The measurement of multidimensional inequality

Abstract

In our treatment of the earlier chapters, income has been taken as the only indicator of well-being. But often this is inappropriate. Well-being of a population is a multidimensional phenomenon; income is just one of its many dimensions. It is certainly true that with high income a person may be able to improve the buying capacity of some of his nonincome dimensions of well-being. But for some dimensions, markets may not exist. An example is pollution control program in a community. This, therefore, shows inappropriateness of the use of prices as relative weights for the dimensions to arrive at a single measure of well-being or income. Further, the assumption of adequacy of prices for normative purposes is questionable (Tsui, 2002). In the basic-needs approach, an improvement in an array of certain fundamental needs, such as housing, food, clothing, education, health, various other social and political activities, and freedom is taken as an indication of development, not just growth of income alone (Streeten, 1981). Sen (1992) argued that the proper space for social evaluation is that of “functionings,” the different things, such as essential services, adequate nourishment, having self-respect, environmental factors, and communing with friends, etc., a person may value having, doing (or being). While the sets of realized functionings of different persons constitute an important part of social evaluation, more is required to get a complete picture of well-being. “Capability set” of an individual provides information on the set of functionings that he could achieve. The set of alternative functioning vectors from which a person has the freedom to choose, when the resource allocation is given, gives his capability set. Thus, capabilities represent real opportunities related to living conditions. The determination of living standard then relies on the opportunity set of the available basic capabilities of the person to function. Thus, the freedom to choose becomes an important component of the standard of living. This shows that well-being is intrinsically multidimensional from the capability-functioning perspective.