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The Revival of Classical PoliticalEconomy and the Cambridge Tradition:From Scarcity Theory to Surplus TheoryNuno Martins aa Faculty of Economics and Management, Portuguese CatholicUniversity, Porto, PortugalPublished online: 07 Jan 2011.

To cite this article: Nuno Martins (2011) The Revival of Classical Political Economy and theCambridge Tradition: From Scarcity Theory to Surplus Theory, Review of Political Economy, 23:1,111-131, DOI: 10.1080/09538259.2010.510319

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The Revival of Classical PoliticalEconomy and the CambridgeTradition: From Scarcity Theory toSurplus Theory

NUNO MARTINSFaculty of Economics and Management, Portuguese Catholic University,Porto, Portugal

ABSTRACT Hilary Putnam and Vivian Walsh argue that Amartya Sen’s contribution can,like the writings of Piero Sraffa, be best interpreted as a revival of classical politicaleconomy, in which Sen brings back into economics a richer conception of the humanagent, and a moral dimension. Sen criticises the conception of rationality that underpinsmainstream microeconomic theory, and suggests an alternative framework that canaccommodate a variety of motivations, including moral motivations, as will be arguedhere. Furthermore, the work of Sen, and other authors of the Cambridge tradition whoalso devoted much time to the revival of classical political economy, are complementaryin many respects, and provide the basic tools for an alternative economic theory, whichis centred on the economic, social and ethical analysis of the production and distributionof the economic surplus, and not on the modelling of the activity of optimising agents ina context of scarcity. While the notion of scarcity is very important for the analysis ofpoverty and deprivation that Sen undertakes, the central issue to address, in order toexplain the causal mechanisms behind scarcity, poverty and deprivation, concerns thestudy of the production and distribution of the economic surplus.

1. Introduction

Hilary Putnam (2002) and Vivian Walsh (2000, 2003, 2008) argue that AmartyaSen’s writings can, like the writings of Piero Sraffa, be best interpreted as a revivalof the classical economic tradition, within a conception in which values play acrucial role, in contrast to the current approach of mainstream economics,which tends to neglect the role of values, and the implications of a variety ofmotivations (including moral motivations) other than self-interest. As Walsh(2003, p. 318) notes, the revival of the classical framework was a central

Review of Political Economy,Volume 23, Number 1, 111–131, January 2011

Correspondence Address: Nuno Martins, Portuguese Catholic University, Faculty of Economics andManagement, 1327 Rua Diogo Botelho, 4169–005 Porto, Portugal. Email: nmartins@porto.ucp.pt

ISSN 0953-8259 print/ISSN 1465-3982 online/11/010111–21 # 2011 Taylor & Francis

DOI: 10.1080/09538259.2010.510319

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concern not only of Sraffa and Sen, but also of the authors of what is often calledthe Cambridge tradition (on which see Harcourt, 2003; Harcourt & Kerr, 2003; orPasinetti, 2005). Writings on the relation between the Cambridge tradition andclassical political economy highlight the central role of an analytical frameworkthat explains the production and distribution of the economic surplus, whichunderpins the work of classical economists from Adam Smith (1776) to KarlMarx (1999), and is most clearly described by Sraffa (1960).

However, as will be argued here, it is not just Sraffa’s revival of thisanalytical framework of classical political economy that can be situated withinthe Cambridge revival of classical political economy, but also Sen’s contribution,which recovers the integrated approach to ethics, ontology and economics thatcharacterises not only classical political economy from Smith to Marx, but alsothe Cambridge tradition from Sidgwick until today. That is, the moral dimensionof economic analysis that Sen recovers is fundamental not only to the revival ofclassical political economy, but also to the particular way in which this revivalemerged in the Cambridge tradition.

I will also argue that the work of Sraffa and Sen, and many other authors ofthe Cambridge tradition, is complementary in many respects. Pasinetti (2005)distinguishes between two stages of economic analysis, which he terms as ‘puretheory’ and ‘institutional analysis’. While Sraffa’s theory is most useful for thestudy of ‘pure theory’, and to the study of the activities of production of theeconomic surplus, Sen’s contribution, together with the contributions of manyother authors of the Cambridge tradition, is most relevant to the ‘institutionalanalysis’ of the distribution of the economic surplus, which is already implicitin Sen’s writings on capabilities and economic justice, and explicitly discussedby many authors of the Cambridge tradition from the point of view of its impli-cations to economic growth.

Furthermore, the work of Sraffa and Sen provides an alternative to two keyingredients of mainstream economics, namely the neoclassical production func-tion, and the neoclassical utility function. While Sraffa provides an alternativeto the neoclassical production function famously criticised by Joan Robinson(1953), proposing instead a multidimensional framework for the study of pro-duction, Sen points towards an alternative to the neoclassical utility function,suggesting a multidimensional approach not only to the study of well-being inhis capability approach, but also a multidimensional approach to the study ofeconomic behaviour and rationality.

In fact, Sen criticised not only the neoclassical utility function, but also thevery conception of rationality adopted in mainstream economics. I will arguethat Sen’s critique of the mainstream conception of rationality, and of the postulateof optimisation, also opens the way for moving beyond a theory that studies theeconomy and society in terms of the activity of optimising agents in a contextof scarcity, towards an analysis of the activities of production and distributionof the economic surplus, leading to an economic perspective similar to that of clas-sical political economists from Smith to Marx, which underpins the work of manyauthors of the Cambridge tradition.

While scarcity is a most important notion for development economics, andfor the analysis of poverty and deprivation that Sen undertakes, the production

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and distribution of the economic surplus is the essential question to address whendeveloping a theory that explains the mechanisms that generate scarcity, povertyand distribution. Sen’s contribution provides a general philosophical frameworkthat enables the ontological description of advantage and well-being in terms ofcapabilities and functionings, and of rationality as the freedom to scrutinisegoals and values. But in order to render Sen’s philosophical framework applicable,we also need a substantive theory, which can be found in the revival of classicalpolitical economy that took place within the Cambridge tradition.

