The Capability Approach as Metric of Wellbeing: Operationalization and Measures Beyond GDP

Abstract
The Standard of Living and the Quality of Life are multidimensional concepts and core determinants to capture the wellbeing of a country and its citizens. Its improvement constitutes a crucial objective of economic public policy for socio-economic progress and social justice. The main concerns regard the proper ways to capture and measure them to guide effective policies, starting from a theoretical approach to wellbeing to a practical realization. The Standard of Living usually refers to the material basis of wellbeing reflected in a person’s consumption level, being the material wellbeing of the average person in a given population. The Quality of Life is a broader notion taking into account also intangible aspects that make up human life envisaging a broader picture of wellbeing. As pointed out in the Report of the Commission on the Measurement of Economic Performance and Social Progress (CMEPSP) , wellbeing requires a multi-dimensional definition often missed by conventional income measures, such as the Gross Domestic Product (GDP) (Stiglitz, J. Sen, A. Fitoussi, J., 2008, p. 156). Following the CMEPSP perspective to explore alternative ways in the wellbeing assessment of a country, the limits of GDP as a measure for wellbeing will be demonstrated. The analysis will be integrated with Amartya Sen’s point of view regarding the “Standard of living”, showing three interrelated approaches with specific focus on wellbeing as capabilities and functionings (Sen,1984). In the theoretical section, the Capability Approach (CA) by Sen and further developed by Nussbaum in an extended version is discussed, integrated by De Shalit and Wolff contribute. The debate between Rawlsians and Senians linking the CA to social justice dilemmas and the differences between social primary goods and capabilities will be shown. The empirical section will follow, focusing on the practical operationalisation of the CA by Sen in the Human Development Report and the Human Development Index elaboration (UNDP, 2019). The difficulties in translating and monitoring capabilities is shown by several indexes construction, focusing on different capabilities. The aim is to show the complexity of wellbeing evaluation, which has to be holistic, taking into consideration multiple dimensions. Three indexes will be analysed developed at three different levels: HDI developed by UNDP at international level; the Better Life Index proposed at regional level by OECD; the Equal and Sustainable Wellbeing Report (BES) prepared by the Italian National Institute of Statistics with the Council of Economics at national level (2018).Taking Italy as sample-model country, the different results will be assessed, with focus on the importance of inequality distribution.

Introduction
The Standard of Living and the Quality of Life are multidimensional concepts and core determinants to capture the wellbeing of a country and its citizens. Its improvement constitutes a crucial objective of economic public policy for socio-economic progress and social justice. The main concerns regard the proper ways to capture and measure them to guide effective policies, starting from a theoretical approach to wellbeing to a practical realization.

The Standard of Living usually refers to the material basis of wellbeing reflected in a person’s consumption level, being the material wellbeing of the average person in a given population. The Quality of Life is a broader notion taking into account also intangible aspects that make up human life envisaging a broader picture of wellbeing. As pointed out in the Report of the Commission on the Measurement of Economic Performance and Social Progress (CMEPSP)1, wellbeing requires a multi-dimensional definition. The Commission included: Material living standards (income, consumption, wealth); Health; Education; Personal Activities (including work); Political voice and governance; Social connection and relationships; Environment (present and future conditions); Insecurity, of an economic as well as physical nature. These dimensions shape people’s wellbeing and yet many of them are missed by conventional income measures, such as the Gross Domestic Product (GDP), the most widely used index of economic activity capturing the market production level and measuring the market value of all the final goods and services produced within a country in a given time period (Stiglitz, J. Sen, A. Fitoussi, J., 2008, p. 156).

Following the CMEPSP perspective to explore alternative ways in the wellbeing assessment of a country, the limits of GDP as a measure for wellbeing will be demonstrated. The analysis will be integrated with Amartya Sen’s point of view regarding the “Standard of living”, showing three interrelated approaches with specific focus on wellbeing as capabilities and functionings (Sen,1984). In the theoretical section, the Capability Approach (CA) by Sen and further developed by Nussbaum in an extended version is discussed, integrated by De Shalit and Wolff contribute. The debate between Rawlsians and Senians linking the CA to social justice dilemmas and the differences between social primary goods and capabilities will be shown.

The empirical section will follow, focusing on the practical operationalisation of the CA by Sen in the Human Development Report and the Human Development Index elaboration (UNDP, 2019).

The difficulties in translating and monitoring capabilities is shown by several indexes construction, focusing on different capabilities. The aim is to show the complexity of wellbeing evaluation, which has to be holistic, taking into consideration multiple dimensions. Three indexes will be analysed developed at three different levels: HDI developed by UNDP at international level; the Better Life Index proposed at regional level by OECD; the Equal and Sustainable Wellbeing Report (BES) prepared by the Italian National Institute of Statistics with the Council of Economics at national level (2018).Taking Italy as sample-model country, the different results will be assessed, with focus on the importance of inequality distribution.
 

