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Introduction

The view that the traditional utilitarian notion of welfare can render only a partial picture of
human well-being is nowadays quite widely accepted by the community of economists. In fact
this conception relies only on the welfarist criteria of utility (in theory) and income (in
application). The consequent measurements of welfare are generally derived through the
observation of preferences revealed by actual choices, and interpreted in terms of the numerical
representation of these choices1. Therefore the notion of welfare reflects only the class of
differences captured by money metric, under the economic rationality of self-interested utility
maximization. Moreover, the income approach to well-being doesn’t account for the diversity in
human beings and for the heterogeneities of contingent circumstances2. Thus income can be
intended only as a mean to reach an acceptable standard of living, and in no way as an end in
itself, since there are other important dimensions to the flourishing of human well-being that
income doesn’t account for: health, education, social relationships, longevity, employment,
environmental conditions, housing conditions.

The need to move towards such a broader notion of well-being has been strongly advocated,
among others, by Amartya Sen, whose major contributions all stress the centrality of individual
entitlements, opportunities, and rights as conceptual foundations of economics and social choice.
Sen has in fact gradually developed an approach3 focused on the freedom of individuals to
pursue their own project of life, in which well-being is seen «in terms of a person’s ability to do
valuable acts or reach valuable states of being» (Sen, 1993:30). This is the core of the so-called
capability approach.

The multidimensionality of the capability approach doesn’t simply lie in the broadening of
the evaluative spaces. In fact this approach also redefines the concept of well-being itself,
stressing the importance of a systemic view, dependent «on a number of contingent
circumstances, both personal and social» (Sen, 1999:70). Given the rich array of issues and of
levels, the operationalization of the capability approach is not straightforward. Anyway, Sen
himself, though acknowledging the empirical difficulties, ascribes significant importance to the
practical usability of the framework he has depicted: «the approach must nevertheless be
practical in the sense of being usable for actual assessment of the living standard» (Sen,
1987(b):20). For this reason he has provided a possible formalization (Sen, 1985), that turns the
capability approach into a fully fledged economic theory, besides being a field of interest to
philosophers and scholars of development studies.

The main purpose of this paper is to explore the possibility of using system dynamics to
operationalize Sen’s approach. The paper is structured as follows. Section 1 addresses the
methodological issues that have to be considered in order to operationalize the capability
approach in a dynamic framework. Section 2 investigates the architecture of the three-
functionings model we devised to represent human well-being as intended by Sen in the
capability approach. Section 3 analyzes in depth the structure of a particular functioning of the
model, Physical and Psychological Health (the remaining two functionings - Education and
Training, and Social Interactions - are briefly considered in annex I and II). Section 4 considers
some simulations of the selected functioning, and of the whole model over time (similar
simulations are carried out for the remaining two functionings in annex III and IV). Finally, the
concluding remarks briefly consider the main findings derived from the simulations carried out.

1 In the traditional utilitarian framework (from Bentham, to Edgeworth, Marshall, Pigou), the concept of utility is
simply a matter of pleasure, happiness, desire fulfillment. The main limit of this view is that utility is seen in
terms of mental metric, highly subjective and therefore possibly misguiding.

2 A complete critique of the pitfalls of utilitarian approach is beyond the goals of this paper.

3 See, for instance, Sen (1980, 1985, 1987(b), 1992, 1999).

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