Economic Theory 20, 387–399 (2002)

Functioning, capability and the standard of living –

an axiomatic approach

Yongsheng Xu
Department of Economics, Andrew Young School of Policy Studies, Georgia State University,
Atlanta, GA 30303, USA (e-mail: yxu3@gsu.edu)

Received: April 10, 2000; revised version: June 18, 2001

Summary. The standard of living of an agent is viewed as her capability of

achieving various functionings (Sen, 1985, 1987). The agent is thus character-
ized by her capability set that consists of different functioning vectors. The task
of measuring the standard of living of the agent formally is therefore to rank
different capability sets. This paper explores the problem of ranking capability
sets in terms of the standard of living offered to the agent. For this purpose,
we consider capability sets that are non-degenerate, compact, comprehensive
and convex subsets of the n-dimensional real space, propose several intuitively
plausible properties for the ranking and give characterizations of some ranking
rules.

Keywords and Phrases: The standard of living, Capability, Functioning, Rank-

ing capability sets in terms of the standard of living, Quasiordering.

JEL Classification Numbers: C78, D63, D71, D74, I13, O10.

1 Introduction

Comparisons of the standard of living have traditionally taken either the opulence
or utility approach. In the opulence view, an agent’s living standard is judged
by her commanding of wealth and income. In the utility view of the standard

I am grateful to Walter Bossert, Richard Disney, Prasanta K. Pattanaik, Hans Peters and Kotaro

Suzumura for helpful discussions and comments on an earlier draft of the paper. Thanks are also
due to the anonymous referee of this journal whose incisive comments and suggestions helped me
to improve the exposition greatly.
388 Y. Xu

of living, an agent’s standard of living is based on the utility generated by her

consumption of commodities. Both views have come under critical scrutiny from
Sen (1985, 1987) recently. Sen argues that neither comes close to the issue of
measuring the standard of living. Instead, he proposes a functioning-capability
approach. In this paper, we use Sen’s view to approach the problem of measuring
the standard of living.
With the functioning-capability approach, an agent is characterised by the
functioning of the agent and the extent of various functionings. A functioning
is what the agent “succeeds in doing with the commodities and characteristics
at his or her command” (Sen, 1985, p. 10). It is “different both from (1) having
goods (and the corresponding characteristics), to which it is posterior, and (2)
having utility (in the form of happiness resulting from that functioning), to which
it is, in an important way, prior” (Sen, 1985, p. 11). For example, life expectancy,
whether well-clothed, adult literacy rate, child mortality, attending social activi-
ties, or well-nourished, are some examples of an agent’s functionings. The extent
of various functionings is referred to as the capability set and reflects the various
combinations of functionings the agent can achieve when the resource allocation
is given. The living standard is then viewed as the set of available capabilities
of the agent to function.
Given this characterization of the agent and given that functionings are closely
connected with actual living, it may be argued that in assessing the living stan-
dard, one should concentrate on functionings and pay little, if any, attention
to capabilities. This way of viewing the standard of living may initially sound
appealing, it does not, however, survive a closer examination. To see why ca-
pabilities may play a direct role along with functionings in assessing the living
standard, let us consider the following situation which may serve as an illustra-
tive purpose. Suppose the agent’s functionings are represented by various life
styles a, b, c, d , and e.1 Suppose further that she can choose one from these five
different life styles and she chooses c. Consider now that the life styles a, b, d
and e become unavailable to the agent, but she can still choose c. It can be ar-
gued that the agent’s standard of living has been reduced due to the curtailment
of the freedom of choice offered to the agent, even though the life style c is what
the agent would choose. This suggests that in the assessment of the standard of
living of the agent, one should look for both functionings and capabilities. Recall
that the capability set of the agent consists of various combinations of function-
ings the agent can achieve when the resource allocation is given. It is therefore
clear that the capability set of the agent summarizes the relevant information
about both functionings and capabilities for the agent. The exercise of assessing
the agent’s standard of living under different situations can thus be viewed as
ranking alternative capability sets arising from these different situations. We will
adopt this framework to address the issue of measuring the standard of living.
One measure of the standard of living proposed by Sen (1985, 1987) in the
current context is to use the partial ordering generated by set inclusion: if A
1 It should be clear that, implicitly, we assume that each life style is desirable under certain