2. The Cambridge Revival of Classical Political Economy

Putnam (2002) and Walsh (2000, 2003, 2008) argue that Sen’s contributions canbe seen as a recovery of the moral dimension of economic agency, which has beenprogressively abandoned in economics. They also suggest that throughout the 20thcentury there was a revival of classical political economy in two stages. The firststage was initiated by Sraffa (1926, 1960), who attempted to recover the core ofthe analytical framework of classical political economy, and its explanation ofthe production and distribution of the economic surplus, which underpins thework of classical authors from Smith to Marx.

According to Putnam and Walsh, the work of Sen amounts to a revival of thephilosophical anthropology and moral dimension of classical political economy(which was also essential to classical authors from Smith to Marx), in whichethics and economics were not separated (see Sen, 1987); this is the secondstage. Sen (2003) himself notes how Sraffa also had a rich anthropological viewof the human agent, much influenced by Antonio Gramsci, although Sraffa’spublished writings directly addressed only the analytical framework of economictheory.

A strong concern with the moral dimension of economics, and with theanalysis of human well-being within an integrated approach to economics, is akey feature of what has come to be called the Cambridge economic tradition.That tradition was founded and shaped by Henry Sidgwick, Alfred Marshalland Arthur Pigou, and continues today in the work of Sen, amongst others (seeBackhouse, 2006; Harcourt, 2003; Martins, 2009 or Medema, 2007).

Sidgwick, Marshall and Pigou, however, developed a neoclassical frame-work that was abandoned by John Maynard Keynes (1936) and criticised byauthors such as Piero Sraffa (1926). This created a division between authors inthe Cambridge tradition who remained close to neoclassical economics, followingMarshall and Pigou, and those like Keynes and Sraffa who became highly criticalof neoclassical economics.

The authors of the Cambridge tradition, who became critical of neoclassicaleconomics, played a central role in the revival of the classical explanation of theproduction and distribution of a surplus. So although the founders of the Cambridgetradition were neoclassical authors for whom scarcity was a central notion,the study of the production and distribution of the economic surplus laterbecame the central topic in the more heterodox wing of the Cambridge tradition.As Cohen & Harcourt (2003, p. 208) argue, in line with Walsh & Gram (1980):

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While neoclassical economics envisions the lifetime utility-maximizing con-sumption decisions of individuals as the driving force of economic activity,with the allocation of given, scarce resources as the fundamental economicproblem, the ‘English’ Cantabrigians argue for a return to a classical politicaleconomy vision. There, profit-making decisions of capitalist firms are thedriving force, with the fundamental economic problem being the allocation ofsurplus output to ensure reproduction and growth.

However, while ‘English’ Cantabrigians like Joan Robinson and Sraffa wereessentially concerned with finding an alternative that replaced the neoclassicalproduction function, Sen’s contribution was aimed at finding an alternative tothe neoclassical utility function. There was nevertheless much interactionbetween Sen and the authors engaged in the Cambridge revival of the classicaltheory of the production and reproduction of a surplus. Walsh (2003, p. 318;emphasis in original) writes:

Piero Sraffa . . . was in England, at Cambridge, from the 1920s, and in the 1950she was at the center of a group of people vigorously reviving classical theoryunder his inspiration and that of Joan Robinson. Since a number of them wereItalian—such as Pierangelo Garegnani and Luigi Pasinetti—the Cambridgeschool of modern classicism came to be known also as the Anglo-Italianschool. Sen was a graduate student in Cambridge and Robinson was supervisinghis PhD dissertation . . ., and he was studying economics with Piero Sraffa andMaurice Dobb, just as the Cambridge contributions to the classical revival werein full flood. It was thus this part of the 20th century classical revival that lay inthe youthful Sen’s immediate intellectual environment.

But as Walsh also notes, the Cambridge revival of classical political economyin the 20th century was more concerned with the analytical structure of economictheory, while Sen was essentially concerned with another key aspect of classicalpolitical economy, namely a richer moral and philosophical dimension foreconomic analysis.

3. Facts, Values and Ontological Description

Putnam (2002) argues strongly in favour of a closer interaction between econ-omics and moral philosophy, as Sen advocates, since fact, theory and values areentangled in complex ways, so as to make it impossible to analyse them separ-ately. Ethical values are always involved in the exercise of decision-making,and epistemic values (such as simplicity or coherence) always guide a theoreticaldescription of a fact. These ethical and epistemic values are also essential for arational choice, be it individual or collective, to take place.

While Putnam is undoubtedly right in noting how Sen recovers a moraldimension of classical political economy, it also seems to be the case thatPutnam downplays other philosophical dimensions of Sen’s work. Sen’s capa-bility approach, for example, has been more concerned with the ontologicaldescription of a space for assessing well-being and advantage, than with the dis-cussion of ethical prescriptive criteria (see Martins, 2007a). Sen’s ethical analysis,like Smith’s ethics, is essentially a descriptive ethics, more concerned with

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ontological description than with ethical prescription, much influenced by thework of the Cambridge Marxist economist Maurice Dobb, and the latter’snotion of ‘rich description,’ as Walsh (2003, 2008) and Sen (2005) note.

So while Sen undoubtedly combines economic and moral analysis, it is notclear whether Sen’s approach is compatible with Putnam’s (2002) argument forthe entanglement of facts and values, if the latter must lead to Putnam’s (2004)conception of ‘ethics without ontology’. This issue has recently been obscuredby Sen himself, for he writes that if ontology means the analysis of ethicalobjects, ‘it is difficult to understand what these ethical objects might be like’,and that he ‘would rather go along with Hilary Putnam’s argument that this lineof investigation is largely unhelpful and misguided’, because ‘despite someoverlap between description and evaluation, ethics cannot be simply a matter oftruthful description of specific objects.’ This is because ethics involves, asPutnam argues, not only values, but a ‘complex mixture of philosophicalbeliefs, religious beliefs and factual beliefs’ (Sen, 2009, p. 41).

