Human development index

What Is the Human Development Index?

The Human Development Index (HDI) is a composite statistical measure used to rank countries by their level of human development, emphasizing that people and their capabilities should be the ultimate criteria for assessing a country's progress, not just economic growth. This metric, falling under the broader field of macroeconomics and economic development, moves beyond traditional economic indicators to evaluate a nation's performance in key dimensions of human well-being. The HDI considers a long and healthy life, access to knowledge, and a decent standard of living⁶¹, ⁶². It provides a more holistic view of a country's development by incorporating aspects often overlooked when solely focusing on financial metrics like gross national income (GNI) per capita⁶⁰.

History and Origin

Prior to the Human Development Index (HDI), a country's development was predominantly gauged by purely economic statistics, most notably gross domestic product (GDP) or GNI per capita⁵⁹. However, many believed these measures alone were insufficient to capture the true well-being of a population. The HDI was conceived to shift this focus. It was devised and launched in 1990 by Pakistani economist Mahbub ul Haq, with significant contributions from Nobel laureate Amartya Sen, as part of the United Nations Development Programme (UNDP)'s annual Human Development Report. The explicit purpose of the HDI was "to shift the focus of development economics from national income accounting to people-centered policies". The UNDP continues to publish the Human Development Report annually, providing a comprehensive analysis of human development trends and insights globally.⁵⁸

Key Takeaways

• The Human Development Index (HDI) is a composite statistic measuring a country's achievements in health, education, and standard of living.⁵⁶, ⁵⁷
• It was introduced by the United Nations Development Programme (UNDP) in 1990 to provide a broader assessment of development beyond economic output.
• The HDI is calculated as a geometric mean of three normalized dimension indices: a Life Expectancy Index, an Education Index, and an Income Index.⁵⁴, ⁵⁵
• HDI values range from 0 to 1, with higher values indicating greater human development.⁵², ⁵³
• Despite its widespread use, the Human Development Index faces criticisms for its simplicity, potential for misinterpretation, and omission of certain factors like inequality and political freedoms.⁵¹

Formula and Calculation

The Human Development Index (HDI) is calculated as the geometric mean of three normalized dimension indices: the Life Expectancy Index ((I_{Health})), the Education Index ((I_{Education})), and the Income Index ((I_{Income})). Each of these indices is normalized to a value between 0 and 1 using minimum and maximum "goalpost" values⁴⁹, ⁵⁰.

The formula for the HDI is:

Where:

• Life Expectancy Index ((I_{Health})): Measures health, based on life expectancy at birth. The minimum value is 20 years and the maximum is 85 years⁴⁷, ⁴⁸. $$I_{Health} = \frac{LE - 20}{85 - 20}$$ LE = Life Expectancy at Birth
• Education Index ((I_{Education})): Measures access to knowledge, based on mean years of schooling (MYS) for adults aged 25 years and expected years of schooling (EYS) for children of school-entering age. The minimum for both is 0, while maximums are 15 years for MYS and 18 years for EYS⁴⁵, ⁴⁶. $$I_{Education} = \frac{MYSI + EYSI}{2}$$ Where: $$MYSI = \frac{MYS}{15} \quad \text{and} \quad EYSI = \frac{EYS}{18}$$ MYS = Mean Years of Schooling, EYS = Expected Years of Schooling
• Income Index ((I_{Income})): Measures a decent standard of living, based on Gross National Income (GNI) per capita (PPP $). The minimum is $100 and the maximum is $75,000⁴³, ⁴⁴. The natural logarithm is used to reflect the diminishing importance of income with increasing GNI⁴¹, ⁴². $$I_{Income} = \frac{\ln(GNIpc) - \ln(100)}{\ln(75000) - \ln(100)}$$ GNIpc = Gross National Income per capita (constant 2021 PPP $)

These normalized values are then combined using the geometric mean to produce the final HDI score, which ranges from 0 to 1. A score closer to 1 indicates a higher level of human development.³⁹, ⁴⁰

Interpreting the Human Development Index

The Human Development Index (HDI) is a valuable tool for understanding global development beyond mere economic output. A higher HDI score, closer to 1, indicates a country's strong performance across the three core dimensions: a long and healthy life, access to education, and a decent standard of living³⁸. Countries are typically categorized into four tiers: very high, high, medium, and low human development.

