ABSTRACT OF PAPER
Title: Some Cambridge Controversies in the Theory of Capabilities
Author: Martins Nuno
In this article I discuss two different but interrelated sets of controversies in economics, the Cambridge Capital Theory Controversies, and a more recent controversy connected to Sen's capability approach. I will argue that both sets of controversies spring from methodological and ethical issues concerning the distribution of income, which are central for the two key branches of the Cambridge economic tradition: the Cambridge "welfare" tradition, stemming from the Marshallian-Pigovian approach to welfare economics; and the Cambridge Keynesian tradition, with which the protagonists of the Cambridge Capital Theory critique were associated. The Marshallian-Pigovian framework provided a basis for a critique of inequality in the distribution of income, under the assumption of decreasing marginal utility. But the marginalist approach advocated by Marshall and Pigou can also be used to justify a given distribution of income on technical grounds resorting to marginal productivity theory, as indeed happened throughout the history of economic thought, not least in the recent debate between Mankiw and Piketty. After the Cambridge Capital Theory Controversies shown the shortcomings of marginal productivity theory, marginalism still continued to play an important role in discussions on distribution through the use of Bergson-Samuelson social utility functions, which suffer from problems connected to Arrow's general possibility theorem, as argued by Sen, who also generalised this critique to individual utility functions. In so doing, Sen developed his capability approach, which was interpreted by Walsh and Putnam as a revival of classical political economy complementary to Sraffa's own revival. The perspective of Sen, Putnam and Walsh, where facts and values are entangled, was subsequently criticised by Dasgupta, who supported the use of Bergson-Samuelson social utility functions which, according to Dasgupta, enable a separation between economic theory and ethics. The perspectives of Sen and Dasgupta point towards two very different developments of the Marshallian-Pigovian framework on the Cambridge "welfare" tradition, and touch upon an analytical framework which is as essential to neoclassical economics as the production function, but was left untouched by the Cambridge Capital Theory Controversies: the utility function, rejected by Sen, and defended by Dasgupta. Sen's critique of (individual and social) utility functions can then be seen as a complementary to the critique of the production function that took place in the Cambridge Capital Theory Controversies, also with important implications for the revival of classical political economy.
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