Sen’s criticism of ontology springs from the fact that, similarly to Putnam(2004), he considers only a very limited conception of ontology, and of the wayin which ethics and ontology can be combined. Sen is taking ontology to be the‘truthful description of specific objects’, where this description would involveno values or beliefs. This view seems to spring from Sen’s own understandingof description, which is, on a closer look, actually incompatible with Putnam’sposition, since Sen actually rejects the entanglement of facts and values. Senwrites:

But why must every factual statement involve values? The basis of the claimseems to rest uneasily on the belief, which is correct, that any descriptioninvolves some selection. What is not correct is the further belief that the selec-tion must be based on some explicit or implicit prescriptive criterion. The cri-teria used for selection, as I have been arguing, may be aimed at objectivesother than prescription, e.g., catering to curiosity. (Sen, 1982, p. 444; emphasisin original)

This is a point repeated by Sen (2005) when, discussing Putnam’s interpret-ation of his work, he notes how the labour theory of value is important for him notjust because of its ability to predict prices or because of its prescriptive impli-cations, but essentially as a description of the labour process. Here Sen recogniseshow much he was influenced by Dobb’s notion of ‘rich description.’

But if we see description as an exercise where values and beliefs play no role,and take ontology to consist of such an exercise, then such a view of ontology is, asSen (2009, p. 41) argues, surely ‘unhelpful and misguided’ since, as Lawson(2003, p. 220) explains, ontological realism must be combined with epistemologi-cal relativism. That is, our conceptions of reality are always epistemologicallyrelative, and position dependent. This is in fact the important insight ofPutnam’s (2002) argument for the entanglement of fact and (ethical and epistemic)values.

But to take a further step from here, and conclude that objects of analysis arenot real or a matter of serious study, only because our conceptions of them areepistemologically relative or position dependent, is to confuse ontological

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claims (about existence) with epistemological claims (about knowledge). Ourepistemological conceptions are surely position-dependent and fallible, but onlybecause there is an ontological domain about which we can be wrong, asPutnam (2002, p. 100) implicitly recognises when arguing that ‘there areobjects that are not parts of thought and language’, and that ‘what we say aboutthose objects sometimes gets the facts right’ (emphasis in original).

Not only do the claims of Putnam (2004) and Sen (2009) seem to reduce ontol-ogy to the study of unexplained ‘ethical objects’, or ‘mathematical objects’, as thecommonsense realism they endorse presupposes the existence of an externalreality, and thus an ontology. In fact, by neglecting ontology, Sen (2009) wouldbe throwing away the baby with the bathwater, for at least two reasons. First,because if there is no such thing as a real object about which we can be wrong(if we do not accept both ontological realism and epistemological relativism),we are led to a relativist position (not only on epistemology, but also on ethicsand ontology), which is destructive of what is important in Sen’s contributionand in the project of human development, as Walsh (2003, p. 340) explains.Putnam (2002, pp. 98–101) criticises Richard Rorty precisely for his relativism,which is however a natural consequence of neglecting ontology and realism.

Secondly, the added value of Sen’s conception is the ontological descriptionit provides of categories like well-being, freedom, functionings, capabilities,agency, rationality, and the like. This point is surely clear in the capabilityapproach, which became extremely useful (and popular) for the study of develop-ment precisely because of the rich description of development it provides, goingbeyond the impoverished mainstream account of development (see Martins,2007a, 2007b). But it is also true of Sen’s criticism of microeconomic theory,which has been relatively neglected in mainstream economics.

In fact, Sen’s critique of mainstream economics does not consist only inarguing for a larger ethical basis (in an integrated approach to ethics and descrip-tion). Another central point in Sen’s critique of mainstream economics is his claimthat the use of utility functions is unsatisfactory because it presupposes theexistence of complete preferences in every occasion, in line with an argumentPutnam (1996) also makes in another context. Sen notes that the complexity ofhuman behaviour requires an explanatory framework that can accommodate avariety of motivations that characterise human behaviour and that are neglectedin mainstream economics. This is a critique of the limited descriptive potentialof mainstream economics, which led Sen to a multidimensional conception ofbehaviour and well-being.

Sen’s work on rationality shows how, while he is surely critical of the ethicalunderpinnings of utilitarianism, his critique is also directed at the mainstreamdescription of rationality of behaviour, and not just at the ethical underpinningsof this theory. Mainstream economic theory is unsatisfactory for Sen because ofthe poor description of behaviour it provides, where the lack of attention tomoral issues is part of this general failure at the level of ontological description.Furthermore, Sen’s critique of the conception of rationality of mainstream econ-omics is essential to the project of a revival of classical political economy, since itchallenges the neoclassical utility function which, together with the neoclassicalproduction function, constitutes one of the key analytical frameworks of

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mainstream economics. To see why this is the case, Sen’s critique of mainstreamrational choice theory, and of mainstream welfare economics, will now beexplained in more detail in the following sections.

4. Rationality in Mainstream Microeconomics

Sen (2002, p. 225) identifies two dominant approaches to rational choice theory,which he designates as the ‘internal consistency’ approach and the ‘self-interestpursuit’ approach. The ‘internal consistency’ approach aims to explain behaviourby finding regularities in observed behaviour that enable us to assess its consist-ency without reference to anything other than observed behaviour—hence thename ‘internal consistency’, for consistency properties are internal to the choicefunction that describes behaviour.1

The internal consistency approach has been a basis for the theory of‘revealed preference’ in economics. In this theory, instead of starting fromassumptions on preferences, we start by observing choices, and then work outwhich preferences are consistent with those choices, by checking whether theagents’ choices do or do not violate the strong or weak axiom of revealed pre-ference. In this way we infer the underlying preference that is revealed inchoice. Sen (2002, p. 124) quotes Ian Little’s endorsement of this approach:‘if an individual’s behavior is consistent, then it must be possible to explainthe behavior without reference to anything other than behavior’ (Little, 1949,p. 90). Sen (2002) notes that one could interpret axioms of revealed preferencenot as conditions of internal consistency of choice or behaviour, but as a conse-quence of utility optimisation. In this case, the revealed preference approachwould be in line with the self-interest pursuit approach, and not with the internalconsistency approach.

In the self-interest pursuit approach, it is assumed that one motivation,self-interest, dominates all other motivations in economic agency. So ‘rational’behaviour, insofar as it is economically relevant, will consist of the pursuit ofself-interest. This assumption overcomes the problem of disentangling theeffects of different motivations on behaviour, by ruling out motivations otherthan what is defined as self-interest. It is also assumed that self-interest can berepresented by a unique preference ordering. This approach provides a basis forthe application of utility theory in microeconomic analysis, through the use ofutility functions. The utility function represents the chooser’s preferences, andconstitutes a tool of analysis for explaining how preferences determine choices.

