists( utchison( Iondon. +nand( /udhir and +martya /en( 1114. , uman Development Inde62 .ethodology and .easurement0( #ccasional !apers( 1$( uman Development Report 5ffice( 8ew Nor". +nand( /udhir and +martya /en( $%%%. ,9he Income Component of the uman Development Inde60( 'ournal of 9uman De%elopment( 1L1( @<*1%B. +nderson( -li'abeth( 1113. ,Practical Reason and Incommensurable Doods0( in R. Chang #ed&( :ncommensurability" :ncomparability and !ractical Reason ( arvard 7niversity Press( 1%*1%1.

13

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/en( +martya( $%%$. Rationality and Freedom( 9he =el"nap Press( Cambridge2 arvard 7niversity Press. /mith( +dam( E1351F 1@@4. The Theory of Moral Sentiments( ed. by D. D. Raphael and +. I .acfie( Iiberty Fund( Indianapolis. /mith( +dam( E133BF 115$. $n :n2uiry :nto the Nature and Causes of the 1ealth of Nations( -ncyclopaedia =ritannica Inc. /trauss( Ieo( 1151. 1hat is !olitical !hilosophyC Illinois2 9he Free Press of Dlencoe. /treeten( Paul( 1114. , uman Development2 .eans and -nds0( The $merican Economic Re%ie*( @4L$( $<$*$<3. /ugden( Robert( 1111. ,Rational Choice2 + /urvey of Contributions from -conomics and Philosophy0( The Economic 'ournal 1%1( pp. 351*3@5. 7nited 8ations Development Program #78DP&( 111%. 9uman De%elopment Report DEE4( 8ew Nor" and 56ford2 56ford 7niversity Press. 7nited 8ations Development Program #78DP&( 1111. 9uman De%elopment Report DEED( 8ew Nor" and 56ford2 56ford 7niversity Press. 7nited 8ations Development Program #78DP&( 111<. 9uman De%elopment Report DEEF( 8ew Nor" and 56ford2 56ford 7niversity Press. 7nited 8ations Development Program #78DP&( $%%1. 9uman De%elopment Report 344E( =asingsto"e and 8ew Nor"2 Palgrave .acmillan. 7nited 8ations Development Program #78DP&( $%1%. 9uman De%elopment Report 34D4& The Real 1ealth of Nations6 !ath*ays to 9uman De%elopment( 8ew Nor"2 Palgrave .ac.illan. ?allace( R. >ay( $%%@. ,Practical Reason0( in Stanford Encycopledia of !hilosophy( retrieved $1 +pril $%1%( http2LLplato.stanford.eduLentriesLpractical*reasonL ?olff( endri"( oward Chong and .a6imilian +uffhammer( $%11. ,Classification( Detection and ConseAuences of Data -rror2 -vidence from the uman Development Inde60( The Economic 'ournal( 1$1( @4<*@3%. Noung( >effery 9.( 1113. Economics as a Moral Science& The !olitical Economy of $dam Smith( Cheltenham2 -lgar.

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