Wellbeing and Standard of Living Measurement beyond GDP
The GDP represents a composite measure aggregating the consumption level, investment, government expenditures, net exports.2  It can be calculated in three ways: firstly, as a measure of production, meaning the value of final outputs produced in an economy less the value of all the inputs used in their production; secondly, as a measure of expenditure, namely the expenditure on final goods and services produced in an economy by households, corporations and governments; thirdly, focusing on the income, it captures the income earned by individuals and businesses from the production of goods and services in the economy. GDP as a money measure, assessing economic performance of a country, provides a clear framework to capture material standard of living related to resources consumption level. Although resources play a crucial role for human wellbeing, however they are not sufficient for a holistic assessment of wellbeing. Indeed, exploring GDP shortcomings as indicator of living standards, it does not measure income distribution and non-monetary output or transactions like barter, household activities; it does not take into account desirable externalities such as leisure and environment; it does not measure social wellbeing, therefore it correlates to standard of living but it is not a measure of standard of living (Schotter, 2009).

Therefore, the demand for rigorous measures of wellbeing and standard of living that go beyond income, consumption, wealth dimension have grown to portrait a clearer QoL assessment.This commitment reverberates in the echoes of the CMEPSP Report commissioned by the French President Sarkozy and released in 2008. Its main aim is to identify the limits of GDP as an indicator of economic performance and social progress (Alkire, 2015).

The Nobel laureate economist Amartya Sen, reflecting on the interrelation between the SoL and the intrinsic value of wellbeing, proposes three general approaches to wellbeing: SoL as utility of a person, as opulence, as freedom and capabilities. Sen criticizes the approaches to wellbeing based on the utilitarianist view and on prosperity as opulence, proposing the Capability Approach as a more complete perspective (Sen 1984).

Firstly, Sen recalls Pigou theory of utility, where “economic welfare”, “standard of living” “standard of real income”, “material prosperity” are used as synonymous (Pigou, 1952). He defends the desiredness (and the willingness to pay measure) asserting that “it is fair to suppose that most commodities, especially those of wide consumption that are required, as articles of food and clothing are, for direct personal use, will be wanted as a means to satisfaction, and will, consequently, be desired with intensities proportional to the satisfactions they are expected to yield” (Sen, 1984, p. 24). Sen proposes a critique of the Utilitarian idea of ‘happiness of the greatest number’ introduced by Bentham (Sen, 1977). His concern was with the total utility of the community which also meant the aggregate of the people’s aggregates of happiness.3  The focus was on the total sum of utilities rather than the distribution of it, and in this we can see the blindness of considerable ethical and political concern (Sen, 1970). He therefore concentrates on choice systems with partial interpersonal comparison, partial cardinality, and incomplete social preferences to show that in certain circumstances the total economic welfare would be increased by a more equitable distribution of income, allowing for the uncertainty about the precise correspondence between different individuals and different units of welfare.

The second approach—SoL as opulence—dates back to Adam Smith’s (1776) idea that the two objectives of political economy were “first, to provide a plentiful revenue or subsistence for the people, or more properly to enable them to provide such revenue or subsistence for themselves; and secondly, to supply the state or commonwealth with a revenue sufficient for the public services” (Smith, 1776). The mainstream measures focused on real income indicators (GDP) and commodity bundles derive from the evaluating opulence tradition. Sen illustrated how deceiving GDP per capita may be as a measure of prosperity, in one of its first empirical application of the capability approach (1985).4  Sen showed that, in the early 1980s, GNP per capita of Brazil and Mexico was more than seven times the GNP per capita of India, China, Sri Lanka. However, performances in life expectancy, infant mortality, child death rates were best in Sri Lanka, better in China compared to India and better in Mexico compared to Brazil, showing that social indicators related to life, premature death and health, cannot be read from the average national income statistic (Alkire, 2015).

The third approach is based on the notion of freedom, interpreted in its “positive” sense rather than in its “negative” form (not to be interfered with) and on the notion of capabilities that will be explored. What is valued, it is the capability to live well, and in the specific economic context of standard of living, it values the capabilities associated with economic matters (Sen 1980, 1984). Therefore Sen overcome the idea of standard of living as purely material, enlarging the reflection on freedom and capability.
 

Wellbeing Assessment with the Capability Approach
In order to assess the intrinsic value of wellbeing, a framework of analysis based on the “Capability Approach”(CA) can be used, connecting QoL evaluation with functionings and capabilities. In this regard, the CEPSPS has proposed a tripartite approach to the QoL measurement where SoL is not only resource-based.

The first approach to the QoL is anchored to the notion of subjective wellbeing, linked to the philosophical tradition assumptions that individuals are the best judges of their own conditions. This approach is closely linked to the utilitarian tradition, based on the idea that enabling people to be happy and satisfied with their life is a universal goal of human existence. A second approach is based on fair allocations according to welfare economics, based on weighting the various non-monetary dimensions of quality of life according to people’s preferences. The third approach is rooted in the notion of capabilities. This approach conceives a person’s life as a combination of various “doings and beings” (functionings) and of his or her freedom to choose among these functionings (capabilities). The foundations of the CA, which has strong roots in philosophical notions of social justice, reflect a focus on human ends, rejecting the economic model of individuals acting to maximise their self-interest (Stiglitz, Sen, Fitoussi, 2008).
 