circumstances.
Functioning, capability and the standard of living 389

and B are two capability sets, and B is a proper subset of A, then A offers a
higher standard of living than B . The partial ordering based on set inclusion is
often criticized as leaving “too many” capability sets unranked (see, for example,
Roemer, 1996). Therefore, in this paper, we go beyond the partial ordering pro-
vided by set inclusion, propose and axiomatically characterize a quasiordering
that extends the partial ordering proposed by Sen and that has some interesting
features.
Our formal framework of ranking subsets has been employed and devel-
oped in the context of ranking opportunity sets in terms of freedom of choice
(see, among others, Arrow, 1995; Bossert, Pattanaik and Xu, 1994; Foster, 1992;
Gravel, 1994, 1998; Jones and Sugden, 1982; Pattanaik and Xu, 1990, 1998,
2000; Puppe, 1996; Sen, 1991, 1992; Steiner, 1983; Sugden, 1998; van Hees,
1998; Xu, 1999). There are several important differences of our exercise in this
paper from the existing literature on ranking opportunity sets in terms of free-
dom of choice. First, most of the existing literature on ranking opportunity sets
is confined to finite opportunity sets (Pattanaik and Xu, 2000; Xu, 1999, are
two exceptions). Apparently, this approach has its own limitations since in many
economics context, opportunity sets are not finite. Secondly, our approach in this
paper is different from those of Pattanaik and Xu (2000), and Xu (1999). Pat-
tanaik and Xu (2000) are concerned with the problem of ranking compact subsets
of the non-negative orthant of the n-dimensional real space. For their purpose,
they introduce a set of sufficient conditions for the ranking rule representable by
a real-valued function. Xu (1999) considers the problem of ranking linear budget
sets, and axiomatically characterizes the ranking rule based on the volumes of
budget sets. In the current paper, we consider the problem of ranking compact,
comprehensive, convex and non-degenerate subsets (see Section 2 for formal
definitions) of the non-negative orthant of the n-dimensional real space. Finally,
unlike the existing literature on ranking opportunity sets where the concern is
exclusively on ranking opportunity sets in terms of freedom of choice, our inter-
pretation of ranking capability sets is in terms of the standard of living offered to
the agent. As argued by Sen, the living standard in the functioning-capability ap-
proach concerns both the freedom aspect of the living and the actual functioning
of the living conditions. We try to incorporate these two important ingredients
of the living conditions into the formulation of our axioms. As a consequence,
we are inclined to interpret our exercise of ranking capability sets in terms of
the standard of living.
The plan of the paper is as follows. In Section 2, we lay down the basic
notation and definitions. Section 3 introduces some intuitively plausible axioms
to be imposed on the living-standard ranking. In Section 4, we present our results,
and their proofs are organized in Section 5. Section 6 contains some concluding
remarks.
390 Y. Xu

2 The basic notation and definitions

Let Rn+ be the non-negative orthant of the n-dimensional real space. The points
in Rn+ will be denoted by x , y, z , a, b, · · ·, and will be called alternatives. For
all x = (x1 , · · · , xn ), y = (y1 , · · · , yn ) ∈ Rn+ , define x > y when xi ≥ yi for all
i = 1, · · · , n and xj > yj for some j ∈ {1, · · · , n}. The alternatives are to be
interpreted as functioning vectors à la Sen (1985, 1987).
At any given point of time, the set of all alternatives that may be available
to the agent is a subset of Rn+ . Such a set will be called the agent’s capability
set. We will use A, B , C , etc. to denote the capability sets.
Our concern in this paper is to rank different capability sets in terms of the
standard of living that they offer to the agent. What are the capability sets that
one would like to rank in the current context? In this paper, we confine our
attention to capability sets that are
(2.1) non-degenerate: a capability set A ⊆ Rn+ is non-degenerate iff there exists
x ∈ A such that xi > 0 for all i = 1, · · · , n,

(2.2) compact: a capability set A ⊆ Rn+ is compact iff A is closed and bounded,

(2.3) comprehensive: a capability set A ⊆ Rn+ is comprehensive iff, for all

x , y ∈ Rn+ , if xi ≥ yi for i = 1, · · · , n and x ∈ A, then y ∈ A,

(2.4) convex: a capability set A ⊆ Rn+ is convex iff, for all x , y ∈ A and for all
α ∈ [0, 1], αx + (1 − α)y ∈ A holds.
Let K be the set of all capability sets that are non-degenerate, compact, compre-
hensive and convex.2
For all A ∈ K , all i ∈ {1, · · · , n} and all αi > 0, let αi A := {x ∈ Rn+ |xi = αi yi
and xj = yj for all j = i , ∀ y ∈ A}. Finally, for all A, B ∈ K , if for all b ∈ B , there
exists a ∈ A such that a > b, then we say that B lies entirely in A. Note that, if
B lies entirely in A, necessarily, B is a subset of A. For all A ∈ K and for all i =
1, · · · , n, let maxi (A) be the maximum amount of functioning i that the agent can
achieve under capability set A; that is, maxi (A) = max{xi |(x1 , · · · , xi , · · · , xn ) ∈
A}.
Let  be a binary relation over K that satisfies reflexivity: [for all A ∈ K , A 
A] and transitivity: [for all A, B , C ∈ K , if A  B and B  C then A  C ]. 
is thus a quasiordering. When  satisfies completeness: [for all A, B ∈ K with
A = B , A  B or B  A], reflexivity and transitivity,  is called an ordering.
The intended interpretation of  is the following: for all A, B ∈ K , [A  B ]
will be interpreted as “the standard of living offered by A is at least as high as
the standard of living offered by B ”.  and ∼, respectively, are the asymmetric
and symmetric part of . We will use “¬” to denote the logical negation of a
statement.
2 These restrictions on the capability sets in K can be derived from some basic assumptions in a

resource allocation model, see Gotoh, Suzumura and Yoshihara (1999).

