The capabilities approach continues to flourish, although given the scale of interest it has attracted the pace of development can sometimes seem dauntingly rapid for those in the field. Sufficiently fast, in fact, that the issue of how the capabilities and happiness literatures might relate, which seemed crucial when this book was commissioned, may already have peaked. Whether that is the case or not, this collection edited by Luigi Bruni and colleagues, contributes to an issue of general significance and includes a number of instructive papers, mainly by economists or philosophers with an eye for the policy context in which grand debates about conceptions of welfare are currently being cashed out. Exemplary amongst them is an opening chapter by Amartya Sen that summarizes some of the key points that have guided his analysis, rather consistently I would suggest, over a period of five decades or so. It is notable that his comments about the value of positive and negative freedoms now have a familiarity that one associates with widespread acceptance, at least in some circles.

Sen blames Lionel Robbins and other economists in the 1930s for mutilating utilitarianism by denying the possibility of interpersonal comparisions of utility and I valued particularly his remarks correcting the hearsay that he was uninterested in happiness. For Sen, happiness is a ‘momentous’ achievement in itself and a reflection of the fact that we have reason to value something. The key is to be careful about causality as happiness does not necessarily confirm the rational value of something, though with that caveat in mind, Sen concludes that there is much of interest in happiness, even for post-utilitarian economics.

A nice complementary example of such work can be found in the chapter by Carol Graham, an economist with long-standing interests in development and international affairs, who argues that work on happiness has the capacity to shed light on poverty dynamics and inequality and is complementary, rather than substitutive for work on income. As she notes of the Easterlin Paradox, discussed by its author in the chapter following Sen's, many development economists would find the view that more income fails to improve welfare over time, troubling to say the least. Surveying her previous papers, Graham asks what is missing from traditional income-based measures of welfare, comments on some of the early work that looks at happiness in developing countries, discusses a causality problem associated with the kinds of happiness equations that she estimates before considering the relevance of happiness research to development policy and practice. In her conclusions, Graham makes a nice, empirically informed, set of methodological points that may be commonsensical but needed to be made. Her search for drivers of happiness in developing countries concurs with the Senian argument for multi-dimensionality but highlights the fact that in national cross sections there are diminishing returns to increasing income and there are also goods, like health, quality of government and respect for human rights, that correlate with higher levels of happiness. In addition, the contribution of perceived equity of rewards to happiness appears to be on a par with the happiness derived from the rewards themselves. As she notes, ‘All of this suggests that happiness surveys – if used cautiously and with awareness that they do not well reflect long-term gains in income and health, which are important to the welfare of the poor – may broaden our understanding of a number of development questions.’ Graham also suggests that norms about equity and perceptions of fairness may play a role in providing what she calls a ‘nuanced’ view of adaptation to shocks. Finally, she suggests, on the basis of her own estimates, that macro-economic volatility, unstable employment and highly unequal income distributions have impacts on human welfare that have been underestimated in the past. Ultimately, the main claim is that this underlines the need for social insurance and that novelty is the justification of her argument, empirical welfare measurements, as opposed to pure political arguments. Of course, it is possible to prefer the latter to the former, but equally, we might find it interesting when they seem to point in a similar direction.

Luigino Bruni's chapter on relational goods is rather a different kettle of fish – potentially a valuable read for philosophers, economists or sociologists – and though it may not resolve any of the key issues provides a useful way in the topic. One idea that does seem conclusive, however, is the proposition that relational goods are neither private, because they can't be traded, nor public as they fail to reflect joint (possible) action between individuals and that they therefore constitute a third class of good. This seems right and draws the reader to a chapter that highlights various aspects of relational goods – notably identity, reciprocity, simultaneity, motivation, emergence, gratuitousness and value. Bruni expands on the items in his list without pretending a theory would be easy and gives, in discussion of other theories, most attention to one by Gui in which there is a distinction between the relationship and the relational goods, or encounters that arise as the relationship continues. This seems sensible enough though I wasn't sure just how far the distinction will take us. (Nussbaum takes a different line and makes a slightly different point when she argues that the relationship is the good.)

Bruni's analysis follows from a discussion of different kinds of wellbeing – subjective wellbeing (pleasure and pain) and eudamonia (relationality and intrinsic motivation) – in which sociality emerges as a common theme. His interest in relational goods is grounded in the observation that authentic relations are important in the Senian account but also turn out to be empirically linked to happiness, and I think this illustrates nicely one of the editors' main points in this collection, namely that, notwithstanding the normative differences, there are significant points of overlap when it comes to empirical prescriptions that derive from these two approaches. The fact that market processes have come to ruthlessly exploit our need for relational goods might help to question whether there can, in fact, be any relations that are not instrumental and these are issues that it would be good to see Bruni explore in more detail subsequently.

