Kahneman’s Objective Happiness and Sen’s
Capabilities: a Critical Comparison
Nick Vikander
March 2007
Abstract
I compare Daniel Kahneman’s work on Objective Happiness and Amartya
Sen’s work on Capabilities, and contrast both with mainstream modern
economics. Both Kahneman and Sen challenge the standard welfare and
rational choice assumptions in economics. They both use elements of
modern economic rhetoric but the emphasis of their work has more in
common with earlier trends in economic thought. Their work differs from
each other primarily in their choice of focal variable for welfare judgments,
and the role they allow for adapation and reflective judgement.1 2
1
Introduction
This short essay aims to sketch out a number of similarities and differences in
the work of Daniel Kahneman and Amartya Sen. It focuses on Kahnemans work
on objective happiness, or experienced utility (terms I use interchangeably), as
a welfare measure and on Sens development of the capability approach to judge
personal advantage.
The essay consists of six short sections. Section 2 briefly describes these
two approaches and their normative foundations. Section 3 contrasts them to
the mainstream concept of welfare in economics and explores both Kahneman
and Sens criticism of standard rationality assumptions and the revealed preference paradigm. Section 4 looks at how both approaches relate to the rhetoric
of modern economics, and notes precursors to their content in the history of
economic thought. Section 5 examines how the objective happiness and capabilities approaches deal with human adaptation. Section 6 looks at the view on
deliberative judgement taken in each approach, while section 7 concludes.
This text does not attempt to do justice to Kahneman and Sen’s body of
scholarship. Instead it aims to pinpoint a few interesting areas of convergence
and divergence in their work, both with respect to each other and to mainstream
modern economics.
1 Contact: Erasmus University Rotterdam and Tinbergen Institute, [email protected],
www.tinbergen.nl/∼vikander
2 This paper was originally written for the Tinbergen MPhil field course Recent History of
Economic Thought.
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2
Objective Happiness and Capabilities
Kahneman makes a conceptual distinction between decision utility, experienced
utility and remembered utility. Decision utility is familiarly defined in terms of
a persons choice, in that one option (x) gives more decision-utility than another
(y) if the person would choose x over y. The experienced utility of an event is
a function of the instantaneous level of pain or pleasure a person feels at each
point in time. It is defined as the integral of this instant utility above a certain
neutral reference point, over the whole time period of the event. In that sense
it is the persons total hedonic experience from the event. Remembered utility
is a retrospective judgement of the experienced utility from a past episode [2].
While arguing that all these utility concepts are related, Kahneman argues
for the use of objective happiness as a welfare measure for a number of reasons.
A person’s actual mood and their enjoyment of life are generally viewed as important constituents of quality of life. While its strength may vary, this general
viewpoint holds across different cultures and systems of thought. Furthermore,
there may be specific situations where objective happiness is in fact the correct
way to assess welfare [1]. He argues not for its general applicability as judging
quality of life, but rather for its application when a separate value judgement has
determined it to be relevant for judging a particular situation [2]. For example,
a person may judge that objective happiness is the appropriate way to evaluate
how unpleasant a medical operation was, but that more complex criteria should
be used to evaluate how meaningful a given interpersonal relationship is.
Kahneman also defends the broader relevance of measures of subjective well
being (of which he considers objective happiness to be a part), such as a person’s
reported life satisfaction. He notes that there is systematic correlation between
these measures and certain personal characteristics as well as objective medical
and physiological criteria. Irrespective of one’s view on causality, it seems that
people with a higher level of life satisfaction tend to recover more quickly when
they fall ill, have better sleep quality and better self reported health. They
are also more sociable and have a high income, both in terms of its level or in
comparison to their reference group [5].
Sen makes a conceptual distinction of his own between personal welfare, or
well-being, and personal advantage. He defines well-being as the quality of a
person’s being, that is what a person is and what he does. The achieved beings
and doings of a person are called functionings, such as being healthy, being mobile, appearing in public without shame, taking part in the life of the community,
and Kahneman’s objective happiness. Personal advantage is viewed in terms of
a person’s effective freedom to choose over a set of potential combinations of
functionings, and this is called capability. To make a parallel with consumer
theory, achieved functionings are to capability what chosen commodity bundles
are to the budget set. Capability is thus viewed as a person’s real freedom to
choose the kind of life they have reason to value, and Sen proposes its use to
evaluate a person’s advantage [9].