Functioning, capability and the standard of living 391

3 Axioms

In this section, we present several intuitively plausible axioms to be imposed on

the ranking .
Definition 3.1.  over K satisfies
(3.1.1) Monotonicity iff, for all A, B ∈ K , if B ⊆ A then A  B , and if B lies
entirely in A, then A  B .

(3.1.2) Desirability of Each Functioning iff, for all A ∈ K and for all
i = 1, · · · , n, there exists ti with 0 < ti < maxi (A) such that A  A ∩ {x ∈
Rn+ |xi ≤ ti }.

(3.1.3) Invariance of Scaling Effects iff, for all A, B ∈ K and for all αi > 0,
A  B ⇔ αi A  αi B .

(3.1.4) Dominance iff, for all positive integer k , all A, B1 , · · · , Bk ∈ K with

∪ki=1 Bi ∈ K , if A  B1  B2  · · ·  Bk , then A  ∪ki=1 Bi .

(3.1.5) Continuity iff, for all A ∈ K and a sequence of opportunity sets

{Bp }p=1,···,+∞ such that Bp ∈ K for all p and B = limp→∞ Bp ∈ K , if
Bp  A for all p, then B  A.3
The property of Monotonicity is simple and easy to explain. It requires that
if the capability set B is a subset of the capability set A, then A offers at least
as high a standard of living as B , and if B lies entirely inside A, then A offers a
higher level of the standard of living than B . The intuition of Monotonicity can be
explained by appealing to the agent’s actual living and the agent’s capabilities.
The functioning-capability approach to the standard of living focuses on two
essential parts of the agent’s living conditions, namely, her actual living and her
capabilities to achieve her actual living. The notion of an agent’s capabilities is a
freedom type notion and reflects the degree of opportunities offered to the agent.
In the case that B is a subset of A, A (weakly) dominates B in both these two
essential parts of the agent’s living conditions. Thus, it makes sense to say that
in such a case, A offers at least as a high standard of living as B . On the other
hand, when B lies entirely inside A, A dominates B in both her actual living
and her capabilities to achieve her actual living. Thus, in this case, the living
standard offered by A is higher than the living standard offered by B .
Desirability of Each Functioning stipulates that, starting with a capability set
A, by throwing away all those alternatives that have more of a certain amount of
functioning i , the capability set formed by the remainder of the alternatives will
eventually offer the agent less standard of living than the original capability set A.
Thus, it requires that each functioning is desirable for the agent in evaluating the
living standard offered by capability sets: in throwing out certain alternatives, the
3 We can use the Hausdorf metric to measure the distance between two sets in K .
392 Y. Xu

agent’s actual living may no longer be there for her to choose and her freedom
of choice may be curtailed; and as a consequence, the agent’s standard of living
will be lowered if enough alternatives are thrown away.
The property of Invariance of Scaling Effects requires that, by re-scaling the
unit of measurement for any functioning while maintaining others unchanged,
the relative standard of living offered by two capability sets A and B should
be the same: if A offers a higher level of the standard of living than B before
rescaling, then A should offer a higher level of the standard of living than B after
re-scaling and vice versa. The idea is that the choice of “measuring rod” for a
functioning is not relevant for ranking capability sets in terms of the standard of
living. It should also be clear that Invariance of Scaling Effects assumes away
any inter-functioning comparabilities.
Dominance requires that when A offers a higher standard of living than each
and every Bi (i = 1, · · · , k ), and the standards of living offered by those Bi are
comparable, then A offers a higher standard of living than ∪ki=1 Bi provided that
∪ki=1 Bi is in K . This is a highly reasonable property. Given our specification of
the capability sets A, B1 , · · · , and Bk , it may be noted that Dominance places
an implicit importance on the agent’s actual living when ranking her standard
of living: as far as the freedom aspect of the living standard is concerned, we
may have the situation in which putting all Bi together may increase the freedom
of choice already offered by each of them; consequently, the requirement that A
offers a higher standard of living than ∪ki=1 Bi would need the implicit assumption
that the agent’s actual living has some importance.
Finally, Continuity is a technical requirement for the ranking  and requires
that the standard-of-living ranking  should not reverse the ranking suddenly: if
every opportunity set Bp in the sequence {Bp } offers at least as high a standard
of living as A, then the limit of this sequence should also offer at least as high
a standard of living as A.