The notion of ‘utility’ is used in a somewhat ambiguous way in these twoapproaches. Sen identifies three common interpretations of the concept ofutility: ‘happiness’ (used by Marshall, 1920, and Pigou, 1920), ‘desire-fulfilment’(used by Sidgwick, 1874, and Frank Ramsey, 1928, 1978), and ‘choice’ (which is

1These regularities are analysed by checking whether observed behaviour conforms tocertain axioms of ‘internal consistency’ of the choice function, such as the weak axiomof revealed preference, the strong axiom of revealed preference, basic contraction consist-ency, basic expansion consistency or binariness of choice.

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implied in Paul Samuelson’s revealed preference theory, on which see Samuelson,1947). The self-interest pursuit approach seems to suggest one of the first twointerpretations, for ‘happiness’ and ‘desire-fulfilment’ are commonly regardedas the aim of self-interested behaviour. The internal consistency approach, onthe other hand, looks like a case where utility is taken in the third interpretationmentioned, since in such an approach one starts from observed choices—andutility, welfare and preferences are then inferred from observed choices.

5. Sen’s Critique of Mainstream Rational Choice Theory

Sen notes how internal consistency of choice is neither a sufficient nor a necess-ary condition of choice. It is not sufficient because ‘[a] person who alwayschooses the things he values least and hates most would have great consistencyof behavior, but he can scarcely count as a model of rationality’ (Sen 2002,p. 20). Sen argues that internal consistency of choice is not a necessary conditionfor rationality either, for there may be actions that are rational (according to ourcommon understanding of rationality) but where the axiomatic conditions ofconsistency of behaviour would not obtain (for elaborations, see Sen, 1987,1993a, 2002).

Sen also points out how the internal psychological structure of the individualmay be affected by conflicting motivations, values or goals, each of them corre-sponding to a different ordering, and interacting in a way that precludes the emer-gence of an internally consistent preference ordering. Furthermore, externalfactors may influence choice as well. An example is the case Sen (1997, 2002)calls ‘menu-dependence’. Changes of the menu—for example by introducing anew element in the menu—may change our attitude towards the other elementsof the menu, thus changing the preference ordering that ranks the other elementsof the menu. This menu-dependence effect violates the axiomatic conditions ofinternal consistency of choice, which require that orderings must be independentfrom external conditions. It is thus very unlikely that one ordering only willconsistently represent the joint effect of non-congruent motivations, and theirinterplay with the external environment.

Furthermore, as Putnam (1996) also argues, preferences may not even becomplete. In many circumstances, some options may not be ranked vis-a-viseach other in any way, and hence internal consistency will not obtain, for differ-ent choices would arise under the same circumstances. Incompleteness maycharacterise not only a preference relation that describes a given motivation,but also any preference relation that would describe the ‘actual’ behaviour thatarises out of competing motivations. Limited information, value conflicts, orthe need to act before the judgemental process has been made, may underminethe possibility of consistently acting according to complete preferences, as Sen(1997) notes.

Incompleteness and indifference are two distinct notions (Sen, 1982, pp. 60–62). Indifference between two elements of a set means that the agent is able tocompare the two elements, and reaches the conclusion that she or he weaklyprefers each element to the other, but does not strictly prefer either of them tothe other. In the case of incompleteness, the preference ordering is not even

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defined over two or more elements, for the reasons mentioned above. Completepreference orderings are compatible with the existence of indifference, and thelatter does not preclude the emergence of optimal outcomes, as will be shownlater.

Sen concludes thus that the internal consistency approach fails conceptually:it is ‘foundationally misconceived’, for ‘[w]hat counts as “consistency” is basi-cally undecidable without taking some note of the motivation of the chooser’(Sen, 2002, p. 20). Moreover, it fails substantively for, Sen argues, the conditionsof internal consistency may not even obtain.

Sen (1997, 2005) also criticises the self-interest pursuit approach, for ignor-ing motivations for behaviour other than what is defined as self-interest. Senargues that whilst motivations such as sympathy or reputation can be viewed aspart of the person’s welfare or ‘utility’ (if sympathy affects our welfare, or ifthe reason to maintain a reputation is merely to attain a higher level of welfarein the future), other motivations such as conventional rule following, socialcommitment and moral imperatives, can drive a wedge between personal choiceand personal welfare. There are situations where a given choice increases ourwelfare (and thus it is the choice to which the pursuit of self-interest wouldlead us), but social or moral constraints prevent us from choosing the welfare-optimising option.

Hence, the motivation of self-interest is not enough to account for all relevant‘reasons for choice’. This also means that one has to be careful, when using theterm ‘preference’, to state whether one means actual choices or personalwelfare. Since choice and self-interest may not coincide, the self-interest pursuitapproach, which posits that they always do, is also unsatisfactory.

6. The Role of Prediction

Sen notes how the internal consistency approach and the self-interest pursuitapproach are often conflated. In the self-interest pursuit approach, whatever isdefined as our preferences determines which option will be chosen. So, in thelatter approach, preferences, utility, welfare and choice are represented by thesame ordering, and to define preferences and utility according to any of the firsttwo interpretations of utility (namely, ‘happiness’ and ‘desire-fulfilment’)would lead us to identify the latter with the third interpretation of utility(namely, ‘choice’).

Analogously, in the internal consistency approach, whatever choice ismade is supposed to be the utility- or welfare-optimising choice—in fact,such a choice only ‘reveals’ the ‘preference’ that led to it in the first place—so the same identity between all concepts follows. Hence, in both approaches,welfare, choice and preference imply the same ordering of options. Further-more, in both approaches, such an ordering, like any ordering by definition,must be complete and transitive, enabling us to predict choices—that is,predict which element of a set will be chosen, if that element is strictly pre-ferred to all other elements, or which is the set of elements from which thechoice will be made, if there is a set of elements between which the chooser

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is indifferent, with all elements of such a set being strictly preferred toelements that are not in such a set.2

Sen (2002, p. 226) notes how even though the two approaches are ‘fundamen-tally different’ they are confounded in this way in standard microeconomic theorybecause self-interest and utility are defined through the binary relation of revealedpreference. This is why both these approaches lead to the same results, and to anidentification of choice with preferences and welfare.

