A New Index for Measuring Human Development

A New Index for Measuring Human Development


For most of the 20th century, statistical measurements of human well-being emphasized its economic dimension. In 1990, the United Nations offered an alternative and more comprehensive way of measuring human progress, the human development index (HDI). The HDI represents a compromise between comprehensiveness and measurability. In the HDI, the level of human development is conceptualized as having three dimensions: health, education and economic conditions.

Despite its success, the HDI has been widely criticized. The first fundamental limitation of the HDI is the high level of measurement error implicit in each one of its dimensions (especially the Gross National Income, GNI). A second important technical criticism is related to the implied tradeoffs across its dimensions. For example, keeping the value of the HDI constant, how much additional GNI is needed to compensate for one year less of life expectancy? Unfortunately, if governments were to use the HDI to measure their performances, this would imply that in poor countries they would do better by increasing the GNI and lowering life expectancy (for example, by increasing pollution). The third concern is related to the redundancy of HDI’s dimensions, with income and education being highly correlated with life expectancy. Finally, given its late definition and measurement and its continuous changes during the last 30 years, the HDI provides a de-historicized and time limited view of the human development performance.  

In our paper, we take the view that we should be seeing incomes and commodities not as something that people have reason to value intrinsically, but rather as instruments, i.e., as means to other ends,  this end being a good and long life. For this reason, we propose a new index: the Human Life Indicator, or HLI. The HLI looks at life expectancy at birth, but adjusts it in order to take the inequality in longevity into account. If two countries had the same life expectancy, the country with the higher rate of infant and child deaths would have a lower HLI.

This solves the problem of having contentious trade-offs, implying that the economic dimension matters only to the extent that it is able to influence life conditions and mortality. It solves the problem of inaccurate data, because life expectancy is the most reliable component of the HDI. Because GDP per capita, the level of education and life expectancy are closely related to one another, little information is lost by using a human development indicator based only on life expectancy. Finally, with the HLI we are able to provide consistent trends that go back to the post Second WW period for most countries and further down to the early nineteenth century for a bunch of European countries.

Our index draws a different picture than the one made by the HDI. Based on data from 2010 to 2015, Norway would not be on top of the list in terms of human development. That honor goes to Hong Kong. The reason is that Norway ranks highly on the HDI in part because of the revenues that it receives from North Sea oil and gas, something that has no value in itself in our HLI. The UN puts Canada and the U.S. as tied at 12th and 13th  place respectively, but Canada is ranked 17th in the world using our system, while the U.S. does poorly, ranking as 32nd. This relatively higher ranking of Canada reflects the higher longevity of its inhabitants and the lower inequality in their ages of death compared to people in the U.S.

by Simone Ghislandi, Dept. of Social and Political Sciences, Bocconi

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