4 Results

In this section, we examine the consequences of the axioms proposed in the last
section. Proofs of the results in this section can be found in Section 5.

Theorem 4.1. Suppose  over K is a quasiordering. Then,  on K satisfies

Monotonicity, Desirability of Each Functioning, Invariance of Scaling Effects,
Dominance and Continuity if and only if there exists a set Γ = {(s1 , · · · , sn ) : si >
0, i = 1, · · · , n and s1 + · · · + sn = 1} such that

for all A, B ∈ K , A  B ⇔ maxx ∈A (x1s1 · ... · xnsn ) ≥ maxy∈B (y1s1 · ... · ynsn ) for all
(s1 , · · · , sn ) ∈ Γ. · · · (4.1)

Thus, if the standard-of-living ranking  is a quasiordering and satisfies the

axioms proposed in the last Section, it is then given by the intersection of some
orderings each of which is represented by a Cobb-Douglas type of functions
Functioning, capability and the standard of living 393

with appropriate weights. The set Γ may be determined by, say, the society’s
minimum norms on the standard of living.
It is interesting to note that if we require  to be an ordering in Theorem
4.1, we have the following result.
Theorem 4.2. Suppose  over K is an ordering. Then,  on K satisfies Mono-
tonicity, Desirability of Each Functioning, Invariance of Scaling Effects, Dom-
inance and Continuity if and only if there exist si > 0 (i = 1, · · · , n) with

n
i =1 si = 1 such that

for all A, B ∈ K , A  B ⇔ maxx ∈A (x1s1 · ... · xnsn ) ≥ maxy∈B (y1s1 · ... · ynsn ).· · · (4.2)

5 Proofs

To prove Theorem 4.1, we first prove the following lemmas and Theorem 4.2.
In the following lemmas, Lemmas 5.1 to 5.6, it is assumed that  over K is an
ordering and satisfies Monotonicity, Desirability of Each Functioning, Invariance
of Scaling Effects, Dominance and Continuity.
Lemma 5.1. For all integer m > 1 and all A, A1 , · · · , Am ∈ K , if A = ∪m
i =1 Ai ∈ K ,
then there exists k ∈ {1, · · · , m} such that A ∼ Ak .
Proof. Let m > 1 be an integer and A, A1 , · · · , Am ∈ K be such that A = ∪m i =1 Ai .
By Monotonicity, A  Ai for all i = 1, · · · , m. We now show that A ∼ Ak for
some k ∈ {1, · · · , m}. Suppose to the contrary that there exists no k ∈ {1, · · · , m}
such that A ∼ Ak .  being an ordering and A  Ai for all i ∈ {1, · · · , m},
we must have A  Ai for all i ∈ {1, · · · , m}. Also, since  is an ordering,
for all i , j ∈ {1, · · · , m}, Ai  Aj or Aj  Ai . Without loss of generality, let
A1  A2  · · ·  Am . A straightforward application of Dominance then yields
A  ∪m i =1 Ai = A, a contradiction. Therefore, A ∼ Ak for some k ∈ {1, · · · , m}.



n
Lemma 5.2. For all A ∈ K with A = {x ∈ Rn+ | i =1 xi ≤ 1}, there exists s such
that 1/2 < s < 1 and A ∼ A ∩ (∩ni=1 {x ∈ Rn+ |xi ≤ s}).

n
Proof. Let A = {x ∈ Rn+ | i =1 xi ≤ 1}. From Desirability of Each Functioning,
there exists t1 ∈ (0, 1) such that A  A ∩ {x ∈ Rn+ |x1 ≤ t1 } = A1 . Consider
A2 = A ∩ {x ∈ Rn+ |x2 + x3 + · · · + xn ≤ 1 − t1 }. Clearly, A1 , A2 ∈ K and A1 ∪ A2 = A.
From Lemma 5.1, noting that A  A1 , we must have A ∼ A2 . Let t1 ∈ (0, 1/2) be
such that t1 ≤ t1 . Consider A3 = A ∩ (∩ni=2 {x ∈ Rn+ |xi ≤ 1 − t1 }). By construction,
A2 ⊆ A3 ⊆ A. By Monotonicity, A  A3  A2 . Then, A ∼ A3 follows from A ∼
A2 and the transitivity of  immediately. By Desirability of Each Functioning,
there exists t2 ∈ (0, 1 − t1 ) such that A3  A3 ∩ {x ∈ Rn+ |x2 ≤ t2 } = A4 . Consider
A5 = A3 ∩ {x ∈ Rn+ |x1 + x3 + · · · + xn ≤ 1 − t2 }. From construction, A4 , A5 ∈ K
and A4 ∪ A5 = A3 . By Lemma 5.1, noting that A3  A4 , it follows that A3 ∼ A5 .
From A ∼ A3 , by the transitivity of , A ∼ A5 holds. Let t ∈ (0, 1/2) be such
that t < min{t2 , t1 , t1 }. Consider A6 = A3 ∩ (∩i =2 {x ∈ Rn+ |xi ≤ 1 − t}) and
394 Y. Xu

