The capability approach constitutes a significant contribution to social theory but its potential is diminished by its insufficient treatment of the social construction of meaning. Social meanings enable people to make value judgements about what they will do and be, and also to evaluate how satisfied they are about what they are able to achieve. From this viewpoint, a person’s state of wellbeing must be understood as being socially and psychologically co-constituted in specific social and cultural contexts. In this light, the telos of ‘living well’ which is at the heart of Sen’s version of the capability approach is inadequate and must be modified to a telos of ‘living well together’ which includes consideration of the social structures and institutions which enable people to pursue individual freedoms in relation to others. The policy significance of the capability approach can be further strengthened by paying greater consideration to the political economy of policy decision-making processes and the ways in which conflicts and distributions of power are institutionalized.