It may be too early to tell if this holds any policy level significance, but it is a development that Indian policymakers should watch closely. French President Nicolas Sarkozy has asked the renowned Nobel laureate and welfare economist Amartya Sen to help solve a riddle: why is it that so many voters stay pessimistic about their lives even while the big statistics portray a picture of optimism for the economy? Is there a way to measure progress that minimises this gap between success on paper and conditions on the ground?
Sarkozy could not have found a more appropriate person to tackle the problem. What is remarkable, perhaps, is that it has taken a right-of-centre French leader to focus attention on a field of economics that has, so far, been of philosophical influence more than practical utility in programme implementation terms. Of course, the centreground of French politics is to the left of that in most comparable countries, and it could also be argued that the ?inclusive growth? instincts of India?s current UPA dispensation owe their intellectual origin to Sen?s revival of welfare thinking within a free market framework. Yet, this is not leftover leftism. In fact, it is perfectly reasonable that welfare economics should interest those on the right of unreformed old socialists. As a discipline, it is distinct from the statism implied by old-style socialism now abandoned by just about everybody, and represents a political opportunity to take away the last clump of support that leftists anywhere have?their clear concern for the welfare of all?without retarding economic growth.
The way that France has chosen to frame the riddle is interesting because it addresses one of Sen?s core concerns about the assumptions we often make. Rational agents in an economy, he has argued, include those who think beyond their own self-interest and want to maximise everyone?s well-being. And such people do have a role in an economy that optimises outcomes through market mechanisms operated by the free exercise of individual choices. Nobody is talking about state controls, here, mind you. At the broader level of collective choices made, Sen has shown that it is theoretically possible to run a system that can satisfy a conscience that demands that it is independent, not directed internally by diktat, compatible with everyone?s own preferences, and accommodative of individual desires that do nobody else any harm. In other words, unfair compromises need not be made to secure both economic prosperity and whatever constitutes happiness at the individual level. On paper, that certainly sounds like excellent stuff, especially since it contradicts the earlier understanding that economic choices invariably involve trade-offs resulting in a raw deal for somebody or the other. But how does it actually work on the ground? Here, welfare economics requires inter-personal comparisons of individual well-being to be brought on to the table. It is quite likely that this will be the starting point of what Sen equips the French government with. What exactly needs to be found out? Can it be found out without an invasion of privacy that might render people vulnerable in some way? The informational approach to welfare economics will have to be ?Pareto efficient? in itself, too. None of its tools should be found objectionable. India should watch closely. But, as fellow laureate Joseph Stiglitz might advise, we must not simply replicate it without taking local realities into account.
