On-site Keynote Lecture by Leandro Prados de la Escosura

Welfare and freedom: a long-term vision

The Rafael del Pino Foundation organised on Tuesday 21 February 2023 at 7 p.m., the keynote lecture of Leandro Prados de la Escosura entitled "Welfare and freedom: a long-term vision"on the occasion of the publication of his latest book entitled "Human Development and the Path to Freedom"published by Cambridge University Press.

Leandro Prados de la EscosuraProfessor Emeritus of Economic History at the Universidad Carlos III de Madrid and Research Fellow at the Centre for Economic Policy Research in the United Kingdom is also Professor Rafael del Pino. He holds a PhD from Oxford University and a PhD in Economics from the Universidad Complutense, and has taught at Georgetown University (as Prince of Asturias Professor) and the University of California-San Diego. He has held the Maddison Honorary Chair at the University of Groningen and has been Leverhulme Professorial Fellow at the London School of Economics and Political Science (LSE), Visiting Fellow, All Souls College, Oxford, and Jean Monnet Fellow at the European University Institute (Florence).

He has chaired the European Historical Economics Society and has been a member of the Executive Committee of the International Economic History Association. He is a member of the editorial boards of the Journal of Economic Surveys and Cliometrica and was editor of the Journal of Economic History. He is on the advisory boards of the European Review of Economic History, Explorations in Economic History and the Scandinavian Economic History Review.

He has published and edited monographs on growth and distribution in Spain, Latin America since independence, the costs and benefits of European imperialism, British exceptionalism in the age of the Industrial Revolution, and the sources of long-term growth. His most recent books are Spanish Economic Growth, 1850-2015 (Palgrave Macmillan, 2017) and Human Development and the Path to Freedom (Cambridge University Press, 2022). He is currently researching economic freedom and welfare in the world in historical perspective and economic development in Spain over the very long term.


On 21 February 2023, the Rafael del Pino Foundation organised the keynote lecture "Welfare and Freedom: A Long-Term Vision", given by Leandro Prados de la Escosura, Emeritus Professor of Economic History at the Carlos III University of Madrid, on the occasion of the publication of his latest work entitled "Human Development and the Path to Freedom", published by Cambridge University Press.

According to Prados de la Escosura, well-being is a set of things necessary to live well. In reality, the vision of well-being is broader, multidimensional, and today there is widespread dissatisfaction with the idea of measuring well-being through material progress, GDP. Ten years ago, Angus Deaton, Nobel laureate in economics, said that well-being should include health, education, income, life satisfaction and participation in a democratic society under the rule of law. This clashes with the tendency to use GDP as a measure of well-being.

In reality, this idea of welfare is not so modern. A little more than two hundred years ago, some prestigious individuals gathered in Cadiz said, in article 13 of the 1812 Constitution, "the object of the Government is the happiness of the Nation, since the end of all political society is none other than the welfare of the individuals who compose it". Therefore, the idea of welfare comes from further back.

Forty years ago, Amartya Sen wrote about approaches to well-being and said that we can distinguish three. One is utility, or the satisfaction and intensity of desire, which translates into two types of studies: trying to weigh the monetary dimensions of quality of life and the study of subjective well-being. Another is what he calls affluence, or control over resources. Finally, what Sen proposes is what he calls the freedom approach. The idea is that well-being depends on a combination of achievements in a context of freedom to choose. That is, well-being is not simply the attainment of certain achievements, such as a long life, access to knowledge, or a decent standard of living, if there is not the ability to choose between alternative lives.

Amartya Sen's idea actually also has fathers who are almost as old as the Cadiz Constitution, such as Marx and Engels, or, a century later, Friedrich Hayek. That is, the idea of freedom and choice is in the Constitution of 12, in Marx and Engels, in Hayek and, of course, in Amartya Sen. But it is a rather unpopular view.

The last century and a half has been a period of widespread growth in material welfare and globalisation. The principle that inspires well-being is to expand the choices of the individual, which is what inspires human development. As a shortcut, Sen and his collaborators included a long and healthy life, access to knowledge and the resources to enjoy a fulfilling life when they developed the human development index.

For the same levels of material well-being measured by per capita income, well-being in a multidimensional sense has risen. That is to say, at whatever level of income in the past, today, for the same level of income we have a much higher level of well-being.

In the evolution of life expectancy over the last 150 years, there are two moments when it falters. One is Covid and the other is the great Chinese famine of the long march. These are the two moments when there are interruptions in the sustained improvement in longevity, in living long and healthy lives. There has been a steady increase in access to knowledge, accelerating from the 1950s onwards. The problem with these indices is that they do not take into account free choice.

If we look at the human development index and see how countries are ranked, we see that countries with abject political regimes appear very high in the rankings. All kinds of authoritarian regimes, left-wing and right-wing, usually show up with very good well-being performances. Without agency and freedom, and by agency we mean the capacity to act intentionally and achieve one's purposes, the human development index becomes an index of basic needs. Fortunately, today we have the liberal democracy index, which includes civil and political liberties.

The index of liberal democracy integrates two elements. One is what we would call positive, collective freedom, such as the holding of elections. The other is a negative freedom, in the sense of avoiding interference in individual decisions, such as civil rights, respect for minorities, and so on. The index captures these two things. Unlike the other indices, it grows until the First World War. It falls in the 1920s and 1930s. There is another breakthrough in the 1950s and 1960s and there is another breakthrough in the 2000s. We have sharp declines in the 1960s and early 1970s and what has happened in the 21st century, with a very sharp fall.

If we include all these variables we have a human development index that, in the long term, we see that the evolution is very positive. The only time in the last 150 years when there has been a setback is in the last decade.

