Capabilities and Skills

Abstract

This paper discusses the relevance of recent research on the economics of human development to the work of the Human Development and Capability Association. The recent economics of human development brings insights about the dynamics of skill accumulation to the literature on capabilities. Skills embodied in agents empower people. Enhanced skills enhance opportunities and hence promote capabilities. We address measurement problems common to both the economics of human development and the capability approach. The economics of human development analyzes the dynamics of preference formation, but is silent about which preferences should be used to evaluate alternative policies. This is both a strength and a limitation of the approach.

Keywords:

• Skills
• Capabilities
• Freedom
• Technology of skill formation

Jel Classification:

• D63
• D04
• D31
• I31

Acknowledgements

An earlier version of this paper was given with the title “Creating Flourishing Lives: The Dynamics of Capability Formation,” as the Amartya Sen Lecture at the Human Development and Capability Association conference held at Georgetown University, September 11, 2015. We thank Steve Durlauf, Martha Nussbaum, and Amartya Sen for their comments on the early version, and Steve Durlauf for his comments and conversations on this draft.

Disclosure Statement

No potential conflict of interest was reported by the authors.

About the Authors

Professor James J. Heckman is the Henry Schultz Distinguished Service Professor of Economics at the University of Chicago, where he has served since 1973. In 2000, he won the Nobel Prize in Economics for contributions to the field of policy analysis (the study of selection bias and for the evaluation of social programs). Heckman received his BA in mathematics from Colorado College in 1965 and his PhD in economics from Princeton University in 1971. He directs the Center for the Economics of Human Development at Chicago and is a senior research fellow at the American Bar Foundation.

Chase Corbin is a research analyst at the Center for the Economics of Human Development at the University of Chicago. He received a BA in Economics and Philosophy from the University of Florida in 2013, and an MA in Social Sciences at the University of Chicago.

Notes

1. See United Nations Development Programme (2010).

2. For an early attempt to include nonmarket benefits in national income accounts, see Nordhaus and Tobin (1973).

3. See Nussbaum (2011).

4. See Senior (1836) for an early statement of this division: The business of a economist is neither to recommend nor to dissuade, but to state general principles which it is fatal to neglect, but neither advisable, nor perhaps practicable, to use as the sole, or even the principal, guides in the actual conduct of affairs.

5. Sen explicitly criticizes the utilitarian, consequentialist, Rawlsian, and libertarian theories of morality. See Sen (2009).

6. See Sen (1985, 1991, 1999b), Robeyns (2000, 2003), and Foster (2010).

7. See Sen (1999a, 15).

8. For recent statements of the literature, see Heckman (2008) and Heckman and Mosso (2014).

9. See Arrow (1973) and Spence (1974), who developed the “signaling” literature based on this notion.

10. See Heckman, Stixrud, and Urzúa (2006), Heckman (2008), Borghans et al. (2008), Almlund et al. (2011), Lindqvist and Vestman (2011), and Kautz et al. (2014).

11. See Kautz et al. (2014).

12. Sen (1985, 1991, 1999a).

13. See Robeyns (2000, 2003) and Foster (2010).

14. See Bowles, Gintis, and Osborne (2001a, 2001b).

15. See Kautz et al. (2014).

16. See, for example, Lochner (2011), Heckman, Stixrud, and Urzúa (2006), Borghans et al. (2008), and Almlund et al. (2011).

17. See Kautz et al. (2014).

18. See Sen (1999b).

19. In much of the capability approach literature, standard economic analysis is criticized for its inattention to the importance of personal health and nutrition, but such criticism is not well founded. Even the earliest work in the economics of human development acknowledged nutrition and choices that promote health as being investments in one’s human capital and a means for achieving more desirable outcomes. See Mushkin (1962).

20. Robeyns (2005, 193, Table 1) has a related diagram more in the spirit of capability theory, but does not isolate the role of skills.

21. See Cunha and Heckman (2007, 2008), Cunha, Heckman, and Schennach (2010), and Heckman and Mosso (2014).

22. Here, “parenting” is used in a very general way and includes parenting, extended family, schooling, and other environmental influences.

23. See Heckman and Mosso (2014).

24. See Cunha and Heckman (2007, 2009), Cunha, Heckman, and Schennach (2010), and Heckman and Mosso (2014).

25. See Heckman (2008).

26. See Kautz et al. (2014).

27. See Caspi et al. (Forthcoming) and Elango et al. (Forthcoming).

28. See the survey in Borghans et al. (2008).

29. See the link to a recent Human Capital and Economic Opportunity Global Working Group (HCEO) conference on measuring skills: http://cehd.uchicago.edu/page/conference-measurement.

30. See Bowen, Chingos, and McPherson (2009), Kautz and Zanoni (2015), and Hanson (1999) for examples.

31. Geiser and Santelices (2007) show how early grades predict later life educational attainment.

32. See Sen (1985, 1999b), Robeyns (2000, 2003), and Foster (2010).

33. Bruni, Comim, and Pugno (2009) attempt to unify the happiness literature with the capabilities literature. They focus on the recent development of surveys meant to measure subjective values and the importance of agency; evaluating agent’s agency over all possible functionings is argued as a means for better evaluating agency, freedom, and well-being. Such surveys, which include, among others, the world values survey relied upon in constructing domains of the OECD’s better life index, ask respondents to rank the importance of different domains of so-called self-direction or empowerment and include domains like “social status and prestige,” “hedonism,” “achievement,” “independent thought,” and “universalism.”

34. Groot (2000) is one example of the effects of bias in such self-assessments.

35. See Bruni, Comim, and Pugno (2009, 208).

36. Sen (1999a, 44) considers and shows the difficulties with using this approach.

37. See Lancaster (1990), who discusses the costs of decision-making among large numbers of choices.

38. Altruism and reciprocity, for example, are commonly considered as economic preferences that are important for making and maintaining social relationships and for interacting with one’s neighbors and peers. Dohmen et al. (2010) report the correlation between preferences and skills.

39. See Heckman and Vytlacil (2007a, 2007b) for an extensive discussion of the identification of counterfactual states from samples of observed choices. See also Heckman (1990) and Heckman and Honoré (1990).

40. Robeyns (2005) discusses this issue.

41. See Rossi (1965).

42. See Borghans et al. (2008), Bandiera, Barankay, and Rasul (2005), and Einav et al. (2010).

43. Bowles, Gintis, and Osborne (2001b) consider preferences that can provide incentives in favor of desirable outcomes, and that may shape noncognitive skills.

44. Alfred Marshall and Richard Ely gave arguments for improving life of the poor by shifting them towards Victorian morals. See, for example, Himmelfarb (1995) and Ely (1891).

45. See Sen (2009).

46. See Nussbaum (2001, 2003).

47. In preparing the proofs of this article, we became aware of an interesting paper by Maurizio Pugno (Forthcoming) that draws on research by Scitovsky (1992) to introduce dynamics into Sen's capability approach.

Additional information

Funding

This research was supported in part by the Pritzker Children’s Initiative; the Buffett Early Childhood Fund; NIH grants NICHD R37HD065072, NICHD R01HD054702, and NIA R24AG048081; an anonymous funder; Successful Pathways from School to Work, an initiative of the University of Chicago’s Committee on Education and funded by the Hymen Milgrom Supporting Organization; the Human Capital and Economic Opportunity Global Working Group, an initiative of the Center for the Economics of Human Development and funded by the Institute for New Economic Thinking; and the American Bar Foundation. The views expressed in this paper are solely those of the authors and do not necessarily represent those of the funders or the official views of the National Institutes of Health.