this is development economics one part

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

2. 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!!

3. The Body Mass Index
Click here to calculate your
own body mass index.

4. The Wind Chill Index

5. The Big Mac Index
Click here to watch a short
informational video about
the “Big Mac Index”

6. Other Common Indexes
Click here to see
the 2008 rankings
Click here to see the indicators
that make up the index

7. 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.

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

9. 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

10. 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)

11. 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.

12. Calculating HDI:
The United States
• 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.
Click here to access an
interactive HDI calculator.

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

14. 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)
United States ($43,444)
The IMF’s GDP Per Capita
Rankings (2006)
Purchasing Power Parity (PPP)
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?

15. 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.

16. 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.”

17. 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”

18. Three Issues to Consider
When Evaluating
Indexes Like the HDI
1) Validity
2) Reliability
3) Parsimony

19. 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?

20. 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?

21. 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?

22. 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.

23. What’s the Economy For, Anyway?
A Project of the Center for Communication and Civic Engagement
at the University of Washington.

24. Thanks To All