Interpreting the HDI involves more than just looking at a single number. For instance, two countries might have similar HDI scores but achieve them through different combinations of life expectancy, education, and income. This can prompt questions about specific policy choices and resource allocation within those nations, particularly concerning public health and education systems³⁶, ³⁷. The HDI aims to encourage dialogue about how countries prioritize and invest in their people's capabilities, fostering a focus on human well-being as a primary goal of economic policy. It serves as a benchmark for assessing how well countries are improving their citizens' quality of life.

Hypothetical Example

Consider two hypothetical countries, Alpha and Beta, that are both seeking to improve their citizens' well-being.

Country Alpha:

• Life Expectancy (LE): 75 years
• Mean Years of Schooling (MYS): 12 years
• Expected Years of Schooling (EYS): 16 years
• GNI per Capita (PPP): $30,000

Let's calculate Alpha's dimension indices:

• (I_{Health}) = (\frac{75 - 20}{85 - 20}) = (\frac{55}{65}) (\approx) 0.846
• (MYSI) = (\frac{12}{15}) = 0.8
• (EYSI) = (\frac{16}{18}) (\approx) 0.889
• (I_{Education}) = (\frac{0.8 + 0.889}{2}) (\approx) 0.845
• (I_{Income}) = (\frac{\ln(30000) - \ln(100)}{\ln(75000) - \ln(100)}) = (\frac{10.301 - 4.605}{11.228 - 4.605}) = (\frac{5.696}{6.623}) (\approx) 0.860

Now, Alpha's HDI:

• (HDI_{Alpha} = \sqrt{0.846 \cdot 0.845 \cdot 0.860} \approx \sqrt{0.615} \approx 0.850)

Country Beta:

• Life Expectancy (LE): 68 years
• Mean Years of Schooling (MYS): 9 years
• Expected Years of Schooling (EYS): 13 years
• GNI per Capita (PPP): $20,000

Let's calculate Beta's dimension indices:

• (I_{Health}) = (\frac{68 - 20}{85 - 20}) = (\frac{48}{65}) (\approx) 0.738
• (MYSI) = (\frac{9}{15}) = 0.6
• (EYSI) = (\frac{13}{18}) (\approx) 0.722
• (I_{Education}) = (\frac{0.6 + 0.722}{2}) (\approx) 0.661
• (I_{Income}) = (\frac{\ln(20000) - \ln(100)}{\ln(75000) - \ln(100)}) = (\frac{9.903 - 4.605}{6.623}) = (\frac{5.298}{6.623}) (\approx) 0.800

Now, Beta's HDI:

• (HDI_{Beta} = \sqrt{0.738 \cdot 0.661 \cdot 0.800} \approx \sqrt{0.390} \approx 0.731)

In this example, Country Alpha, with an HDI of approximately 0.850, would be classified in the "very high human development" category, while Country Beta, with an HDI of approximately 0.731, would be in the "high human development" category. This comparison highlights that even with a decent GNI, deficiencies in health or education can lead to a lower overall human development score, influencing decisions related to public policy and resource allocation for enhancing human capital.

Practical Applications

The Human Development Index (HDI) serves multiple practical applications in global development, analysis, and policy formulation. Governments and international organizations utilize the HDI as a broader metric to assess and compare countries' progress, moving beyond solely economic indicators³⁵.

For policymakers, the HDI can help identify areas requiring intervention. For instance, if a country exhibits a relatively low HDI despite a high gross national income, it might signal issues in the distribution of resources for health or education. This can stimulate debate and inform decisions on fiscal policy and public spending priorities³³, ³⁴. The United Nations urges governments to consider the HDI when making policy choices that influence human development³².

