This research projects aims at developing a theoretical framework combining Amartya Sen’s Capabilities Approach and John Roemer’s Equality of Opportunity Approach for assessing public policies that aim to improve individual wellbeing and social justice. Our objective is to develop a solid theoretical basis that encompasses the virtues and strengths of both the approaches that can be practically implemented in a sound econometric framework.

We argue that, separately, these theories have constituted core theoretical foundations of path-setting empirical research in development economics over the recent years, but there are still few attempts to build a combined framework. Indeed, there are important similarities between these two approaches, which have often led to perceive that they provide practically identical elements of analysis regarding wellbeing and social justice. However, there are also substantial conceptual and practical differences between the two approaches, as the mechanisms that lead to personal life-style outcomes and wellbeing and their possible links to public policies, are quite different from one theory to the other. Regarding a person’s responsibility on her way of living or wellbeing, we perceive that the Capabilities Approach is more concerned with liberty, freedom and ability to choose, whereas the focus of Equality of Opportunity approach is more on the role of individual circumstances and willingness and commitment to achieve, on a person’s outcome.

We stress that the Capabilities Approach sheds clearer light into a positive way of thinking about what is a “good life”, linking it to realistic freedom of choice. However, it is well known that this approach does not explicitly advocate for any specific public intervention or algorithm in the quest for increased social justice. In a complementary fashion, the Equality of Opportunity Approach offers well established formal insights on what should be done in order to achieve social justice and increase individual wellbeing from a normative perspective. Yet, this approach is rather nuanced around what is individual wellbeing. Thus we see powerful complementarities between the two approaches, as one excels where the other one might come short.

It is based on these ideas that we propose a conceptual framework that combines both the approaches and argue that the combination offers a better analytical tool in the quest for explanations to a person’s way of life and to the mechanisms through which it can and should be influenced by public policies.

Basically, we reason that in order to assess public policies for individual wellbeing and design public actions compatible with social justice, one needs to identify and isolate the impact of these policies on both individual capabilities as well as circumstances and efforts. Indeed, the observable aspects of a person’s lifestyle are only partial manifestations of her wellbeing, and are ultimately, a personal choice. Therefore, we advocate for a theoretical framework where public policies cannot have a direct influence on a person’s lifestyle but an indirect one through its influence on capabilities and circumstances.

The econometric implementation of this framework relies on the analysis of latent variables, such as efforts and capabilities. Preliminary, this implementation requires the development of a Structural Equations Model (SEM) that can gauge the interrelations between these latent variables and public policies, amongst others.