Sen’s Capability Approach and its Philosophical Connection to Eudaimonia
The CA is a theoretical paradigm pioneered by the Indian economist and philosopher Amartya Sen (1933-).5  It refers to a “normative framework for the evaluation and assessment of individuals and groups’ wellbeing, in order to design policies and proposals for social change, to conceptualize well-being, poverty, inequality. The emphasis is on the concepts of functionings and capabilities, meaning on the substantive freedoms people have reason to value, instead of “people’s income, expenditures, consumption, happiness or desire-fulfilment/utility” (Robeyns, 2017).

Wellbeing is connected to freedom and particularly to capabilities and functionings, fulfilled achieving “basic needs” (Sen, 1977), which differs from the rawlsian “social primary goods”. Rawls, focusing on interpersonal comparisons according to the “difference principle”, defines a list primary goods based on “income and wealth”, “basic liberties”, powers and prerogatives of offices and positions of responsibility”, “social bases of self-respect” (Robeyns, 2010). The list is concerned with means rather than ends dealing with thinks that help to achieve what we want to achieve. However, basic needs fulfilment is not the actual aim of wellbeing in a instrumental way, fulfilling temporary pleasure which refers to the concept of ἡδονή in ancient Greek. The Aristotelian idea of εὐδαιμονία is beneath the achievement of wellbeing, meaning “flourishing” linked to the accomplishment of a goal in itself. Etymologically, it consists of the words εὐ (good) and δαιμον (spirit, demon) referring to an idea of deep life satisfaction, reached when the perfection of an action is fulfilled, making an individual virtuous, reaching the chief human good, the perfect wellbeing. different from and a more temporary fluctuation of happiness.Therefore, Sen’s idea of well-being is not derived from the subjective pleasure given by goods consumption; rather, it is linked to the ‘objective’ functionings that a person is able to realize within the set of capabilities, depending on personal choices, freedom and agency. “The concept of capability can be seen as the opportunity to use goods in order to achieve the internal standard of excellence in every given field of human activity” (Sacconi, 2017). Thus, for Sen the the basic terms of a metric of justice are the capabilities to achieve functionings, rather than the Rawlsian primary social goods.

Further, functionings are rooted in the Aristotelian notion of a human function (ἔργον ) explained in the Nicomachean Ethics describing the variety of resources the achievement of eudaimonia requires (Ransome, 2010):
“For just as for a flute player, or a sculptor, or any expert, and generally for all those who have some characteristic function [ergon] or activity, the good – their doing well–seems to reside in their function, so too it would seem to be for the human being, if indeed there is some function that belongs to him” (Aristotle, Nicomachean Ethics).

Ergon, for Aristotle, is closely associated with our possession of reason, is only fulfilled in a life of activity in accordance with reason and excellence and virtue (arête) and wisdom (phronesis). Making the example of the flute maker, Aristotle describes his achievement of eudaimonia when he manages to produce the perfect lute, fulfilling  arête, phronesis, and eudaimonia

Functionings, Capabilities and its Conversion into Wellbeing
As explored in the “Tanner Lectures on Equality” (1979), the intrinsic value of wellbeing is linked to the activation of functionings which are “states of doing and being”, namely what a person manages to do or to be. More specifically, the individuals can convert the commodity bundles to functionings on the basis of entitlements and capabilities. Capabilities are defined derivatively as the set of achievable functions that an agent is able to choose in order to achieve some functionings through his or her agency. Capabilities refer to the effective freedom of an individual to choose between different functionings and combinations (Sen, 1994). The element of freedom to choose the capabilities and to have access to goods which activate different functionings is fundamental, meaning that capabilities are “ the substantive freedom to achieve alternative functioning combinations” while the achieved functionings constitute a person’s wellbeing (Sacconi, 2017).

Regarding the practical process to convert good consumption in wellbeing, Sen differentiates means (goods and services) and ends of wellbeing. What makes a life valuable are “the effective opportunities to undertake the actions and activities that individuals want to engage in and be whom they want to be”, meaning the functionings (Robeyn, 2017). Therefore, external goods are “commodities” whose utilisation, via functionings, determines the realization of personal value and ultimately the achievement of wellbeing. It is crucial to focus on the goods characteristics and multiple elements in which they can be decomposed (Sacconi, 2017). Indeed, each good possesses certain features which makes it of interest to people and which enable a functioning. The appropriate uses of such characteristics by means of a set of conversion functions allow individuals to realize a combination of functionings. ‘An agent’s capability set’ is composed of characteristics of a good, the conversion functions and the range of control over them. Then, by choosing among such capabilities, an agent can transform a good into a ‘realized functioning’. Each agent selects different conversion functions among those available, and, for any choice, vector of achieved functionings is obtained (Sacconi, 2017).