A7 = A ∩ (∩ni=1 {x ∈ Rn+ |xi ≤ 1 − t}). Noting that t < min{t2 , t1 , t1 }, it is then
clear that A5 ⊆ A6 ⊆ A3 and A6 ⊆ A7 ⊆ A. By Monotonicity, A3  A6  A5
and A  A7  A6 . Noting that A3 ∼ A5 ∼ A, A6 ∼ A3 and A ∼ A7 follow from
the transitivity of . Let s = 1 − t. Then, the desired result of Lemma 5.2 is
obtained. 


n
Lemma 5.3. For all A ∈ K with A = {x ∈ R+ | i =1 xi /pi ≤ 1} where pi > 0
n

for i = 1, · · · , n, there exists a ∗ ∈ A such that ai∗ > 0 for all i = 1, · · · , n,

A∗ = {x ∈ Rn+ |xi ≤ ai∗ , i = 1, · · · , n} ∈ K and A∗ ∼ A.
Proof. Given Invariance of Scaling Effects
n and noting that  is an ordering, it is
sufficient to show that for A = {x ∈ Rn+ | i =1 xi ≤ 1}, there exists an a ∗ ∈ A such
that 1 > ai∗ > 0 for i = 1, · · ·
, n and A ∼ {x ∈ Rn+ |xi ≤ ai∗ , i = 1, · · · , n} = A∗ .
{x ∈ Rn+ |xi ≤ ai∗ , i = 1, · · · , n},
n
This is because, if {x ∈ R+ | i =1 xi ≤ 1} ∼

n
n
then by Invariance of Scaling Effects, {x ∈ R+ | i =1 xi /pi ≤ 1} ∼ {x ∈ Rn+ |xi ≤
n
∗
pi ai , i = 1, · · · , n}.
From Lemma 5.2, there exists s ∈ (1/2, 1) such that A ∼ A ∩ (∩ni=1 {x ∈
Rn+ |xi
≤ s}) = B . Clearly,
n B ∈ K . Let (a1 , · · · , an ) = (s, · · · , s) and define
n
δ = i =1 ai − 1. Since i =1 ai = ns, s > 1/2 and n > 1, it follows that
δ > 0. Now, define bi = ai − (1/n)δ for
nall i ∈ {1, · · · , n}. From the definition,
4

0 < bi < ai for all i = 1, · · · , n and i =1 bi = 1. For all i ∈ {1, · · · , n}, define
Bi as follows:
Bi = B ∩ {x ∈ Rn+ |xi ≤ bi }.
We note that Bi ∈ K for all i ∈ {1, · · · , n}, and ∪ni=1 Bi = B . From Lemma
5.1, B ∼ Bk for some k ∈ {1, · · · , n}. Let B 1 = Bk and the bounds of B 1 be

1n, · · ·1, an ). From the construction, ak1 = bk and ai1 = ai for all i = k . Note that
1 1
(a
i =1 ai − 1 = ( n )δ > 0.
n−1

Now, let
n
n −1
δ1 = ai1 − 1 = ( )δ > 0,
n
i =1

n b1i = ai −δ1 /n for all i ∈ {1, · · · , n}. From the definition, 0 < bi1 < ai1
1 1
and define
and i =1 bi = 1. For all i ∈ {1, · · · , n}, define Bi1 as follows:

Bi1 = B 1 ∩ {x ∈ Rn+ |xi ≤ bi1 }.

It can be checked that Bi1 ∈ K for all i ∈ {1, · · · , n}, and ∪ni=1 Bi1 = B 1 . From
Lemma 5.1, B 1 ∼ Bk1 for some k ∈ {1, · · ·
, n}. Let B 2 = Bk1 and the bounds of B 2
n
be (a1 , · · · , an ). It can be calculated that i =1 ai2 − 1 = ( n−1
2 2
n )δ1 = ( n ) δ > 0.
n−1 2

By repeating the above procedure infinite times, we obtain B , · · · , B r , · · ·.