How does this whole story compare with the conventional one, which is based on per capita income? In the long run, the evolution is parallel, but we see that there are small differences in the steepness of the curves representing the evolution of the indices. If we look at the cumulative rates of change over five periods, between 1950 and 1970 and between 200 and 2020 the growth of GDP per capita is higher than that of welfare. But between 1920 and 1950 the increase in welfare is much higher than the increase in GDP per capita. This is an era of de-globalisation, with the two world wars and the Great Depression, when the growth rate of GDP per capita slows down and yet there is a large increase in welfare.

How is it possible that there is no correspondence between increased well-being and improved material conditions? If we are richer, we would be better fed, we would have a better immune system, and we would also have better health and education provision, probably from the public purse. And material well-being will probably lead to democracy. But it turns out that, at the same income levels, we used to be less healthy, and now at the same income levels, we are much healthier.

How could this have happened in 1950? Because there have been great advances in medicine, with the discovery that it is microbes that transmit diseases. That is when vaccines, sulphonamides and, later, antibiotics appeared. The great advances in health took place after the Second World War thanks to the advances in developed countries and the international cooperation agencies that spread these advances.

How does this quantum leap in health happen? There are two parts to progress. One is the technology turned into new medicines and the other is the knowledge to prevent the transmission and spread of diseases. One can be very poor, but these breakthroughs happen because this knowledge makes it possible to prevent the spread of these diseases, which reduces infant mortality and maternal mortality. This is the element that is ignored because everyone looks at antibiotics.

In the 1970s nothing happens in terms of welfare, even though it is the worst period in economic terms since the Second World War, thanks to the spread of healthy hygienic techniques, which are very cheap and often spread through the education of children.

We are healthier because we are richer, but, for the same level of income, we are healthier.

In the case of education we have a similar situation. Education does not only depend on whether we have more money to finance it. It also depends on war, because war requires indoctrination and education is a very simple indoctrination mechanism. It depends on the desire for nation-building. There is no better way than using language as a vehicle to cohere a certain part. Or the dissemination of new ideas, such as the importance of human capital or ideas of redistribution. Again we have much more access to knowledge than in the past for the same income levels.

Finally, what about freedom? This case is different. We can be much less democratic and have much less freedom at the same income levels we had before. In the 1970s there are all sorts of reversals of freedoms under very different kinds of regimes. This rejects the idea that the higher the income level, the freer we are going to be. In the year 2000 we have improved, but in 2020 we are much worse off.

Adding all these elements together, we see that, in 2020, for the same income levels, we have higher levels of well-being.

What happens if instead of looking at aggregate measures we look at dispersion and compare it with per capita income? The first thing that emerges is a reduction in relative inequality, with a sustained fall in the long run from the 1920s onwards. This supports the reliability of the previous results. As for absolute inequality, it increased until the 1960s and decreased thereafter. This is not the case for per capita income.

If we go to the different indicators, we have the explanation. With regard to advances in life expectancy, the spread of medical and health knowledge is not equally distributed between countries because it depends on society's acceptance of innovations, requires physical and human capital and changes in mentality. At first it spread to developed countries, but from the 1920s onwards it spread throughout the world, irrespective of creed, economic status and political regime. This explains the dramatic improvement in health worldwide.

At the end of the 20th century and the beginning of the 21st century, there is no progress because the epidemiological transition has been exhausted. In addition, there is a second transition, so far only in advanced countries, which is not about child or maternal survival, but about the survival of the elderly, because these are medical advances that fight cardiovascular, respiratory and eye diseases. Patients who have relatively good health based on a healthy childhood respond better. This, for now, is a phenomenon restricted to the Western world.

The reduction of inequalities in terms of schooling is a sustained phenomenon over time.

Freedom, on the other hand, evolves in a different way. Until the First World War there was a reduction in inequality, but then it was enormous until the 1970s, and from then on there was a reduction.

Finally, if we compare relative welfare inequality with relative per capita income inequality, income inequality increases steadily until the turn of the century. It then declined moderately, but we are still at levels of inequality similar to those of the 1930s. In terms of welfare, on the other hand, the evolution has been different, with a steady reduction since the 1920s. In other words, welfare gains have not been purely statistical, but have affected most of the population.

When we look at what happens at each percentile, the world's middle class benefits the most, followed by the lower class. The richest, on the other hand, have improved the least in relative terms. In terms of absolute inequality, on the other hand, improvements have been greatest among the countries with the highest initial well-being. But in relative terms, the higher the initial welfare, the smaller the relative welfare gain. In terms of welfare, those who improve the most are the middle class; in terms of per capita income, those who improve the most are the top 5% and then the upper middle class.

The moral is that, despite appearances, material well-being is a poor predictor of multidimensional well-being. Material and multidimensional well-being do not always coincide and are not equally distributed. Relative inequality declined in terms of multidimensional well-being over the last hundred years, but not in terms of purely material well-being.

The Rafael del Pino Foundation is not responsible for the comments, opinions or statements made by the people who participate in its activities and which are expressed as a result of their inalienable right to freedom of expression and under their sole responsibility. The contents included in the summary of this conference, written for the Rafael del Pino Foundation by Professor Emilio González, are the result of the debates held at the meeting held for this purpose at the Foundation and are the responsibility of the authors.

The Rafael del Pino Foundation is not responsible for any comments, opinions or statements made by third parties. In this respect, the FRP is not obliged to monitor the views expressed by such third parties who participate in its activities and which are expressed as a result of their inalienable right to freedom of expression and under their own responsibility. The contents included in the summary of this conference, written for the Rafael del Pino Foundation by Professor Emilio J. González, are the result of the discussions that took place during the conference organised for this purpose at the Foundation and are the sole responsibility of its authors.