Measuring Social and Economic Development A Look at the Human Development Index (HDI)

Understanding Indexes What is an index? An index is a composite of indicators that produces a single calculation which can then be ranked. Let’s look at some examples!!

Click here to calculate your The Body Mass Index Click here to calculate your own body mass index. The Body Mass Index (BMI) measures the relationship between a person’s height and weight. Click on the image to the left to go to a website which will calculate your body mass index for you.

The Wind Chill Index The Wind Chill Index measures the relationship between air temperature and wind speed.

The Big Mac Index Click here to watch a short informational video about the “Big Mac Index” The Big Mac Index measures the relationship between exchange rate and purchasing power parity. Those countries where the price of a big mac is more than in the U.S. (adjusting for exchange rate) are considered to have overvalued currencies, while those countries where the price of a big mac is less than in the U.S. (adjusting for exchange rate) are considered to have undervalued currencies. Clicking on the figure in the middle will take you to the Economist website where you can click on “video clip” to see a short informational video on the big mac index.

Click here to see the indicators Other Common Indexes Click here to see the 2008 rankings Click here to see the indicators that make up the index Click on the “U.S. News & World Report” image in the middle to go to a webpage that lists the different indicators that make up the index. Click on the “America’s Best Colleges 2008” image on the right to go to a webpage that lists the rankings for 2008.

Economic & Social Indexes Economic and social indexes are like those we just talked about except they include economic and social data (such as income, educational attainment, health, etc.) rather than wind speeds, body weight, and the like.

…is the best known composite index of social and economic well-being… The Human Development Index (HDI) …is the best known composite index of social and economic well-being…

The Concept of Human Development "The basic purpose of development is to enlarge people's choices. In principle, these choices can be infinite and can change over time. People often value achievements that do not show up at all, or not immediately, in income or growth figures: greater access to knowledge, better nutrition and health services, more secure livelihoods, security against crime and physical violence, satisfying leisure hours, political and cultural freedoms and sense of participation in community activities. The objective of development is to create an enabling environment for people to enjoy long, healthy and creative lives." Mahbub ul Haq -- Founder of the Human Development Report

How the UNDP Measures Human Development The HDI consists of three equally weighted components: (1) “A long and healthy life” (Health) (2) “Knowledge” (Education) (3) “A decent standard of living” (Wealth) Questions to ask: Do you think the combination of “health,” “education,” and “wealth” adequately measures “human development”? Why or why not? What other measures of “human development” might you include if you were to create your own human development index (e.g., environment, leisure, happiness, etc.)?

Deconstructing Each Measure Each component of the HDI is measured in the following way: Health Measured by life expectancy at birth. Education Measured as a combination of adult literacy (with two-thirds weight) and gross enrollment (with one-third weight). Wealth Measured by GDP per capita. Is “life expectancy at birth” a good measure of health? Why or why not? Can you think of other ways to measure “health” that might bring about different results (e.g., obesity rates, infant mortality rate, etc.)? Is the combination of “adult literacy” and “gross enrollment” a good measure of “education”? Why or why not? Can you think of other ways to measure “education” that might bring about different results (e.g., percent in college, test scores, etc.)? Is “GDP per capita” a good measure of “wealth”? Why or why not? Can you think of other ways to measure “wealth” that might bring about different results (e.g., income inequality, poverty rates, etc.)?

Calculating HDI: The United States Click here to access an interactive HDI calculator. In the United States, in 2005: The average life expectancy was 77.9. The adult literacy rate was 99%. The gross enrollment rate was 93.3%. The GDP per capita was $41,890. The HDI was .951. The HDI ranking was 12th. If you click on either calculator it will take you to an interactive calculator that shows how the human development index (HDI) is calculated. Plug in the numbers above to see how the United States ends up with an HDI score of .951.

U.S. HDI = .951 What does it mean that the U.S. ranks 12th in the world with an HDI of .951?

