Smith writes of poverty in terms of a person’s ability to appear in public without shame, and, at his time, doing so would have been dependent on owning a linen shirt: “…in the present times, through the greater part of Europe, a creditable day-labourer would be ashamed to appear in public without a linen shirt, the want of which would be supposed to denote that disgraceful degree of poverty which, it is presumed, nobody can well fall into without extreme bad conduct.”3 It is not the linen shirt per se that establishes poverty, but the lack of the capability to appear in public without shame.
The capabilities concept of economic well-being has been established by Amartya Sen. He argues that “…the right focus for assessing standard of living is … something that may be called a person’s capability....[It is the] capability to function …that comes closest to the notion of standard of living.” (Sen, 1983, p 160)4 The general capability to function in society involves, in addition to Smith’s capability to appear in public without shame, “the most basic capabilities, e.g., to meet nutritional requirements, to escape avoidable disease, to be sheltered, to be clothed, to be able to travel, and to be educated.” (Sen, 1983, pp. 162-63)
For the individual, many of these capabilities can be met with money. Nutritional requirements, for example, can almost always be met if the individual has sufficient money. In his well-known examination of famines, Sen points out that famines generally arise not because of an absolute society-wide lack of food but because people, or some people, do not have the “entitlements” that allow them to obtain food. (Sen, 1981) A principal entitlement is money with which one can buy food.
The fulfillment of some other capabilities, however, cannot be fully accomplished through the market. To a substantial degree, the individual’s capability to avoid disease depends upon a broad set of social conditions and public goods (e.g., vaccination programs and clean air).5 One’s capability to become educated is also heavily dependent on non-market elements, though certainly aspects of an education can be purchased as commodities.6 And the capability to travel is usually dependent to a large degree on the
3 Smith (1937 , Book Five, Chapter II, Article IV, pp. 820-821). I will have reason below to return to this passage. While I have seen this passage quoted many times, I have never seen comment on Smith’s implicit assumption that one falls into poverty due to, presumably, one’s own, “extreme bad conduct.” In Smith’s view, apparently, as in the view of many of his modern-day free market followers, poverty is not a structural or systemic problem, but a problem of the individual.
4 Sen has developed this concept extensively in several sources. See, for example, Sen (1983, 1987 and 1992)
5 Moreover, it is well established that inequality – represented by the distribution of income, but more generally the whole complex of social inequalities – can have profound impacts on health. The evidence and arguments on this issue are presented by Wilkinson (2005) and Kawachi and Kennedy (2006).
6 The extent to which one can purchase the education capability also depends in part on what one wants or what one means by education. For example, trying to provide what I considered a “good education” for my children, I realized that it was virtually impossible to buy a high quality (in the traditional sense) education where my children would partake in their schooling along with others from a great diversity of social, economic, racial and cultural backgrounds – even if I had had the money!