The assumption that rational behaviour can be described through a uniqueordering, combined with the assumption that rational behaviour mimics orapproximates actual behaviour, enables the use of rational choice theory for pre-dictive purposes. As Sen argues:

[T]he use of ‘rational choice’ in economics and related disciplines is very oftenindirect, particularly as a predicting device for actual behavior, and this canoften overshadow the direct use of rationality. That indirect program is gearedto the prognostication of actual behavior by first characterizing rational behav-ior, and then assuming that actual behavior will coincide with rational behavior,or at least approximate it. In this indirect use, the idea of rationality plays anintermediating role in taking us to predictive analysis via the presumption ofrational behavior (combined with a view—typically a simple view—as towhat makes a behavior rational).

A substantial part of the immediate appeal of this approach of ‘prediction viarationality’ lies in the tractability—and perhaps the simplification—that thisprocedure may provide. (Sen, 2002, p. 42; emphasis in original)

In short, it is not a particular interpretation or use of concepts like ‘choice’,‘preference’, ‘welfare’, ‘utility’ and ‘self-interest’ that is central to mainstreameconomic theory—for these concepts are often conflated or used in an ambiguousway in mainstream economic theory—but rather the modelling of human behav-iour in terms of exact regularities so as to enable prediction of events throughthe use of a unique and complete preference ordering, and avoid the difficultiesgenerated by the existence of various (possibly conflicting) motivations.

The central claim of Sen’s argument against mainstream economics is thatwhile a complete preference ordering may be necessary for prediction, it consti-tutes an insufficient description of human preferences and well-being:

The economic theory of utility, which relates to the theory of rational behaviour,is sometimes criticized for having too much structure; human beings are allegedto be ‘simpler’ in reality. If our argument so far has been correct, precisely theopposite seems to be the case: traditional theory has too little structure. A personis given one preference ordering, and as and when the need arises this is

2Note that the latter case, when there is an optimal set as opposed to a unique optimum, isseldom considered. This is because the possibility of indifferent preference relations(which leads preference orderings to be represented by quasi-concave utility functions,and may lead to the emergence of an optimal set, as opposed to an unique optimum),albeit a theoretical possibility in the analytical framework of mainstream microeconomics,is rarely considered in most models, precisely in order to enable the model to predict whichoption will be chosen, that is, to ensure that a unique optimum exists.

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supposed to reflect his interests, represent his welfare, summarize his idea ofwhat should be done, and describe his actual choices and behaviour. (Sen,1982, p. 99; emphasis in original)

Frank Hahn (1991, p. 8) criticised this argument on the grounds that sincehuman agents trade between ‘competing desires and motives’ in their choices,and ‘trades involve comparisons and comparisons require comparability’,recourse to a unique preference ordering is crucial for economic theory. The con-ception of economic theory that Hahn is adopting here is one where agents opti-mise in a context of scarcity. But as Sen (1991) noted in his response to Hahn,while scarcity is an important notion within economic theory, the formulationof an economic theory within which human action must always be explained asthe outcome of utility-optimisation given a set of scarce resources led to theneglect of the ‘existence of a variety of motives’ for human agency in mainstreameconomics (see also Walsh, 1961). Within Sen’s multidimensional conception ofpreferences, conflicts of preferences, goals or values may occur.

7. Maximisation and Optimisation

A question that follows is how a decision can be reached if some options may benon-comparable, due to the existence of incomplete preferences. To explain this,Sen (1997) makes a distinction between optimisation and maximisation. For Sen,optimisation means finding a ‘best’ alternative amongst all the feasible options(where an optimal option is weakly preferred to all other feasible options in a set).Maximisation, on the other hand, means to choose an element such that there is noother alternative in the set that is strictly preferred to the chosen ‘maximal’ element.

So to optimise implies comparing and ranking all alternatives vis-a-vis eachother. But to maximise (in Sen’s usage of the term) does not require comparing allelements. The ‘maximal’ element is any element such that there is no otherelement that is strictly preferred to the former. This can happen in two situations:either the preference relation is defined and no other element is strictly preferred tothe maximal element according to such a preference relation; or the preferencerelation is not even defined, and thus there is no other element that is strictlypreferred to the chosen element, hence the chosen element is maximal as well.

Therefore, when we have some elements of a set that are not ranked vis-a-viseach other, and so the preference relation is incomplete, there will exist maximalelements nevertheless—the set of maximal elements will be non-empty. Thisterminology may generate some confusion, for Sen uses the term ‘maximisation’in a very different sense than most economic literature. Sen (2002, p. 159; emphasisin original) explains:

The formulation of maximizing behavior in economics has often paralleled themodelling of maximization in physics and related disciplines. But maximizingbehavior differs from nonvolitional maximization because of the fundamentalrelevance of the choice act, which has to be placed in a central position inanalyzing maximizing behavior.

Maximisation, in Sen’s conception of the term, allows for a choice being madeeven with ‘incompleteness’ of preferences. Sen explains that this incompleteness

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may be tentative incompleteness, when some pairs of alternatives are not yetranked, but they may get ranked with more deliberation or information, or assertiveincompleteness, when some pairs of alternatives are simply ‘non-rankable’. Sen’sview is that human agents are what he calls ‘maximisers’, while in mainstreammicroeconomic theory they are seen as what Sen calls ‘optimisers’.

It may happen, as a particular case, that a complete and fully transitive pre-ference relation arises. Or it may even happen that only one maximal element, orone optimal element, exists, and hence it is possible to predict exactly whichoption will be chosen. But the point to note is that whilst in mainstream economictheory human agents are assumed to always follow a unique ordering (where typi-cally only strict preference relations exist, so that a unique optimum arises), inSen’s conception the situation that is posited in mainstream economic theorybecomes a particular case, which may or may not occur. Recall that Sen doesnot argue that actual behaviour will never turn out to be representable by aunique ordering, but rather that one cannot assume a priori that a unique orderingwill always describe human behaviour adequately, or that a unique optimal willinvariably arise.

Since the representation of preferences through a utility function with theusual properties presupposes complete preferences, Sen’s critique of rationalityundermines the foundational basis of the utility function. Sen criticises not onlythe reliance on utilitarianism as an ethical theory, but also the insufficient descrip-tion of rationality and behaviour that the utility function, and its reliance on com-plete preferences, provides.