The IMF’s GDP Per Capita Rankings (2006) Purchasing Power Parity (PPP) 1 Luxembourg ($80,471) 11 United Kingdom ($35,051) 2 Ireland ($44,087) 12 Finland ($34,819) 3 Norway ($43,574) 13 Belgium ($34,478) 4 14 Sweden ($34,409) 5 Iceland ($40,277) 15 Qatar ($33,049) 6 Switzerland ($37,369) 16 Australia ($32,938) 7 Denmark ($36,549) 17 Singapore ($32,867) 8 Austria ($36,031) 18 Japan ($32,647) 9 Canada ($35,494) 19 Germany ($31,095) 10 Netherlands ($35,078) 20 Italy ($30,732) As you can see here, the United States has the fourth highest GDP per capita in the world. The question is: how well is the United States using its income to bring about human development? United States ($43,444) Click on the table above to access an interactive graph on the UNDP’s website which shows how some countries do better than others in turning income into education and health opportunities and therefore into higher levels of human development. If you select the United States you will see that the United States has a HDI similar to Italy’s, but a much higher GDP per capita which suggests that Italy is doing a better job of turning income into education and health opportunities and therefore into higher levels of human development. If you agree with the Human Development Index’s measurement(s) of human development then the United States seems to be doing a pretty good job, but not as good as it could based on its level of income. Click on the “UNDP” images to the left and right of the title to go to an interactive map that lists HDIs for countries around the world.

The UNDP’s HDI Rankings (2005) 1 Iceland (.968) 11 Finland (.951) 2 Norway (.968) 12 3 Australia (961) 13 Spain (.949) 4 Canada (.960) 14 Denmark (.949) 5 Ireland (.959) 15 Austria (.948) 6 Sweden (.956) 16 United Kingdom (.946) 7 Switzerland (.955) 17 Belgium (.946) 8 Japan (.953) 18 Luxembourg (.944) 9 Netherlands (.953) 19 New Zealand (.943) 10 France (.952) 20 Italy (.941) United States (.951) Click here to access an interactive graph which shows how some countries do better than others in turning income into education and health opportunities and therefore into higher levels of human development. Click on the table above to access an interactive graph on the UNDP’s website which shows how some countries do better than others in turning income into education and health opportunities and therefore into higher levels of human development. If you select the United States you will see that the United States has a HDI similar to Italy’s, but a much higher GDP per capita which suggests that Italy is doing a better job of turning income into education and health opportunities and therefore into higher levels of human development.

Is the HDI Enough to Measure a Country’s Level of Development? According to the UNDP, the answer is: “Not at all.” “The concept of human development is much broader than what can be captured in the HDI, or any other composite indices…” “The HDI and the other composite indices can only offer a broad proxy on some of the key the issues of human development…” “A fuller picture of a country's level of human development requires analysis of other human development indicators and information.” Is the HDI enough to measure a country’s level of development? According to the UNDP website, the answer is no, but: http://hdr.undp.org/en/statistics/faq/question,70,en.html But HDI is definitely better than GDP. http://hdr.undp.org/en/statistics/faq/question,71,en.html Ultimately, the concept of human development is much broader than what can be captured in the HDI, or any other composite index. The HDI, for example, does not reflect political participation or gender inequalities. The HDI and the other composite indices can only offer a broad proxy on some of the key issues of human development. A fuller picture of a country's level of human development requires analysis of other human development indicators and information. It is worth asking students what indicators they would include if they were to create their own human development index (Note: this is one of the exercises that comes at the end of this presentation).

A Sampling of Other Development Indexes The Economist’s “Quality of Life” Index UNICEF’s “Child-Welfare” Index The “Happy Planet” Index The UNDP’s “Human Poverty Index” The UNDP’s “Gender Empowerment Measure” International Living’s “Quality of Life” Index The “Global Peace Index” Freedom House’s “Freedom Rankings”

Three Issues to Consider When Evaluating Indexes Like the HDI Validity Reliability Parsimony

Validity What is the index supposed to measure? What indicators make up the index? Are these the best indicators for this index? How are the indicators calculated? Are there better ways to calculate these indicators? In short, how well does the index actually measure what it is supposed to be measuring? Point out that the selection of indicators and the weighting that they receive have a huge impact on the results. Ask students to come up with their own examples.

Reliability Who or what organization collected the data? How were the data collected? In short, if you or someone else were to try to replicate the index would you end up with more or less the same results? Point out that the way that data are collected can have a huge impact on the results. Ask students to come up with their own examples.

Parsimony The whole point of an index is to simplify the measurement of a particular phenomenon. In short, does the index rely upon as few indicators as reasonably possible without undermining its validity? Point out that there is often a tension between validity and parsimony.

Writing Exercise How would you define human development? Specifically, what indicators would you focus on if you were trying to measure human development? Would you measure human development differently than the Human Development Index (HDI)? Why or why not? Explain.

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