While recognizing the importance of achieved well-being, focusing on capability recognises the intrinsic value of a person’s freedom to choose over possible
options whether they actually end up choosing an option or not. As well, certain types of functionings related to a person’s agency (in the sense of acting
to bring about change based on one’s values and objectives) such as a commitment to political and social change, may not be part of their well-being as such.
2
Furthermore, the liberal philosophical background of the capability approach is
reflected in its aims to respect differing ideas of what a good life is, since two
people with identical capability sets may make different choices in terms of what
functionings to achieve [6].
Sen points out that despite the philosophical merits of capabilities, applied
work may often analyse functionings or income instead. This choice may be
due to data limitations, but also to the fact that functionings and income may
at times provide clear inference regarding a person’s capability. For example,
a person whose bodily integrity has been violated quite generally has also had
their freedom to be free from violation violated as well, while looking at real
income holdings of different segments of the population can provide important
information on the ability to avoid malnutrition or mortality during times of
famine. In this sense, both Kahneman and Sen present a nuanced account of
when their respective approaches can best be applied, and in what way.
3
Challenge to Standard Welfarism, Revealed
Preference
Both Kahneman and Sen therefore present judgements of advantage or welfare
that are different from the central approach in economics based on revealed preference. Using Kahneman’s terminology, neither of them base their evaluative
judgements on decision-utility. As described above, Kahneman bases welfare
on objective happiness, while Sen eschews utility information altogether to base
judgement on the freedom to achieve. Moreover, Kahneman and Sen both argue
that there are many circumstances in which choice cannot be expected to reveal
preference, or even be rational in the traditional sense of obeying the Weak Axiom of Revealed Preference or standard expansion and contraction properties
(alpha, beta properties).
Kahneman’s research suggests that a person’s choice behaviour may be consistent yet still fail to reflect a person’s true preference, defined in terms of
objective happiness over different options. Most decisions are not based on
instantaneous feelings of pleasure or pain, but rather on recollections of past
events. In that sense, people’s choices may often reflect the maximization of
remembered utility, which itself is prone to certain systematic biases and as
such often differs from objective happiness. A major example of this sort is
peak-end evaluation, where a person’s remembered utility is largely determined
by the most intense moment of pleasure or pain of an experience, averaged with
his feeling shortly before the experience ends. Peak-end evaluation leads to duration neglect, where the duration of a pleasurable or painful experience has
little impact on remembered utility. Peak-end evaluation and duration neglect
were both observed in Kahneman’s 1996 study of patients undergoing colonoscopies in a Toronto hospital, where he measured both their minute by minute
discomfort level and asked for a retrospective judgement of their experience. A
consequence of this bias is that people’s retrospective ranking of experiences can
violate temporal monotonicity, in the sense that a person may report a higher
remembered utility when subjected to an extra period of moderately unpleasant
sensation at the end of their experience (thereby reducing the end effect). Since
choice behaviour is often based on remembered utility, choice behaviour itself
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may be consistent and yet still suffer from these same biases [2].
Furthermore, the way people analyse trade-offs can result in observed choices
that violate standard consistency requirements. When asked to report their willingness to pay for something with which they have little personal experience (for
example protecting a certain amount of rain-forest), people’s answers may reflect their general attitudes to the question rather than their preferences to the
specific situation at hand. A person’s attitude that environmental protection
is important may spur him to list a certain figure, which is largely independent of the specific area of rain-forest mentioned in the question. Furthermore,
decision-making heuristics and aspects not taken into account in general economic analysis, like the endowment effect or the pain of regret, can lead to
choices that are not rationalisable by any set of preferences [4].
Sen takes a different track but presents criticisms of revealed preference
and consistency of choice axioms that parallel Kahneman’s. He also points
out that a person’s choices may be consistent and yet not reflect (or reveal) a
person’s actual preferences. In certain situations, people make decisions taking
into account not only what they would personally prefer but also their cultural
traditions, their sense of duty or their feelings for others [7]. In this way of
looking at preferences, one could reasonably express a preference to go on a
vacation abroad rather than tend to an ailing family member, yet be perfectly
rational and consistent in choosing to stay because of a sense of duty.