3

Note that B r ∼ B ∼ A for all r = 1, 2, · · · , and each r

n B r and its bounds,
(a1 , · · · , an ), have the following properties: (1) ∆r = i =1 ai − 1

r r
n ) δ;
= ( n−1 r
n
(2) limr→∞ ∆r = 0; and (3) for some t1 , · · · , tn ∈ (0, 1) such that i =1 ti = 1,
limr→∞ B r = {x ∈ Rn+ |xi ≤ ti } = T . By continuity, from B r  A for all
r = 1, 2, · · · , we obtain T  A. On the other hand, noting that T ⊆ A, by
4 I thank the referee for suggesting this bound.
Functioning, capability and the standard of living 395

Monotonicity, A  T follows easily. Therefore, from the definition of ∼, we

obtain A ∼ T . 


n
Lemma 5.4. For all A ∈ K with A = {x ∈ R+ | i =1 xi /pi ≤ 1} where pi > 0 for
n

all i = 1, · · · , n, there exists a unique a ∗ ∈ A such that ai∗ > 0 for all i = 1, · · · , n
and A ∼ {x ∈ Rn+ |xi ≤ ai∗ , i = 1, · · · , n}.
Proof. Given
n Invariance of Scaling Effects, it is sufficient to show that for S =
{x ∈ Rn+ | i =1 xi ≤ 1}, there exists a unique s ∗ ∈ S such that si∗ > 0 for i =
1, · · · , n and S ∼ {x ∈ Rn+ |xi ≤ si∗ , i = 1, · · · , n} = S ∗ . By Lemma 5.3, suppose
that there exist s ∗ , t ∗ ∈ S such that s ∗ = t ∗ , si > 0, ti∗ > 0 for all i = 1, · · · , n
and S ∼ S ∗ ∼ {x ∈ Rn+ |xi ≤ ti∗ , i = 1, · · · , n} = T ∗ . Let z ∗ = γs ∗ + (1 − γ)t ∗
∗ ∗ ∗ ∗
where γ ∈ (0,
1). Clearly,
n by ∗Monotonicity, s1 + · · · + sn = 1 =∗ t1 +∗· · · + tn ∗. Since
s = t and i =1 si = i =1 ti = 1, there exist j , k such that sj < tj and sk > tk∗ .
∗ ∗ ∗
n

Without
n loss of generality, let s1∗ < t1∗ and s2∗ > t2∗ . Consider the sets Z = {x ∈
R+ | i =1 (si xi /zi∗ ) ≤ 1} and Z ∗ = {x ∈ Rn+ |xi ≤ zi∗ , i = 1, · · · , n}. By Invariance
n ∗

of Scaling Effects, from S ∼ S ∗ , it follows that Z ∼ Z ∗ . Note that Z ∗ ⊆ S .

∗ ∗
Note also that the upper boundary of Z is the hyperplane
∗ ∗ ∗ ∗

n containing
∗

n (z∗1 , · · · , zn )
with the gradient (s1 /z1 , · · · , sn /zn ). Given that i =1 si = i =1 ti = 1 and
z = γs ∗ + (1 − γ)t ∗ , it is clear that either S ∗ lies entirely inside Z or T ∗ lies
entirely inside Z . From s1∗ < t1∗ and s2∗ > t2∗ , the hyperplane for Z is flatter
than the hyperplane for S relative to axis 1. Therefore, T ∗ lies entirely inside
Z . By Monotonicity, S  Z ∗ and Z  T ∗ . From T ∗ ∼ S and S  Z ∗ , by the
transitivity of , it follows that T ∗  Z ∗ . On the other hand, from Z ∼ Z ∗ and
Z  T ∗ , by the transitivity of , Z ∗  T ∗ holds, a contradiction. Therefore,
by Lemma 5.3, there exists a unique s ∗ ∈ S such that si∗ > 0 for i = 1, · · ·, n,

n ∗
i =1 si = 1 and S ∼ S . 


n
Lemma 5.5. For all A = {x ∈ R+ | i =1 (xi /pi ) ≤ 1} ∈ K where pi > 0 for all
n

i = 1, · · · , n, A ∼ {x ∈ Rn+
|xi ≤ si pi , i = 1, · · · , n}, where
s ∈ Rn+ is such that

n n
si > 0 for all i = 1, · · · , n, i =1 si = 1 and S = {x ∈ Rn+ | i =1 xi ≤ 1} ∼ {x ∈
Rn+ |xi ≤ si , i = 1, · · · , n} = S ∗ .

n
Proof. Let S = {x ∈ R
+|
n
i =1 xi ≤ 1} ∈ K . From Lemma 5.4, there exists a
that i =1 si = 1 and S ∼ {x ∈ Rn+ |xi ≤ si , i = 1, · · · , n} = S ∗ .
n
unique s ∈ S such

Let A = {x ∈ Rn+ | i =1 (xi /pi ) ≤ 1} ∈ K . From S ∼ S ∗ , by Invariance of Scaling
n

Effects, it follows that

n
{x ∈ Rn+ |x1 /p1 + i =2 xi ≤ 1} ∼ {x ∈ Rn+ |x1 ≤ s1 p1 , xi ≤ 1, i = 2, · · · , n}.
From the above, by the
nrepeated use of Invariance of Scaling Effects, one
obtains that A = {x ∈ Rn+ | i =1 (xi /pi ) ≤ 1} ∼ {x ∈ Rn+ |xi ≤ si pi , i = 1, · · · , n}.