Furthermore, researchers and analysts often use the HDI to study trends in economic development and evaluate the effectiveness of various development strategies. It provides a standardized framework for cross-country comparisons, enabling insights into why countries with similar economic levels might have vastly different human development outcomes³¹. The HDI is a key component of the Human Development Reports published by the United Nations Development Programme (UNDP), which are widely consulted resources for understanding global human development.³⁰

Limitations and Criticisms

Despite its widespread adoption and influence, the Human Development Index (HDI) has faced several limitations and criticisms. A primary critique is its perceived simplicity, as it condenses the complex concept of human development into just three dimensions: health, education, and income²⁹. Critics argue that a comprehensive understanding of human development should encompass additional factors such as political freedom, gender equality, environmental sustainability, human security, and poverty²⁶, ²⁷, ²⁸. The HDI does not account for disparities within countries, meaning a nation could have a high average income, but if wealth is concentrated among a few, a significant portion of the population might still experience deprivation²⁴, ²⁵.

Another point of contention is the equal weighting assigned to each of the three dimensions. Critics argue that these weights can be arbitrary and may not reflect the actual value or importance of each component in different contexts²³. For example, the HDI might imply that an increase in life expectancy has an equivalent "value" to a certain increase in GNI, which may not hold true in all scenarios. Additionally, some scholars suggest that the components of the HDI, such as education and income, are highly correlated in developed economies, potentially leading to misleading results or providing little additional information beyond simpler economic measures²².

The reliance on gross national income (GNI) per capita as the income indicator has also drawn criticism. While the HDI uses purchasing power parity (PPP) adjusted GNI to account for differences in living costs²¹, some argue that even GNI per capita does not fully capture income distribution or the value of unpaid work²⁰. The Brookings Institution has discussed these challenges, noting that incorporating broader concepts like empowerment into the HDI is complex.¹⁹

The United Nations Development Programme itself acknowledges that the HDI is not a "comprehensive measure" and publishes other composite indices, such as the Inequality-adjusted Human Development Index (IHDI) and the Gender Development Index (GDI), to provide a broader picture of human development challenges.¹⁸

Human Development Index vs. Gross Domestic Product

The Human Development Index (HDI) and Gross Domestic Product (GDP) are both widely used metrics for assessing countries, but they measure fundamentally different aspects of national well-being. GDP, specifically GDP per capita, represents the total monetary value of all final goods and services produced within a country's borders in a specific time period, divided by its population¹⁶, ¹⁷. It is primarily an indicator of a nation's economic output and growth¹⁵.

In contrast, the Human Development Index was specifically created to move beyond purely economic measures, focusing on people and their capabilities¹⁴. While GDP per capita is a component of the HDI, the HDI also incorporates non-economic factors: life expectancy at birth (health) and years of schooling (education)¹², ¹³. This means that two countries with similar GDP per capita figures can have significantly different HDI scores if their health and education outcomes vary widely¹⁰, ¹¹.

For example, a country might have a high GDP due to extensive natural resource extraction, but if the benefits of this wealth are not translated into better health services or educational opportunities for its population, its HDI might be lower than a country with a more modest GDP but stronger social indicators⁹. The HDI thus aims to paint a more holistic picture of a country's overall development and the well-being of its citizens, whereas GDP provides a narrower view centered on economic activity.⁸

FAQs

What is the primary purpose of the Human Development Index?

The primary purpose of the Human Development Index (HDI) is to measure a country's average achievements in three basic dimensions of human development: a long and healthy life, access to knowledge, and a decent standard of living. It provides a broader perspective on national progress than traditional economic measures alone.⁶, ⁷

Who calculates and publishes the HDI?

The Human Development Index is calculated and published annually by the Human Development Report Office for the United Nations Development Programme (UNDP).⁵

What are the three core dimensions measured by the HDI?

The three core dimensions measured by the HDI are health (measured by life expectancy at birth), education (measured by mean years of schooling and expected years of schooling), and a decent standard of living (measured by gross national income per capita).³, ⁴

Does the HDI account for inequality within a country?

The basic Human Development Index does not directly account for inequality within a country. However, the UNDP also publishes the Inequality-adjusted Human Development Index (IHDI), which discounts the HDI's average values based on the level of inequality in life expectancy, education, and income within a country.²

Why is the Human Development Index considered important?

The HDI is considered important because it shifts the focus of development assessment from purely economic growth to people-centered development. It helps policymakers and the public understand how effectively a nation is converting its economic wealth into opportunities for its citizens to live long, healthy, and educated lives, encouraging investment in social indicators.¹