Sen’s criticism of traditional consistency of choice axioms is not based on
psychological bias but on what he calls their demand for internal consistency;
they require choice to be consistent in relation to the information internal to the
choice function itself, irrespective of changing external circumstances. Internal
consistency may be violated in situations of positional choice, where one may be
quite eager to quit a job or cross a picket line on the condition of not being the
first to do so. In other situations, the menu of choice may yield new information about each one of the options and lead to violations of internally consistent
choice behaviour. In Sen’s evocative example, a person is invited to tea by a
distant acquaintance. She may well choose to go for tea rather than stay home
but if invited for either tea or cocaine, she may prefer to stay away instead,
thereby violating the Weak Axiom. In a similar vein, the substantive content
of each of the options may depend on the other options that are available. For
example, refraining from eating food only becomes fasting if the option of eating
is also available. While one could then redefine each option in a different way
when it is part of a different choice set, this leaves any intermenu consistency
conditions vacuous. Sen argues that all of the above choice behaviour is consistent in a broader, external sense, but only if one takes into account a richer set
of circumstances than is allowed for in traditional rational choice theory [9].
4
Rhetoric and Precursors in Economic Thought
Objective happiness and capabilities have an interesting connection to the rhetoric
of modern economics, despite diverging in content from standard welfare economics and the revealed preference framework.
In Kahneman’s case, this connection is due to the pervasiveness of the use
of the term utility in modern economics. He argues that the widespread assumption of rational behaviour in economics has permitted the informal use
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of the word utility to denote happiness, while formal analysis uses it simply
as a binary representation of choice behaviour. Following the idea that people
rationally maximize something in terms of their choice, and the attractiveness
of the claim that a rational person will maximize their own pleasure, utility is
simultaneously used in these two distinct ways within the economics profession.
In this sense, Kahneman’s focus on utility seems at first glance to mirror that
of mainstream economics, even though his experienced utility is quite distinct
from decision utility [4].
As for Sen, the rhetorical connection is caused by the frequent use of the
word freedom in the language of defenders of the market system. A decentralized
system of markets allows people the freedom to choose and make their own
consumption decisions, whereas government intervention tends to impede free
markets and free trade. This focus on freedom in language contrasts with the
formal defence of markets which is usually based on Pareto efficient allocations
in the space of utility. Freedom to trade or to choose is not valued in and
of itself, but is rather valued for its instrumental role in generating efficient
outcomes. No distinction would be made in terms of welfare if these allocation
were imposed by a dictatorial social planner [10].
Moving from language to content, there are a number of precursors to each of
their work in the history of economic thought. Kahneman’s objective happiness
is very similar to that of the traditional utilitarians such as Bentham, Edgeworth
and Marshall. Bentham coined the term utility as the pleasure or pain that
determines both people’s choice and what they should do. Edgeworth actually
fantasized about an imaginary instrument called a hedonimeter, which could
take instantaneous readings of the intensity of pleasure or pain throughout a
person’s experience of an event [4]. This instrument could be used to find the
person’s utility from the experience, which is precisely what Kahneman has
attempted to do in his experiments.
Sen often quotes John Hicks from 1981’s Wealth and Welfare to suggest that
an approach in economics based on freedom dates back to before attention was
ever paid to utility:
The liberal, or non-interference, principles of the classical (Smithian
or Ricardian) economists were not, in the first place, economic principles; they were an application to economics of principles that were
thought to apply to a much wider field. The contention that economic freedom made for economic efficiency was no more than a
secondary support. [10]
Sen also alludes to the central role of freedom in the work of Friedrich Hayek.
He views Hayek as placing economic issues in the broad context of a person’s
liberties and freedom, and arguing that economic considerations allow people to
reconcile their purposes which themselves are not economic in any deeper sense
[11].
5
Addressing Adaptation
Both Kahneman and Sen stress that happiness or life satisfaction can adapt
quite dramatically to one’s circumstances, but they address this issue in different
ways. A change in life circumstances may cause a great deal of happiness or
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unhappiness, but this tends to gradually becomes less intense as time goes by.