Lemma 5.6. For all A ∈ K , there exists a unique a ∗ ∈ A such that ai∗ > 0 for
all i = 1, · · · , n and A ∼ {x ∈ Rn+ |xi ≤ ai∗ , i = 1, · · · , n} = A∗ .

n
Proof. Let
s ∈ Rn+ be such that si > 0 for all i = 1, · · · , n, i =1 si = 1 and S =
{x ∈ Rn+ | i =1 xi ≤ 1} ∼ {x ∈ Rn+ |xi ≤ si , i = 1, · · · , n} = S ∗ . From Lemma
n

5.5, such s is well-defined and unique. Let a ∗ ∈ A be such that Πin=1 (ai∗ )si ≥
396 Y. Xu

Πin=1 (xi )si for all x ∈ A. Since A is compact and convex and the function Πin=1 (xi )si
is strictly quasi-concave, a ∗ is well-defined and unique. Further, since si > 0
for all i = 1, · · · , n, ai∗ > 0 for all i = 1, · · · , n. It should also be noted that the
gradient vector of Πin=1 (xi )si evaluated at a ∗ is proportional to (s1 /a1∗ , · · · , sn /an∗ ).
Using this gradient vector, let us consider the capability set B defined as follows:

n
B = {x ∈ Rn+ |(x − a ∗ ) · (s1 /a1∗ , · · · , sn /an∗ ) ≤ 0} = {x ∈ Rn+ | (xi si /ai∗ ) ≤ 1}.
i =1

From Lemma 5.5, B ∼ A∗ . Noting that A is convex, from the construction of B ,

it is clear that A∗ ⊆ A ⊆ B . By Monotonicity, B  A  A∗ . Now, from B ∼ A∗ ,
the transitivity of  implies A ∼ A∗ . 

With the help of Lemmas 5.1 to 5.6, we present the proof of Theorem 4.2
below.
Proof of Theorem 4.2. It can be checked that if  over K is given by (4.2), then
it satisfies Monotonicity, Desirability of Each Functioning, Invariance of Scaling
Effects, Dominance and Continuity. Therefore, we have only to show that if
 on K satisfies Monotonicity, Desirability of Each Functioning, Invariance of
Scaling Effects, Dominance and Continuity, then (4.2) holds.
Let  over K satisfy Monotonicity, Desirability of Each Functioning, Invari-
ance of Scaling
Effects, Dominance and Continuity. Consider the capability set
n
S = {x ∈ Rn+ | i =1 xi ≤ 1}. By Lemma
n 5.6, there exists a unique s ∈ S such
that si > 0 for all i = 1, · · · , n, i =1 si = 1 and S ∼ {x ∈ Rn+ |xi ≤ si , i =
1, · · · , n} = S ∗ . We note that the gradient of the function x1s1 · · · xnsn evaluated at
s is proportional to (1, · · · , 1). For all A ∈ K , if s = arg maxx ∈A (x1s1 · ... · xnsn )
(given that A is compact and convex and the function x1s1 · ... · xnsn is strictly
quasi-concave, arg maxx ∈A (x1s1 · ... · xnsn ) is therefore unique), then, it must be
true that S ∗ ⊆ A ⊆ S . By Monotonicity and S ∼ S ∗ , A ∼ S follows from the
transitivity of  immediately. By Invariance of Scaling Effects, the following
can be obtained easily:
for all B , C ∈ K , if arg maxx ∈B (x1s1 · ... · xnsn ) = arg maxx ∈C (x1s1 · ... · xnsn ), then
B ∼ C. · · ·(5.1)
By Lemma 5.6 and (5.1), we only need to show that the sufficiency part of
Theorem 4.2 holds for sets of the form S (a) = {x ∈ Rn+ |xi ≤ ai , i = 1, · · · , n}.5
Let R be a binary relation on Rn++ , where Rn++ is the positive orthant of the n-
dimensional real space, defined as follows: aRb ⇔ S (a)  S (b). Note that R
is an ordering because  is one, and R satisfies Weak Pareto and Ratio-Scale
Measurability of Tsui and Weymark (1997) because  satisfies Monotonicity and
Invariance of Scaling Effects, respectively. Further, since  satisfies Continuity,
R satisfies Upper Semicontinuity of Trockel (1992). By the Corollary in Trockel
(1992), given that R satisfies Ratio-Scale Measurability, R also satisfies Continu-
ity of Tsui and Weymark. Therefore, by Theorem 4 of Tsui and Weymark (1997),
5 I am deeply indebted to the referee for suggesting the following proof strategy, which is simpler

and much shorter than my original proof.