8. Sen’s Conception of Rationality

After criticising the accounts of rationality given by mainstream rational choicetheory, Sen provides his own conception of rationality. According to Sen, ration-ality is neither the permanent exercise of self-interest pursuit, nor does it meanchoice (internally) consistent with some set of axioms:

Rationality is . . . the discipline of subjecting one’s choices—of actions as well asof objectives, values and priorities—to reasoned scrutiny. Rather than definingrationality in terms of some formulaic conditions that have been proposed in theliterature (such as satisfying some prespecified axioms of ‘internal consistencyof choice’, or being in conformity with ‘intelligent pursuit of self-interest’, orbeing some variant of [nonvolitional] maximizing behavior), rationality isseen here in much more general terms as the need to subject one’s choices tothe demands of reason. (Sen, 2002, p. 4)

Sen’s view of the human agent is one in which the latter is driven by amultiplicity of motivations other than self-interest, which may reflect differentorderings, and need not yield complete or transitive preferences. For Sen,rationality means neither that one of these motivations (like self-interest) mustdominate all others, nor that actual behaviour (or any of our competing objec-tives, goals or values) can be described by a unique ordering. Rationality, asthe discipline of scrutinising our actions, objectives, motivations, goals andvalues, means not the conformity of behaviour to any ordering at all, but

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rather the possibility of revising and changing preferences, in a conceptionwhere human preferences are seen in a multidimensional way.3 Rationalchoice theory, Sen (2002, p. 28) writes, ‘has denied room for some importantmotivations and certain reasons for choice, including some concerns thatAdam Smith had seen as parts of standard “moral sentiments” and ImmanuelKant had included among the demands of rationality in social living (in theform of “categorical imperatives”).’

Sen refers to both Smithian ‘moral sentiments’ and Kant’s emphasis onreason. A crucial question then is how Sen reconciles Kant’s prescriptive ethics,where the latter is essentially a rational exercise, and Smith’s conception, whichis essentially a descriptive ethics concerned with the role of moral sentimentsinvolved in several concrete situations from the point of view of an impartial spec-tator. Sen writes:

When it is claimed that a certain moral principle has shortcomings, what can bethe basis of such an allegation? There seem to be at least two different ways ofgrounding such a criticism, aside from just checking its direct appeal to moralintuition. One is to check the implications of the principle by taking up particularcases in which the results of employing that principle can be seen in a ratherstark way, and then to examine these implications against our intuition. I shallcall such a critique a case-implication critique. The other is to move not fromthe general to the particular, but from the general to the more general. Onecan examine the consistency of the principle with another principle that isacknowledged to be more fundamental. Such prior principles are usuallyformulated at a rather abstract level, and frequently take the form of congruencewith some very general procedures. . . . I shall call a critique based on suchan approach a prior-principle critique. (Sen, 1982, pp. 353–354; emphasis inoriginal)

While Sen’s discussion of prior-principle critiques points towards the role ofabstract reasoning in ethical analysis, in line with Kant, Sen’s position on case-implication critiques focuses on concrete situations, very much as Smith (1759)did when discussing moral sentiments within the context of the description ofconcrete situations, and in such situations Sen recommends we appeal to moralintuition, a position that resonates with G.E. Moore’s (1903) claim that ethicaljudgements ultimately rely upon our intuition.

Intuition had already been much discussed by other authors working inCambridge, like Moore’s teacher Henry Sidgwick, who emphasised the role ofcommon sense, recovering elements of the Scottish tradition of common sense

3Walsh (2000) and George (2007) have noted a connection between Sen’s notion ofreasoned scrutiny and his account of meta-preferences—orderings that are defined overa set of preferences, rather than over a set of options, and thus denote which preferenceswe would, at a meta-level, prefer to have. In fact, some conflicts between competingmotivations and corresponding orderings can be resolved through the exercise of reasonedscrutiny and meta-preferences. But even meta-rankings may be incomplete, and hence theexercise of reasoned scrutiny does not necessarily lead to predictable behaviour (Sen,2002, p. 617).

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that underpins the work of Smith (1759).4 Much influenced by Kant, Sidgwickstressed nevertheless the need for a rational scrutiny of common sense and intui-tion. In fact, Sidgwick’s (1874) contributions to ethics were essentially concernedwith providing a method for ethical reasoning and scrutiny, and not with achievinga full-fledged ethical theory, just as Sen’s work on rationality aims at developing ageneral outline of rationality as the ability to scrutinise goals, values and prefer-ences, and not a full-fledged theory of behaviour. A similar claim can be maderegarding Sen’s work on justice and on the capability approach, which aims atfinding a general framework for the evaluation of well-being or justice, and notat a full-fledged ethical theory, or at a complete theory of justice (see Martins,2007a).

9. Sen’s Critique of Mainstream Welfare Economics

The enrichment of economics with a moral and philosophical dimension isdefended by Sen not only in what concerns his conception of the economicagent, but also in the context of welfare economics:

Welfare economics is a major branch of ‘practical reason’. There are no goodgrounds for expecting that the diverse considerations that are characteristic ofpractical reason, discussed among others, by Aristotle, Kant, Smith, Hume,Marx, or Mill, can, in any sense, be avoided by taking refuge in some simpleformula like the utilitarian maximization of utility sums, or a general relianceon optimality, or going by some mechanical criterion of technical efficiencyor maximization of the gross national product. (Sen, 1996, p. 61)

Sen (1985) criticises not only the mainstream microeconomic conception ofhuman preferences, but also mainstream approaches to development economicsthat use income as a measure of well-being. He argues that well-being shouldrather be assessed in terms of functionings, that is, what a person is or does(the set of achieved functionings), where the set of potential functionings thatcan be achieved are the person’s capabilities. Sen’s critique of the use ofincome as a measure of well-being has many similarities with Pigou’s critiqueof wealth as a measure of well-being. Pigou’s (1912, 1920) distinction betweenwelfare and wealth, in turn, is based on Sidgwick’s (1883) idea that sinceprices may not reflect the well-being a good generates, wealth and welfare maynot coincide.