Kahneman presents several explanations for this. The first is that people’s
standards of evaluation tend to adjust to their circumstances. Case in point,
the amount of income people consider necessary to get by seems to increase
with their actual income level. The second is redeployment of attention, where
people reduce their focus over time on aspects of their situation which remain
particularly pleasant or unpleasant. In this way, paraplegics are not particularly
unhappy after a certain time because they do not constantly think about the
fact that they are paraplegics [4].
Kahneman aims to investigate adaptation theoretically and experimentally.
He mentions that people’s reported general life satisfaction may reflect an imperfect average of one’s objective happiness with an assessment of how things
measure up to one’s goals. Moreover, since objective happiness and a judgment
of how life measures up to one’s goals are distinct concepts, they may each adapt
in a different way to changes in a person’s circumstances. On this point there
are a number of competing hypotheses. The hedonic treadmill hypothesis is
that both a person’s objective happiness and their assessment of measuring up
to goals will adjust, while the aspiration treadmill hypothesis predicts that only
the latter will adjust to circumstances. The focusing hypothesis predicts that
the affect of life circumstances on both satisfaction and objective happiness is
small, but the latter will be even smaller because thoughts of one’s circumstances
are less likely to come to mind during everyday experience [3].
Experimental methods such as Experience Sampling or Kahneman’s Day
Reconstruction Method aim to separate out these effects and determine the
precise role of adaptation. For Kahneman, the consistently strong adaptation
of experienced utility to many life-circumstances (as suggested in the focusing
hypothesis) does not discredit its relevance as a welfare measure but instead
influences the kind of policy recommendations that could be put in place to
increase happiness. For example, the government could focus more on increasing
people’s social contacts and their time management rather than on expanding
income and consumption opportunities [5].
On the other hand, Sen sees people’s strong power of psychological adaptation as a reason to avoid using happiness as an appropriate measure for wellbeing or advantage, particularly when it comes to interpersonal comparisons.
One person may by all accounts have a high quality of life and the freedom to
choose when it comes to what she wants to do. Another may be patently unwell
and unfree, but due to adaptation both may report similar levels of happiness
or satisfaction. Sen argues that this does not change the fact that one is clearly
deprived while the other is not, and suggests policy should focus on increasing
this deprived person’s well-being and expanding their freedom. In short, Kahneman and Sen’s differing choice of a focal measure for welfare or advantage
(objective happiness versus capabilities) leads them to deal with adaptation in
different ways [11].
Although Sen aims to circumvent people’s psychological adaptation by not
focusing on happiness, looking at functioning or capabilities does not avoid the
problem as such. As noted below in Section 6, people’s general assessment of
their own situation and their own needs may also be strongly affected by the
circumstances in which they live. Thus problems of adaptation, particularly
those linked to entrenched deprivation, can also be present in the capability
approach when researchers ask people to subjectively report their level of well6
being or their freedom to choose.
6
Reflective Judgement
The two approaches differ markedly when it comes to how they view selfreflective judgements. Instantaneous utility is the basic concept in Kahneman’s
approach, and this does not involve any kind of consideration or reflective judgment from the person experiencing it. As seen in Section 3, people are prone
to certain systematic biases when they report remembered utility. The effect of
theses psychological biases from the reflective, ex-post evaluation of an experience can be avoided by trying to actually measure their experienced utility and
using that for welfare judgments. This is precisely what his Day Reconstruction
Method tries to do. So while recognizing adaptation’s strong influence on objective happiness but not considering it a problem, Kahneman clearly wants to
avoid the distortions that reflective judgment brings to judging the happiness
of a past experience.
This position is criticised by Alexandrova who argues that objective happiness as Kahneman proposes cannot therefore be a general measure of subjective
well-being [1]. The essence of subjective well-being is that it is judged by the
person himself, and ex-post moral or cognitive judgements (say due to guilt)
may legitimately cause one to adjust the value of what was experienced as happiness in the past. On the other hand, such a judgement will not change how the
emotion was experienced at the moment. As well, Kahneman proposes the use
of objective happiness precisely in situations where a separate value judgement
places hedonic experienced utility above morality, customs or other factors as
the relevant criteria for judging outcomes.