Another contribution, also based on a detailed understanding of the relevant behavioural literature, is a chapter on ‘Capabilities, the Self and Wellbeing’ by Maurizio Pugno who maintains that despite the capabilities approach's association with criticisms of concepts such as ‘utility, rationality and maximisation’, the theory fails to engage with the rise of mental problems in high-income countries. Though hardly discussed in economics, the self is an important aspect of our ability to choose and Pugno seeks to show how, as an organizing concept for decision-making, it can be implicated in failed choices and needs to be included in the capabilities approach if it is to generate useful policy proposals.

Pugno also notes that identity is discussed but not developed by Sen and argues from three aspects of self as developed in social psychology. The agentic self explains the dynamics of self which are seen as the source of the motivation to control: and according to Deci and Ryan, the frustration of social needs when young is associated with the development of extrinsic and material motivations later on in life. The reflexive self by contrast focuses on self-consciousness and the conscious/unconscious distinction. Here Pugno argues, in a nutshell, that we should accept that choice has a significant, if not predominant, unconscious component which leads to error that is hard to correct. Furthermore, active self-deception compounds error and is associated with ill-being. The social self provides a third element and a major strand of research here concerns the way in which, for example, the caring strategies of parents help shape cognitive and motivational capacities at a very early age. Drawing largely on a discussion of attachment styles, Pugno highlights the view that self-development is grounded in the non-conscious capacities formulated through the ‘feelings and intuitions of the others’ self’. Some work on the economics of child development is beginning to emerge (for example from Heckman and colleagues based in Chicago) and as Pugno notes, looking at the development of preference may have implications for early years education. Human capital investment should be on the agenda, for sure, but perhaps this collection hints that the capacity to generate welfare outcomes from social interactions for self and others is important too?

Every chapter provides at the very least an interesting read but Bob Sugden's concluding chapter is perhaps alone the most critical and seems to argue for a plague on both houses line by showing that neither is consistent with contractarian positions. The main point is that both capabilities and happiness lead to policies that violate some actual preferences. Although Sugden builds the argument nicely, I am still not sure that I agree with his overall take-home message. Broadly speaking, the argument is that happiness researchers (Sugden highlights Camerer and colleagues), need to say why they espouse life satisfaction measures. In their case, this seems to be because they accept that decision utility is subject to error and bias compared with ex post assessments. On the other hand, the capabilities approach has been associated with rather different views and arguments, namely that there are objective aspects of wellbeing and that democratic mechanisms (should) underpin social choice. Sugden's analysis concentrates on getting to this point but why does the contractarian object to both? In the case of happiness, Sugden is concerned that we are being offered a world determined by expert opinions as to what is going to make him happy, as opposed to his own views, a position he characterizes in quite traditional, anti-paternalistic ways. I share his libertarian sentiments but I also sense that they are particularly held by certain groups (notably academics and entrepreneurs). From a sociological perspective, by contrast, absence of external coercion is certainly important but once that is removed, many people do in fact seem to get pleasure from similar kinds of rather everyday activities. Similarly, what matters to those concerned about equality of opportunity are the values of equality and autonomy rather than the metaphysics of free will.

A final point worth noting, I think, is that the technology of choice approach (nudge etc.) that derives from behavioural economics and which Sugden seems to regard as unacceptably paternalistic might also be seen as evening up the score between consumers who may be poor and producers who increasingly are backed up by vast research resources that enable them to exploit all the human foibles they can unearth. According to this view, we might see the opposite of paternalism as being share-holderism and recognize that whether consumers are rational or not is only part of the story. To criticize the government action on consumers' behalves is missing the point of many modern interventions.

I want to stress that the contractarian critique seems important and it is quite some time since I have come across an argument that does so much useful work even if, ultimately, it encourages me to espouse a slightly different position. The problem with contractarian social choice that Sugden leads me to dwell on is that by only allowing agreements mutually beneficial to all, the approach risks being excessively democractic. It risks giving the power of veto to a very small group of people with bizarre preferences (they will always exist) and jeopardises the scope to make some changes that would benefit many at a small cost to a few (e.g. health and poverty reduction). In this regard, the problems with contractarianism are analogous to the distributional difficulties that can result from insisting that Pareto optimality should be the only principle of welfare economics and always applied. Ultimately, this argument encourages me to think that social choice is a matter of weighing up rules and welfare outcomes and that preferences for the former will always be informed by societal and historical experience of the latter.

In this review, I have focused on chapters that particularly caught my attention, though there is probably something of value in every single chapter. However, I hope this focus serves to indicate the strength of this volume which lies in the value of its engagement between philosophical themes and evidence that will provide welcome insights for those working in the field. There is more common ground between the capabilities approach and happiness research than some might have thought and this volume nails the point in a number of ways.