This thesis argues for the view that Amartya Sen's capabilities approach is a preferable approach to the measurement of welfare by addressing three questions: Can the capability approach be operationalised? What is the relationship between capabilities and satisfaction with life? How do capabilities respond to changes over time? Chapter 1 provides a discussion of a widely used economic evaluation model of welfare focussing on some of its key problems and concludes with a discussion of Sen's alternative capabilities approach. Chapter 2 discusses the three key relationships that Sen uses in evaluating wellbeing and discusses the identification of capabilities based on the account developed by Martha Nussbaum.