The state of a person (being), is given by currently achieved functions, meaning the successful combination of the vector of commodities possessed by that person (xi) with a function “converting a commodities vector into a vector of characteristics of those commodities” (ci) and a utilisation function “reflecting one pattern of use of commodities” that that person can actually make (fi(·)). A person’s being (bi), with active choice of utilisation function fi(·) and given his or her commodity vector xi , is (Ransome, 2010) :

bi = fi(c(xi))

Wellbeing is described as “an evaluation of bi, indicating the kind of being he or she is achieving,” or his or her ‘valuation function’ (vi) (Sen, 1999):

vi = bi(fi(c(xi)))

The overall set of functioning vectors “feasible for a person” given commodity set xi and overall utilisation function set Fi is given by the set Pi(xi):

Pi(xi) = [bi | bi = fi(c(xi)), for some fi(·) P Fi]

The concepts of freedom and capability enter Sen’s account through the addition of a choice function, restricted by the set of available commodity vectors (Xi), in a set of “feasible functioning vectors Qi(Xi)”:

Qi(Xi) = [bi | bi = fi(c(xi)), for some fi(·) P Fi and for some xi = Xi]

Qi represents a person’s eponymous‘capabilities on Sen’s theory, and Qi(Xi) his or her freedom of choice:

Qi(Xi) represents the freedom that a person has in terms of the choice of functionings, given his personal features Fi (conversion of characteristics into functionings) and his command over commodities Xi (‘entitlements’). Qi can be called the ‘capabilities’ of person i given those parameters. It reflects the various combinations of functionings (‘beings’) he can achieve

The overall wellbeing a person can achieve, given his or her set of achievable ‘beings’ bi and the valuation function vi(·), is then given by the set Vi:

Vi = [vi | vi = vi(bi), for some bi in Qi]

Further, three groups of conversion factors may influence wellbeing: firstly, personal conversion factors (e.g. metabolism, physical condition, sex, reading skills, intelligence) influence how a person can convert the characteristics of the commodity into a functioning. Second, social conversion factors (e.g. public policies, social norms, discriminating practises, gender roles, societal hierarchies, power relations). Third, environmental conversion factors (e.g. climate, geographical location) play a role in the conversion from characteristics of the good to the individual functioning (Robeyn, 2017). To transform characteristics into achieved functionings an agent must possess the right to access the characteristics and to empower them, the ability to use them properly, and the freedom to choose. Thus, the object of a metric of justice is not directly the distribution of functionings; rather, it is the distribution to all sets of capabilities which are neutral with respect to the individual’s life plan and functioning choices

To summarize, functionings constitute the person’s well-being, while capabilities are processes to transform resources into functionings, but also the individual liberty to obtain well-being (Sen 1992).
 

Nussbuam Capability Approach and the Central Capabilities
The CA has been developed by other scholars, such as the philosopher Martha Nussbaum who proposed a theory of justice based on human dignity threshold for all the individuals. In Creating Capabilities (2011), she expands the CA endorsing a new version following the Aristotelian and Marxian ideas of human flourishing and “good life”. Despite sharing the same theoretical foundations, Nussbaum approach differs from Sen in purposes and in the proposal of a universal list of ten Central Capabilities, emphasizing that the most important aspects or capabilities of people’s QoL are plural and quantitatively distinct(Nussbaum, M. 2011). The focus is on the constitutional and institutional basis to ensure capabilities and functioning transformation, rather than on the effects of the capabilities as done by Sen’s consequentialism.

Comparing Sen and Nussbaum theories of wellbeing, some differences are envisaged: Sen’s CA primary aim has been “to identify capability as the most for purposes of quality-of life assessment” (Saigaran, 2015) and not to offer a definite account of basic justice. Consequently, Sen does not employ a threshold or a specific list of capabilities, although some capabilities (such as health and education) are fundamental. Different from Sen is also the focus on the notion of human dignity threshold and political liberalism, which are cornerstones of her theory of social justice. Further, Nussbaum analysis embarks in the evaluational question on what are the most important capabilities with normative arguments. In contrast, Sen takes a stand on the evaluational issue by emphasis, without a systematic answer using the idea of capabilities merely to frame QoL assessment comparisons (Robeyins, 2005)

Shaping the evaluational answer, the role of “human dignity and a life worthy of it” is crucial (Nussbaum,2011). Nussbaum’s view focuses on the protection of areas of freedom so central that their removal makes a life not worthy of human dignity. So, the respect of human dignity requires that citizens are placed above an ample threshold of capability in ten different areas. The list of Central Capabilities derives from fundamental rights and it entails: Life, Bodily Health, Bodily Integrity, Freedom of Senses, Imagination and Thought, Emotions, Practical Reason, Affiliation, Other Species, Play, Control over one’s Environment (Political: political participation; Material: ability to hold property). Focusing on institutional and constitutional basis for social justice,the political order must secure to all citizens at least a threshold level of these 10 Central Capabilities, since the government has the aim of making people ale to pursue a dignified and minimally flourishing life.

