The Development of Capability Indicators and their Relation to Life Satisfaction’

This paper is motivated by sustained interest in the capabilities approach to welfare economics combined with the paucity of economic statistics that measure capabilities at the individual level. Specifically, it takes a much discussed account of the normatively desirable capabilities constitutive of a good life, argued to be comprehensive at a high level of abstraction, and uses it to operationalize the capabilities approach by developing a survey instrument to elicit information about capabilities at the individual level. The paper explores the extent to which these capabilities are covariates of a life satisfaction measure of utility and investigates aspects of robustness and subgroup differences using standard socio-demographic variables as well as a relatively novel control for personality. In substantial terms, we find there is some evidence of quantitative, but no qualitative, gender and age differences in the capabilities–life satisfaction relationship. Furthermore, we find that indicators from a wide range of life domains are linked to life satisfaction, a finding that supports multi-dimensional approaches to poverty and the non-materialist view that people do not just value financial income per se. Our most important contribution, however, is primarily methodological and derives from the demonstration that, within the conventions of household and social surveys, human capabilities can be measured with the aid of suitably designed statistical indicators.