However, Sidgwick and Pigou, like Marshall (1920), accepted that the rela-tive prices of goods are proportional to the marginal utility of goods, and they alsoidentified well-being with utility. Sen, though, rejects the use of utility as a spaceto assess human well-being, arguing that both the interpretations of utility as hap-piness (favoured by Marshall and Pigou) and as desire satisfaction (favoured bySidgwick and Ramsey) are unsatisfactory. But the distinction between wealth

4On the role of common sense in the Cambridge tradition, particularly with respect to theinterplay between philosophy and economics that characterises this tradition, see Coates(1996).

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and income on the one hand, and welfare and well-being on the other hand, is anenduring characteristic of the Cambridge tradition from Sidgwick to Sen.

For Sen (1985), the space of utilities entails the use of a subjective mentalmetric which is unsatisfactory. Note that even if a subjective mental metric isused, a Bergson–Samuelson social welfare function could be given a multiplica-tive form, such as the one suggested by Nash (1950), in which case the choice ofunits (for example, the use of utility units) would not influence the orderings thatarise. Bergson–Samuelson social welfare functions can have various specificforms, albeit the more typical formulation in mainstream economics is the additiveform, with the Rawlsian form being the main alternative form used, when in factonly the multiplicative form would assure the independence of the metric used.

But Sen’s critique of the subjective mental metric of utilitarianism concernsessentially the implications of utilitarianism at an ethical level, and not theimplications of a subjective mental metric for the orderings that arise. Sen(1985) argues that the idea that social policy should follow personal tastes,which could entail redistributing a higher level of goods to someone whoalready has a higher level of goods, income or wealth, due to the exigent tasteof this person, contradicts our moral intuitions. From utilitarianism, Sen tookonly consequentialism, that is, the view that ethical evaluations should take intoaccount the consequences of actions, but not the use of utilities as a measure ofsubjective well-being, or the criterion of sum-ranking, which is the form of aggre-gation typically used in mainstream welfare economics to obtain a scalar measureof well-being.

Sen (1985) defends instead a multidimensional conception of well-being,defined in terms of vectors of functionings in his capability approach. Ofcourse, while the use of scalar measures of well-being leads to a social preferencerelation which is complete, transitive and reflexive (that is, it leads to an orderingthat fulfils the required axiomatic properties), measuring well-being in terms ofvectors leads to the possibility that the social preference relation may be incom-plete, when it is not the case that all the components of a given vector arehigher or equal to the components of another vector. Like his multidimensionaltheory of rationality and behaviour, Sen’s multidimensional conception of well-being means that complete and transitive social preferences can be obtained inparticular conditions only, and not in general.

Sen (1993b) also criticises mainstream economics for measuring well-beingin terms of actual preferences, arguing that freedom to choose is also fundamental.Hence his emphasis on potential functionings, i.e. capabilities, and not onachieved well-being, in his capability approach. In fact, to focus on actual prefer-ences without taking into account the freedom to choose leads to the neglect offuture preferences. Here Sen recovers an argument that was much discussed bySidgwick (1874), who argued that there is no reason to prioritise our preferencesover the preferences of other persons, or even over future preferences (see Walsh,2000). Hence the importance of freedom, which is a central notion in Sen’scontributions. This again is consistent with a multidimensional perspective thatemphasises how advantage depends upon the vector of potential functionings(i.e. capabilities), which are available to the human agent, and not just upon theachieved functionings.

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10. The Implications of Multidimensionality

Sen’s (1970, 1982) work on social choice theory has maintained a multidimen-sional framework that has always been closer to the work of Arrow (1951) thanto the writings of Abram Bergson (1938) and Paul Samuelson (1947). As in hisother writings, Sen maintains a framework where partial orderings are a possi-bility, but there is no guarantee that any ordering (complete or partial) exists.But while Sen’s later writings on the capability approach contain an ethical dimen-sion in which moral values play a central role, his earlier work on social choicewas essentially formal and axiomatic.

In this respect, Sen is not unlike Sraffa, who also used mathematical analysisto provide a rigorous framework for economic theorising. Of course, Sraffa andSen do not give us a mathematical system in which outcomes are exactly pre-dicted, as in mainstream economics, but rather a rigorous and logically consistentframework that needs to be supplemented with further philosophical and socialanalysis. For Robinson (1953) and Sraffa (1960) it was impossible to determineprofits and wages through the neoclassical production function, because of thecomplex interconnections between the various parts of the economic systemand their impact on relative prices in a context where industries have differentintensities of capital and labour. For Sraffa (1926), it was also impossible to deter-mine prices using Marshallian partial equilibrium analysis in conditions of perfectcompetition. Analogously, for Sen, it is impossible to ensure that we can alwaysachieve a unique ordering that invariably describes behaviour and well-being,because of the multiple motivations, and such aspects as value conflicts. Robinsonand Sraffa were concerned with the multidimensional nature of the productionprocess and the implications of price-values for the neoclassical production func-tion, while Sen is concerned with the multidimensionality of human preferencesand the implications of value conflicts for the possibility of complete preferences,and for the mainstream assumption that a unique ordering invariably describeshuman motivations.

The neoclassical position ultimately relies on a unidimensional perspectivein various respects. Solow (1956, 1957) and Swan (1956) utilise a one-sectoreconomy in their models of economic growth that evades Robinson’s critiqueof the neoclassical aggregate production function (Sen, 1974). The neoclassicalutility function similarly requires that there is only one ordering that invariablydescribes behaviour. Sraffa and Sen, on the other hand, have multidimensionaloutlooks in which the neoclassical case arises only under special conditions.

Despite the fact that their work can be seen as complementary, Sraffa and Senbelong to different wings of the Cambridge tradition, with Sraffa being closer tothe Cambridge Keynesian tradition that started with Keynes’s critique of Pigou inThe General Theory, and Sen belonging to the Cambridge ‘welfare’ traditionstemming from Marshall via Pigou.

Authors of the Cambridge Keynesian circle were always more critical ofmainstream economics than the authors of the Cambridge ‘welfare’ tradition,and following this tendency, Sen does not distance himself from the mainstreamcommunity as much as Sraffa did. Perhaps because of this, Sen’s critique of neo-classical utility functions did not generate as much controversy between opposing

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sides as did, for example, the Cambridge capital critique (on which, see Harcourt,1972). But the implications of Sen’s critique of neoclassical utility functionsare no less severe than the implications of Robinson’s critique of neoclassicalproduction functions.