Functioning, capability and the standard of living 397

there exists (w1 , · · · , wn ) ∈ Rn+ such that aRb ⇔ a1w1 · · · anwn ≥ b1w1 · · · bnwn . De-
sirability of Each Functioning now implies
nthat wi > 0 for all i = 1, · · · , n.
Clearly, w1 , · · · , wn can be normalized as i =1 wi = 1. 


Proof of Theorem 4.1. It can be checked that the rule defined in (4.1) is a qua-
siordering and satisfies the axioms specified in the theorem. We now show that
if  over K is a quasiordering and satisfies the axioms in the theorem, then (4.1)
holds. We first note that, since  is a quasiordering, there must exist a set ∆ of
orderings over K : ∆ = {t :t is an ordering over K }, such that [= ∩ t ∈∆ t ,
and for all t ∈ ∆, t is an extension of : (⊆t , and ⊆t )] (see, for ex-
ample, Donaldson and Weymark (1998), Duggan (1999) and Suzumura and Xu
(2000)). Note that  over K satisfies all the axioms specified in Theorem 4.1.
We first show that for each and every t ∈ ∆, t satisfies these axioms as well.
To start with, suppose to the contrary that t does not satisfy Monotonicity;
that is, there exist A, B ∈ K such that B ⊆ A but [¬(A t B ) or (B lies entirely
in A and ¬(A t B ))]. If ¬(A t B ), t being an ordering, it must be true
that B t A. That is, (A, B ) ∈t . Note that = ∩ t ∈∆ t . It is then clear that
(A, B ) ∈. This is in contradiction with the fact that  satisfies Monotonicity
which implies A  B , or (A, B ) ∈. If B lies entirely in A and ¬(A t B ), t
being an ordering, we must have B t A; that is, (B , A) ∈t and (A, B ) ∈t .
On the other hand, noting that B lies entirely in A, A  B follows easily from
Monotonicity; that is, (A, B ) ∈. t being an extension of , we must have
(A, B ) ∈t , a contradiction with (A, B ) ∈t which was obtained a few lines
earlier. In summary, therefore, t satisfies Monotonicity.
We now show that t satisfies Desirability of Each Functioning. Suppose to
the contrary that t does not satisfy Desirability of Each Functioning. That is,
there exist A ∈ K and i ∈ {1, · · · , n} such that for all ti with 0 < ti < maxi (A)
¬[A t A∩{x ∈ Rn+ |xi ≤ ti } = Bti ]. t being an ordering, we must have Bti t A;
that is, (Bti , A) ∈t for all ti ∈ (0, maxi (A)). On the other hand, since  satisfies
Desirability of Each Functioning, for A and i already specified, there exists ti
such that 0 < ti < maxi (A) and A  Bti
; that is, (A, Bti
) ∈ and (Bti
, A) ∈.
t being an extension of , we must have (A, Bti
) ∈t , and (Bti
, A) ∈t , which
is in contradiction with (Bti , A) ∈t for all ti ∈ (0, maxi (A)) that was obtained a
few lines earlier. Therefore, t satisfies Desirability of Each Functioning.
Using similar arguments, it can be shown that t satisfies the other three
axioms as well. Note that t is an ordering. By Theorem 4.2, t is given by the
following rule:

there exist s1t , · · · , snt such that sit > 0 for i = 1, · · · , n and s1t + · · · + snt = 1, and
st st st st
for all A, B ∈ K , A t B iff maxx ∈A (x11 · ... · xnn ) ≥ maxy∈B (y11 · ... · ynn ).

Note that = ∩ t ∈∆ t . Therefore, there exists a set Γ = {(s1t , · · · , snt ) :

sit > 0, i = 1, · · · , n and s1t + · · · + snt = 1} such that for all A, B ∈ K , A  B ⇔
st st st st
maxx ∈A (x11 · ... · xnn ) ≥ maxy∈B (y11 · ... · ynn ) for all (s1t , · · · , snt ) ∈ Γ. 

398 Y. Xu

6 Concluding remarks

In this paper, we have used Sen’s functioning-capability approach to analyse the

issue of the standard of living offered to an agent. For this purpose, an agent
is characterized by her capability sets each of which summarizes her different
functionings and her capabilities to achieve these different functionings under
certain circumstances. Thus, the formal exercise of evaluating an agent’s standard
of living is to rank her capability sets. In this framework, we proposed several
intuitively plausible axioms for the ranking of the standard of living to satisfy
and gave the characterization of a quasiordering that has many attractive features.
The quasiordering characterized in the paper is the intersection of some orderings
each of which is representable by a Cobb-Douglas type of function.
Throughout the paper, we have assumed that there are no inter-functioning
comparabilities. One could argue that in some cases it is possible to make inter-
functioning comparabilities and, subsequently, in evaluating the standard of living
offered by capability sets, one can weigh one functioning against another. It
would then be interesting to examine how capability sets can be ranked in terms
of the standard of living by employing a richer informational framework.

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