Especially the Practical Reason and Affiliation are considered to be the two main Central Capabilities since they support one another playing a distinctive architectonic role: “They organize and pervade the others in the sense that when the others are present in a form commensurate with human dignity, they are woven into them” (Nussbaum 2011). Practical Reason refers to “Being able to form a conception of the good and to engage in critical reflection about the planning of one’s life”. Affiliation refers to two situations of “(a.) Being able to live with and toward others, to recognize and show concern for other human beings, to engage in various forms of social interaction; to be able to imagine the situation of another…” and also “(b) Having the social bases of self-respect and non-humiliation; being able to be treated as a dignified being whose worth is equal to that of others” (Nussbaum, 2011, Appendix A).

Nussbaum CA version has recently been integrated by Jonathan Wolff and Avner De Shalit research (6) proposing new concepts to be added to the theoretical apparatus (2007). The first is that of capability security, concerning the guarantee that should be assured by public policy to achieve the ability of the people to use and enjoy all the capabilities on the list. For instance, one way nations can promote capability security is through a written constitution that cannot be amended except by supramajoritarian process. Moreover an adequate access to the courts and transparency of judges are fundamental requirements too. Wolff and De Shalit introduced other two concepts: fertile functioning and corrosive disadvantage. The former promotes other related capabilities (for instance affiliation is a fertile functioning), supporting capability- formation in many areas. The latter refers to a deprivation that has particularly large effects in other areas of life. Nussbaum refers the example of Vasanti, an Indian thirty-years-old woman living in Gujarat in the North-West side. Nussbaum reflects on the intrinsic value of wellbeing and human dignity threshold as a metric for justice, beyond GDP growth standard. Vasanti story deals with abuses from an alcoholic husband, from which she escaped moving back to her parents’ house. After running out of money due to gambling, her husband got a vasectomy in order to take the cash incentive payment offered by local government. So Vasanti had no children to help her, further her father, producer of sewing machine parts died. Anyway, using one of her father’s old machines and living in the shop, she earned a small income making eyeholes for the hooks on sari tops. Meanwhile, her brothers gave her a loan to get another machine, one that rolls the edges of the sari.With the help of the Self-Employed Women’s Association (SEWA), she got a bank loan to pay back the brothers and she enrolled in SEWA’s educational programs learning to read and becoming more independent and empowered. Finally she managed to pay back almost entirely the SEWA loan itself.(Nussbaum, 2011)

In Vasanti’s story access to credit is a fertile capability, for the loan enabled her to protect her bodily integrity, to have employment options, to participate in politics, to have a sense of emotional well-being, to form valuable affiliations, to enjoy enhanced self-respect. Education plays a fertile role too, opening up opportunities. Landownership can sometimes have a fertile role, protecting a woman from domestic violence, giving her exit options and enhancing her status. On the other side, subjection to domestic violence is a corrosive disadvantage, feeling absence of protection for her bodily integrity jeopardized her health, emotional well-being, affiliations, practical reasoning and other capabilities.

Finally, Nussbaum’s search for a metric of justice in the CA, can be linked to the debate on which is the starting point for wellbeing: on one side Sen and Nussbaum CA; on the other side the Rawlsian theory of social primary goods. According to John Rawls, social primary goods are means or resources that anyone would want regardless of whatever else they wanted. Their holdings, according to Sen, should be compared, without looking closely at what individuals with heterogeneous abilities and preferences can do with them. The social primary goods are (Rawls 2001): basic liberties (freedom of thought and liberty of conscience, etc.); Freedom of movement; Powers and prerogatives of offices of responsibility needed to give scope to various self-governing and social capacities of the self. Income and wealth being the all-purpose means (having an exchange value) for achieving directly and indirectly a wide range of ends; the social basis of self-respect being those aspects of basic institutions that are normally essential if citizens are to have a lively sense of their own worth as moral persons. On the other side, the CA approach instead of looking at people’s holdings of external goods, it looks at what kind of functionings they are able to achieve (Robeyns, Brighouse, p. 2). In “Equality of What?” Sen (1979) presented the capability metric as an alternative for and improvement on the social primary goods metric, critizicing the inflexibility of social goods as metric of justice. Sen believes that the more general problem with the use of primary goods is that it cannot adequately account for differences among individuals in their abilities to convert these primary goods into what people are able to be and to do in their lives. For Sen, the more general problem with the primary goods metric is that “the interpersonal variability in the conversion of primary goods into capabilities introduces elements of arbitrariness into the Rawlsian accounting of the respective advantages enjoyed by different persons; this can be a source of unjustified inequality and unfairness” (Sen, 1990, p. 112). Assuming this theoretical dilemma, a practical analysis on how to translate the CA into measures and how to weigh capabilities will be shown.
 

