The prize indicates a shift in world concern, from maximizing profit in the sloshing sea of finance, to distributing dried up, scarce resources better. At a time when the concept of free flow of capital across borders is being questioned, the committee has stayed away from the central debate by choosing not to reward Paul Krugman, the MIT-based economist who had virtually predicted the Asian economic disaster, and since then has argued in favour of some forms of short-term controls on unfettered capital flow.

Sen has been chosen for his contributions to welfare economics.

The prize marks a return to old but key concerns, which technology and the recent explosive growth of the financial markets have failed to address.

AmartyaSen is an overwhelming presence in almost all branches of welfare economics, through his axiomatic theory of social choice, definitions of welfare and poverty indices, and empirical studies of famine.

In a world increasingly more concerned with profit maximisation, Sen has constantly focused on distribution of resources and analysis of poverty and inequality.

Sen combines a philosophical approach with economic research. His studies and writing on philosophy and morals are the basis of his work on public choice. Can the values which individual members of society attach to different alternatives be aggregated into values for the society as a whole? Is the majority principle a workable decision rule? How can income inequality be measured (for instance, should not reduction of one form of inequality perpetrate other forms of inequality?) When and how can we compare the distribution of welfare in different societies? How should we best determine whether poverty is on the decline? What are the factors thattrigger famines?

Attempts to answer these questions give economics a much-desired ethical orientation that it lacks when it purely deals with the interplay of impersonal market forces.

It was this concern with the normative aspect of economics that led Sen to rescue economics from the grip of the "impossibility theorem" stated by Kenneth Arrow earlier in the 1950s. This theorem had said that aggregating individual choices for different social states was impossible, that to select one alternative among many that would be best for a majority was impossible.

Sen, in his 1970s work, "Collective Choice and Social Welfare", guided succeeding generations of economists in the direction of normative economics once again, by solving the above "intransitivity" problem (that is, say, if any five different majorities are chosen from a population, their choices will be different each time). He worked out, through advanced mathematics, how individual choices can be aggregated to allow evaluation of different socialstates.

Sen initiated an entirely new field in the theory of social choice, by showing how different assumptions on the inter-personal comparability of individuals affect the possibility of finding consistent rules for collective decision-making.

It is important to compare distribution of welfare across countries, and the construction of such indexes is an important application of the theory of social choice. Sen constructed one such important index, which has been extensively applied by others.

Sen has also developed crucial alternatives to traditional welfare indicators like the per-capita income, which only take average conditions into account.

This is not all. Sen has gone further, and said that an economy is driven not just by goods, but the activities for which the goods are, or the opportunities they create. The opportunities, or capabilities, as Sen calls them, are a function of such factors as health, education and other factors related to social infrastructure.

Sen has constantlyresearched these factors in the context of developing economies, and welfare in the poorest societies. In that sense, this year's prize is a swivel-round from unstinted focus on developed economies. Sen's best-known work in this area is his 1981 text, "Poverty and Famines". He made the point that shortage of food was neither the most important nor the only reason for famine. He even proved that some "famine-stricken" areas actually exported food! More important, he said, was the relative position of social groups and how their relative position affected economic opportunity. That is the standpoint from which he explained the Indian famines of the past, as well as the Bangladesh famine of 1974.

His latest concern has been population, and methods of controlling it. He has brought out, in a text co-authored in 1989 by Jean Dreze ("Economic Development and Social Opportunities"), the success of the "Kerala model" of development vis-a-vis that of China, where coercion has been used to suppress populationpressures.

Sen has noted how economic growth does not necessarily go with the factors associated with enhancing the "capabilities" of people. He cites the Kerala situation, where better education and healthcare have led to large-scale migration to West Asia, where greater opportunities to exploit the resultant capabilities abound. He pointed out that in certain respects (like female literacy), Kerala's record was actually better than that of China, where economic growth is far more.

It is to be seen how the hard and troubled world of economics reacts to this reward for ethical concerns. Also, the sudden reward for development economics may still not divert the debate on free capital flows and their consequences towards normative, human aspects of the problem. That debate is far too caught up with consequences for financial markets and risk management to include within its ambit the very basic development parameters that Sen's work has always dealt with.

Whatever the response may be from economic scienceitself, a proud day for India has dawned, with the esteemed prize going to the Cambridge maestro. A prouder day it will be, when we learn the lessons he tries to teach us.