Neoclassical economists can evade the Cambridge capital critique by resort-ing to general equilibrium models along the lines of Arrow & Hahn (1971). ButSen’s critique of the use of utility functions based on complete preferenceswould still apply to the excess demand functions used in general equilibriumanalysis (see Sen, 1993b). If economists were to follow the opposite route andfocus on the use of aggregate production functions, without reference to utilityfunctions and optimising agents, Sen’s critique would be avoided, but Robinson’scritique would not. So a complete critique of mainstream economics requiresboth Robinson’s critique and Sen’s critique which, respectively, point towards amultidimensional perspective of production developed by Sraffa, and a multidi-mensional perspective on preferences and well-being advanced by Sen.

11. From Scarcity Theory to Surplus Theory

There is a further reason why the work of authors like Sraffa and Sen may be fruit-fully complementary. Sen has not taken a clear position on the debate betweenmainstream economists and heterodox economics. It is clear, for example, thatSen is much more sympathetic towards Pigou and his contribution to welfareeconomics, than towards Keynes. However, unlike the Cambridge ‘welfare’tradition founders Sidgwick, Marshall and Pigou, Sen came to reject neoclassicaleconomics:

It was argued by development economists that neoclassical economics did notapply terribly well to underdeveloped countries. This need not have causedgreat astonishment, since neoclassical economics did not apply terribly wellanywhere else. (Sen, 1984, p. 487)

So although Sen is sympathetic to the Cambridge ‘welfare’ tradition, heemphatically rejects neoclassical economics, rational choice theory and main-stream welfare economics. In a broad sense, Sen’s work is compatible with thegeneral spirit of Cambridge ‘welfare’ tradition; but at the level of substantivetheory he never explicitly defined his position: his capability approach, like hisview of rationality, is not a fully specified theory; it needs to be combined witha substantive theory (see Martins, 2006).

Marshall and Pigou put forth a substantive economic theory that is at oddswith the economic framework later provided in the Cambridge Keynesian–Sraffian tradition. Sraffa developed at the level of ‘pure theory’ a non-neoclassicalframework which, when combined with ‘institutional analysis’, provides the basisfor a ‘coherent, non-reductionist, Keynesian–Sraffian theoretical framework’(Pasinetti, 2005, p. 846). Sen, we have just seen, left the more substantive issuesaside to focus on philosophical issues; this opens the door for fruitful interactionbetween his work and the Cambridge Keynesian–Sraffian framework.

In fact, we find strong similarities between the social philosophy of the capa-bility approach, and Keynes’s social philosophy. In both cases, redistribution (of

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income for Keynes, and of capabilities for Sen) is both an end of, and a means for,economic growth and development—for Keynes because it provides more incometo those with a higher marginal propensity to consume, stimulating aggregatedemand; for Sen because capabilities are not only constitutive of well-being,but also instrumental to well-being, providing for example what is often calledhuman capital (see Martins, 2009).

The social philosophy of redistribution implicit in the work of Keynes andSen is a general characteristic of the Cambridge tradition that underpins thework of many of its authors, regardless of their differences in other respects. AsPutnam (2002, p. 53) notes, Pigou (1920) had already argued that any differencesin the utility functions of different persons are probably not large enough tocontradict the general result that income redistribution that reduces inequalitywill increase welfare.

As Walsh (2003, pp. 369–378) observes, Pasinetti has focused on the keyissues that are needed to complement Sen’s approach, namely on the productionof the surplus in a multidimensional and dynamic context, and on the impact ofredistribution on growth. Sen made a pioneering contribution by providing anapproach that explains development in terms of capability expansion, andwhich provides an evaluative framework. But as Walsh (2000, 2003) makesclear, one more vital link in the chain is required in order to render Sen’s capabilityapproach applicable to practical problems—the compatible substantive theory.5

12. Concluding Remarks

The contributions of Sraffa and Sen, like the work of many other authors in theCambridge tradition, can be interpreted as a critique of, and alternative to, main-stream economics, calling for a return to a classical economic tradition startingwith Adam Smith. The classical tradition lost its place as the dominant approachin economics to the marginalist framework of neoclassical economics, with thelatter evolving into the current mainstream approach which views exact predictionthrough mathematical modelling as the defining feature of a scientific discipline.The work of Sraffa and Sen is complementary, for each provides an alternativemultidimensional conception to replace a key analytical component of mainstreameconomics: Sraffa proposes an alternative to the neoclassical production function,and Sen suggests an alternative to the neoclassical utility function in the analysisof behaviour and of welfare.

When criticising the neoclassical utility function, Sen attacks the conceptionof rationality that underpins mainstream economics. His own conception of ration-ality can accommodate a richer moral conception of the human agent, within amultidimensional account of behaviour.

5The interaction between Sen’s capability approach and the Cambridge Keynesian–Sraffian framework deserves further development, not least because the mutual consist-ency of the economics of Keynes and Sraffa is a highly contentious issue (see Harcourt,1981; Lawson, 1994; Martins, 2009).

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The postulate of optimisation played a key role in the adoption of differentialcalculus methods within economics after the marginalist revolution, opening theway for an uncritical import of mathematico-deductive methods. The emphasison such methods led economics away from crucial economic, social and ethicaldiscussions concerning the production and distribution of the economic surplus.Classical political economy, on the other hand, was concerned with the productionand distribution of a surplus. The social philosophy that underpins the workKeynes, Sen and other authors of the Cambridge tradition has a bearing on theethical, social and economic implications of the distribution of the economicsurplus.

Sen’s writings have been much concerned with the problems of poverty anddeprivation, which arise in a context of scarcity. But Sen lacks a theory thatexplains the economic and social mechanisms that cause scarcity, poverty anddeprivation; and mainstream economics addresses these issues in an unsatisfactoryway. The work of Sraffa and other representatives of the Cambridge traditionsuggests that a return to the classical theory of the production and distributionof the economic surplus may be the most promising route.

Acknowledgment

For most helpful comments the author is grateful to Geoffrey Harcourt, TonyLawson, Vivian Walsh and the referees of this journal.

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