Operationalising the CA and the Human Development Approach
The CA can be used as a framework for well-being measurement in order to guide public policy. Its practical operationalisation is explored focusing on the development of QoL assessment indexes which will be compared in order to assess strengths and weaknesses. The focus will be on the Human Development Report and HDI application as direct application of Sen CA and with focus on Better Life Index by OECD, assessing the QoL in Italy. Finally a focus on the national project by the Italian Statistic National Agency developing the equal and sustainable standard (BES) in guiding economic policy decisions will be assessed as practical application of Martha Nussbaum Central Capabilities.
 

Beyond GDP at International level: HDI Methodology
The Human Development Reports (HDRs), published annually by UNDP since 1990, have applied Sen’s CA as a conceptual framework. Functionings and capabilities are used as theoretical cornerstones of the Human Development Approach, being a paradigm for advancing human wellbeing. (Fakuda-Parr 2003). It is about “expanding the richness of human life, rather than simply the richness of the economy in which human beings live. It is an approach that is focused on people and their opportunities and choices”.Indeed, the first Human Development Report launched by the economist Mahbub ul Haq in 1990 had an explicit purpose: ‘‘to shift the focus of development economics from national income accounting to people centered policies’’ (Haq, 1995). Income growth is seen as a means to development, rather than an end in itself. One main aim is giving people more freedom to live lives they value, meaning developing people’s abilities and expanding the chance to activate and use them (UNDP). Regarding how to prioritize the functionings, Sen was initially concerned by the difficulties of capturing the full complexity of human capabilities in a single measure. However, he was persuaded by Haq that only a single number could shift the attention of policy-makers from material output to human well-being as a real measure of progress and adequate proxies of development(Anand, 1994).

The Human Development Index (HDI), introduced in the first HDR (1999),was created to emphasize that people and their capabilities should be the ultimate criteria for assessing the development of a country, not economic growth alone. The HDI is a summary measure of average achievement in three key dimensions of human development, assessing long-term progress: a long and healthy life, being knowledgeable and have a decent standard of living. It is the geometric mean of normalized indices for each of the three dimensions (UNDP). More precisely, a long and healthy life is measured by life expectancy. Knowledge level is measured by mean years of education among the adult population, which is the average number of years of education received in a life-time by people aged 25 years and older; and access to learning and knowledge by expected years of schooling for children of school-entry age, which is the total number of years of schooling a child of school-entry age can expect to receive if prevailing patterns of age-specific enrolment rates stay the same throughout the child’s life. Standard of living is measured by Gross National Income (GNI) per capita expressed in constant 2011 international dollars converted using purchasing power parity (PPP) conversion rates

Starting as a crude measure of an unweighted average of a nation’s longevity, education and income, critics to its shortcomings have advanced modifications and adjustments made to the index over the years. Since 2010 edition, the HDI is calculated with the following three indices:

1. Life Expectancy Index (LEI)

LEI is 1 when LE is 85 and 0 when LE is 20

2. Education Index (EI) =

• Mean Years of Schooling Index (MYSI) =

(15 is the projected maximum of this indicator for 2025)

• Expected Years of Schooling Index (EYSI) =

(18 is equivalent to achieving Master degree in most countries)

3. Income Index (II) =

• II is 1 when GNI per capita is $75000 and 0 when GNI is $100.

(GNI pc = Gross national Income at purchasing power per capita)

Finally HDI is the geometric mean of the previous three normalized indices:

Indeed, the HDI simplifies and captures only part of what human development entails. It does not reflect on inequalities, poverty, human security. Therefore, the Human Development Report Office developed other composite indices as broader proxy on key issues of human development, inequality, gender disparity and poverty.

Anand and Sen have advanced measurement tools of human development beyond the previous three dimensions. For instance exploring gender equality, the Gender-Related Development Index (GDI) and the Gender Empowerment Measure (GEM) were developed in 1995. The Human Poverty Index (HPI), published in the 1997 HDR was developed as a measurement of poverty in human lives rather than income. In 2010, the Inequality-adjusted Development Index was introduced as “the actual level of human development accounting for inequality”. The IHDI combines a country’s average achievements in health, education and income with how those achievements are distributed among country’s population by “discounting” each dimension’s average value according to its level of inequality. Thus, the IHDI is distribution-sensitive average level of HD. Two countries with different distributions of achievements can have the same average HDI value. Under perfect equality the IHDI is equal to the HDI, but falls below the HDI when inequality rises. The difference between the IHDI and HDI is the human development cost of inequality, also termed – the loss to human development due to inequality.