In contrast, Sen views self-reflective, deliberate judgement as a central point
in his capability approach. It is through reflective judgement that people come
to conclusions about what parts of their life they should be critical of, and what
they should value. Like Kahneman, Sen recognizes that people’s judgement
may be constrained but stresses that these constraints often stem from political
and social conditions rather than psychology. These constraints include a lack
of information, failure to be exposed to contrasting viewpoints and restrictive
social norms, all of which can prevent a person from freely coming to their own
conclusions. To mitigate these problems, Sen argues for democratic deliberation
as well as broad social and political dialogue. While also important for intrinsic
reasons, he sees deliberation and dialogue as playing a constructive role in how
people determine their values and priorities. For example, he attributes the
dramatic drop in fertility in certain parts of India to a change in people’s views
of what constitutes a good and happy family. That change has in turn been
caused by increased women’s education and by a political/social dialogue over
the effect of family size on women’s lives and on the community. In fact, this
process of value construction through social dialogue has had a more dramatic
impact on fertility than the coercive one-child policy in China [11]. While this
perspective is powerful, it does leave open the question of what constitutes social
conditions that leave a person truly free to come to their own decisions.
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7
Conclusion
Daniel Kahneman and Amartya Sen have both developed a body of work presenting a constructive challenge to mainstream economics, but in different ways.
In their work on objective happiness and capability, they have both chosen to
judge well-being or advantage by something other than traditional decisionutility. They have also both criticized the revealed-preference framework and
argued that standard rationality assumptions, as embodied in standard consistency of choice axioms, may often not hold. Furthermore, their work displays
some similarity with the rhetoric of modern economics while its content has more
in common with earlier work. While both take the issue of human adaptation
and the process of reflective judgement seriously, their different concepts of wellbeing lead each of them to deal with these issues in dramatically different ways.
Kahneman views psychological adaptation as something to be accepted and reflection on the utility of past experiences as a source of bias that should avoided
if possible. Sen, on the other hand, sees adaptation as a reason to avoid using
happiness in interpersonal comparisons and considers reflective judgement and
dialogue to be a key part of preference construction. These differences however
may be less stark than they at first appear to be. The freedom to be happy is an
important capability, whether or not it adapts to circumstances and irrespective of a person’s reasoned judgement about their happiness (or lack thereof).
Yet, while happiness may be a sufficient criteria for evaluating certain simple
life-situations, it may play a much smaller role when it comes to the complex
task of evaluating the broader issues in one’s life and society.
References
[1] Alexandrova, A. (2005): Subjective Well-Being and Kahneman’s Objective
Happiness’, Journal of Happiness Studies, 6, 301-324.
[2] Kahneman, D., Wakker, P. and Sarin, R. (1997): Back to Bentham? Explorations of Experienced Utility, The Quarterly Journal of Economics, 112:
2, 375-405.
[3] Kahneman, D., Krueger, A., Schkade, D., Schwarz, N. and Stone, A. (2004):
A Survey Method for Characterizing Daily Life Experience: The Day Reconstruction Method, Science, 306, 1776-1780.
[4] Kahneman, D. and Sugden, R. (2005): Experienced Utility as a Standard
of Policy Evaluation, Environmental & Resource Economics, 32, 161-181.
[5] Kahneman, D. and Krueger, A. (2006): Developments in the Measurement
of Subjective Well-Being, Journal of Economic Perspectives, 20:1, 3-24.
[6] Robeyns, I. (2005): The Capability Approach: a theoretical survey, Journal
of Human Development, 6:1, 93-114.
[7] Sen, A. (1973): Behaviour and the Concept of Preference, Economica, 40,
241-259.
[8] Sen, A. (1992): Inequality Reexamined, Clarendon Press, Oxford.
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[9] Sen, A. (1993 a): Internal Consistency of Choice, Econometrica, 61:3, 495521.
[10] Sen, A. (1993 b): Markets and Freedoms: Achievements and Limitations
of the Market Mechanism in Promoting Individual Freedoms, Oxford Economic Papers, 45:4, 519-541.
[11] Sen, A. (1999): Development as Freedom, Knopf, New York.
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