Criticisms moved to the HDI are that it implicitly assumes trade-offs between its components so the same HDI score can be achieved with different combinations. As a result, the HDI implies a value of an additional year of life in terms of economic output. This value differs according to a country’s level of GDP per capita. The HDI also struggles with accuracy in distribution measures and capturing equity (Fakuda o Anand). Conceptualized as a measure of average achievements, HDI does not take into account the distribution of achievements, which leaves out equity, an essential outcome by which to evaluate progress. This problem has been faced developing the Inequality Adjusted HDI. For instance, taking the data of Italy as sample country, Italy’s HDI value for 2017 is 0.880— which put the country in the very high human development category—positioning it at 28 out of 189 countries and territories.7  Between 1990 and 2017, Italy’s HDI value increased from 0.769 to 0.880, an increase of 14.4 percent. Table A reviews Italy’s progress in each of the HDI indicators. Between 1990 and 2017, Italy’s life expectancy at birth increased by 6.3 years, mean years of schooling increased by 2.9 years and expected years of schooling increased by 3.5 years. Italy’s GNI per capita increased by about 14.9 percent between 1990 and 2017. (HDR)

 On the other hand, looking at the Inequality adjusted measures, Italy’s HDI for 2017 is 0.880. However, when the value is discounted for inequality, the HDI falls to 0.771, a loss of 12.3 percent due to inequality in the distribution of the HDI dimension indices. Spain and United Kingdom show losses due to inequality of 15.4 percent and 9.4 percent respectively. The average loss due to inequality for very high HDI countries is 10.7 percent and for OECD it is 11.9 percent. The Human inequality coefficient for Italy is equal to 11.9 percent.

To conclude, this approach contrasts with that of the basic needs approach, which listed the important human needs without an explicit explanation justifying the selection. It also contrasts with other work using the capability approach, such as Nussbaum’s efforts to finalize a list of essential capabilities (Nussbaum 2000). But the HDRs have argued that the capabilities given priority within public policy will change over time and from one community to another. As an exercise in the global evaluation of development, the HDRs had to focus simply on those capabilities that are universally valued and ‘‘basic’’ (i.e., capabilities on which many choices in life depended), reflected in the three HDI capabilities: to be knowledgeable, to survive, and to enjoy a decent standard of living.
 

At Regional Level: The Better Life Index
Another attempt to operationalize the human development approach, expanding the focus on more dimensions than the HDI is the Better Life Initiative launched by the Organisation for Economic Co-operation and Development in 2011, based on two projects: the “Better Life Index” (BLI) and “How’s Life?”. The focus on wellbeing measures and metrics to influence policy-making process has been crucial in the OECD work developing the “Framework for Measuring Well-Being and Progress” (OECD, 2009) and relying on the recommendations of the Commission on the Measurement of Economic Performance and Social Progress (Stiglitz, Sen, Fitoussi 2008). A connection can be seen linking Nussbaum CA expanded version with emphasis on the political liberalism in selecting fundamental areas of wellbeing and beyond-GDP measures.

Looking at the BLI development, its aim is to track wellbeing looking at 11 dimensions8 of wellbeing. It is an interactive tool that allows users to compare well-being across OECD countries and beyond on the basis of the set of well-being indicators used in How’s Life?. Users chose what weight to give to each of the 11 dimensions shown below and then see how countries perform, based on their own personal priorities in life. How’s Life? Is a report that offers a comprehensive picture of what makes up people’s lives in 40 countries worldwide, assessing the 11 areas, which can be conceptualized through a capability lens. Some dimensions, such as education and health outcomes, are strongly correlated with per capita GDP, but others are not — such as the quality of political institutions, homicide rates and exposure to conflicts (Van Zanden et al. 2014).

 OECD BL Initiative

Looking at the BLI 2017 Ranking and focusing again on Italy,the country findings reflect the ratings voluntarily shared with the OECD by 4,336 website visitors in Italy. Findings are only considered as indicative and are not representative of the population at large. For Italian users of the Better Life Index, health, life satisfaction and education are the three most important topics

Regarding average level of current wellbeing in Italy in comparison to other OECD countries, data shows that the employment rate, about 57% in 2016, was among the lowest in the OECD area, and in terms of labour market insecurity and long-term unemployment Italy ranks in the bottom third of the OECD. However, household net wealth is fairly close to the OECD average, and only around 4% of employees regularly work 50 hours or more per week, less than one-third of the OECD average rate. Life expectancy at birth is in the top third in the OECD, and 66% of Italians perceive their health as “good” or “very good”, 3 percentage points below the OECD average. In education and skills, environmental quality and life satisfaction, Italy’s falls below the OECD average, while in terms of civic engagement and governance and personal security, performance is mixed. As for social support, 91% of the population in Italy report having friends or relatives whom they can count on in times of trouble, slightly above the OECD average of 89%.

Assessing shortcomings of the BLI, one major criticism is that BLI uses a limited subset of indicators used by other econometric models such as Gross National Well-being Index 2005, Sustainable Society Index of 2008, and Bhutan Gross National Happiness Index of 2012, and Social Progress Index of 2013. Another criticism is that “the 11 dimensions” still cannot fully capture what is truly important to a population. For instance various critics have pointed out that the OECD’s BLI does not include such dimensions as poverty, economic inequality, access to health insurance, pollution.

At National level: the Case of Italy and the BES
Taking inspiration from the “Beyond GDP Initiative” launched by the European Commission and the involvement in MAKSWELL “MAKing Sustainable development and WELL-being frameworks work for policy analysis”9 EU funded project in the program Horizon 2020, several EU countries are working on the development of wellbeing assessment measures. In 28 EU countries, 19 have developed a framework of wellbeing analysis and evolution, with variation in the indicators development: from a minimum of 7 indexes in Hungary to a maximum of 130 in Italy. Further, projects of integrated approaches between national statistics and Eurostat and OECD shows a process towards more harmonization to support policies. The wellbeing domains have been selected after direct consultations with the citizens and the civil society (BES 2019).

In 2010 Istat (the Italian National Institute of Statistics) and Cnel (National Council for Economics and Labour) jointly launched a project to measure Equitable and Sustainable Well-being (BES) (Turci). It aims at evaluating the progress of society not only from an economic but also from a social and environmental point of view (Ciommi et al.,2013).Together with representatives of the third sector and civil society, a multidimensional approach has been developed, based on 12 social and environmental dimensions, complementing the indicators related to production and economic activity with measures of the key dimensions of well-being, together with measures of inequality and sustainability. The first Report in March 2013 aimed at improving the quality of life of citizens. (Istat, 2019)

Taking the multidimensionality of well-being as a starting point, it is a synthesis of 129 indicators structured in 12 domains of wellbeing: Health; Education and training; Work and life balance; Economic well-being; Social relations; Politics and institutions; Safety; Subjective well-being; Landscape and cultural heritage; Environment; Innovation, research and creativity (previously called Research and innovation); Quality of services.

A crucial step giving relevance to the operationalization of CA approach, is the inclusion of a subset of four BES indicators in the budget documents – the national Economic and Financial Document, since 2017 (DEF) to drive the economic planning. The DEF has to include an analysis of recent trends in 4 chosen domains: adjusted GDP per capita; Inequality index of disposable income; Rate of non-participation in the work, CO2 and other climate-altering gas emissions. The Law no.163/2016, which reformed the Italian Budget law, provided that the Equitable and sustainable well-being indicators should contribute to define those economic policies which largely affect some fundamental dimensions for the quality of life. A committee with representatives of the Ministry of Economy and Finance, the Italian National Institute of Statistics (Istat), the Bank of Italy and two renowned experts, was set up to select the 4 indicators as most salient. (MEF, 2019)

Furthermore, looking at criticisms, the debate on measuring equitable and sustainable well-being involves more and more citizens, stakeholders and policy-makers at the local level. Therefore ISTAT started two pilot projects to deepen the measurement of the Bes framework at the local level with the cooperation of local institutions, also exploring the information potential of their administrative archives. In order to shape a more realistic local monitoring. In 2018 ISTAT issues for the first time a system of Bes indicators at local level, related to the 110 Italian provinces and metropolitan cities (Nuts3 level). This is the first result of the project “Bes measures at local level”, that was started to settle and regularly update a set of indicators that is at the same time useful to meet the statistical information needs at local level and consistent and integrated with the framework applied at national level. (Taralli et al., 2015)

Conclusion
Starting from a general overview on comparative wellbeing assessment, standard of living and quality of life meanings have been explored, assessing the limits of GDP being a resource-based measure used to capture wellbeing. The aim is to provide an accurate and holistic portrait of what is wellbeing for a country and its citizens, rooted in the Aristotelian “human flourishing” idea as metric of individual wellbeing, far from a focus narrowed on material welfare. Relying on the CMEPSP recommendations and on Amartya Sen attempt to decompose the concept of SoL in a measure of utility according to Pigou theory, a measure of opulence according to Adam Smith and a proxy of freedom and capabilities, enhancing complexities and multidimensionality of the quality of life calculations.

The main theoretical focus has been on Amartya Sen CA and its extended version proposed by the philosopher Martha Nussbaum, further integrated by DeShalit and Wolff contributions. The dilemma and valuational question on prioritizing the most important capabilities for enhancing wellbeing has been discussed, with focus on Nussbaum list of ten Central Capabilities. They represent the fundamental pillars that should be provided by each government according to Nussbaum. (Burchi, 2015)

Going through the practical operationalisation of the CA theory, a fundamental question regards how to weigh and prioritize capabilities. The division between Sen CA and Rawls social primary goods as starting point has been explained, with focus on the element of political liberalism which characterize the CA. Finally an overview on different wellbeing measures has been exposed, starting from the Human Development Approach translation in the HDR and HDI initiative by the UNDP, as direct adoption of Sen CA, focusing on the three dimensions of health, education and living standard. Further, at regional level, the OECD Better Life Initiative and BLI has been assessed as example of standard that enlarges dimensions and it is based on liberalism in the choice of the dimensions, following Martha Nussbaum and Sen. Finally the italian national report on “Equitable and Sustainable Wellbeing” (BES) has been analysed as example of national attempts to operationalize CA and to drive policy beyond GDP measure, with concrete implementation in the Financial and Economic Document of Italy.