Sunday, June 17, 2012


Human Development: The Concept

The concept of human development focuses on the ends rather than the means of development and progress. The real objective of development should be to create an enabling environment for people to enjoy long, healthy and creative lives. Though this may appear to be a simple truth, it is often overlooked as more immediate concerns are given precedence.
Human development denotes both the process of widening people's choices and improving their well-being. The most critical dimensions of human development are: a long and healthy life, knowledge and a decent standard of living. Additional concerns include social and political freedoms. The concept distinguishes between two sides of human development. One is the formation of human capabilities, such as improved health or knowledge. The other is the enjoyment of these acquired capabilities, for work or for leisure.
Human development is often being misconstrued and confused with the following concepts and approaches to development.

  • Economic growth is a means and not an end of development. Moreover, high GDP growth does not necessarily translate to progress in human development. Global experience has shown that income and human development are not always perfect companions, where some countries display relatively high levels of human development for their income and vice versa.
  • Theories of human capital formation and human resource development view human beings as means to increased income and wealth rather than as ends. These theories are concerned with human beings as inputs to increasing production;
  • The human welfare approach looks at human beings as beneficiaries rather than participants in the development process;
  • The basic needs approach concentrates on the bundle of goods and services that deprived population groups need - food, shelter, clothing, health care and water. It focuses on the provision of these goods and services rather than their implications on human choices.
Thus the concept of human development is a holistic one putting people at the centre of all aspects of the development process.

   The Human Development Index (HDI) compiled by the UNDP, is a summary composite index that measures a country's average achievements in three basic aspects of human development: health, knowledge, and income. It was first developed by the late Pakistani economist Mahbub ul Haq with the collaboration of the Nobel laureate Amartya Sen and other leading development thinkers (Paul Streeten, Frances Stewart, Gustav Ranis, Keith Griffin, Sudhir Anand and Meghnad Desai) for the first Human Development Report in 1990. It was introduced as an alternative to conventional measures of national development, such as level of income and the rate of economic growth.

        . The HDI was created to emphasize that people and their capabilities should be the ultimate criteria for assessing the development of a country, not economic growth alone. The HDI can also be used to question national policy choices, asking how two countries with the same level of GNI per capita can end up with such different human development outcomes. For example, the Bahamas and New Zealand have similar levels of income per person, but life expectancy and expected years of schooling differ greatly between the two countries, resulting in New Zealand having a much higher HDI value than the Bahamas.

Starting with the 2010 report the HDI combines three dimensions:

-A long and healthy life: Life expectancy at birth

-Access to knowledge: Mean years of schooling and Expected years of schooling

-A decent standard of living: GNI per capita (PPP US$)

-Life expectancy at birth, as an index of population health and longevity

-Knowledge and education, as measured by the adult literacy rate (with two-thirds weighting) and the combined primary, secondary, and tertiary gross enrollment ratio (with one-third weighting).

-Standard of living, as indicated by the natural logarithm of gross domestic product per capita at purchasing power parity.

         The breakthrough for the HDI was the creation of a single statistic which was to serve as a frame of reference for both social and economic development. The HDI sets a minimum and a maximum for each dimension, called goalposts, and then shows where each country stands in relation to these goalposts, expressed as a value between 0 and 1.

Fig. A Diagrammatic representation of HDI.(Source - UNDP)

      The education component of the HDI is now measured by mean of years of schooling for adults aged 25 years and expected years of schooling for children of school going age. Mean years of schooling is estimated based on duration of schooling at each level of education. Expected years of schooling estimates are based on enrolment by age at all levels of education and population of official school age for each level of education. The indicators are normalized using a minimum value of zero and maximum values are set to the actual observed maximum values of the indicators from the countries in the time series, that is, 1980–2010. The education index is the geometric of two indices.

      The life expectancy at birth component of the HDI is calculated using a minimum value of 20 years and maximum value of 83.2 years. These are the observed maximum value of the indicators from the countries in the time series, 1980–2010. Thus, the longevity component for a country where life expectancy birth is 55 years would be 0.554.

      For the wealth component, the goalpost for minimum income is $163 (PPP) and the maximum is $108,211 (PPP), both observed minimum observed during the same time series.
      The decent standard of living component is measured by GNI per capita (PPP US$) instead of GDP per capita (PPP US$) The HDI uses the logarithm of income, to reflect the diminishing importance of income with increasing GNI. The scores for the three HDI dimension indices are then aggregated into a composite index using geometric mean.

 In its 2010 Human Development Report the UNDP began using a new method of calculating the HDI. The following three indices are used:

  1. Life Expectancy Index (LEI) =  LE ─ 20
                                                              83.2 ─ 20

  1. Education Index (EI) = √MYSI . EYSI ─ 0  
                                                      0.951 ─ 0

  -Mean Years of Schooling Index (MYSI) = MYS ─ 0
                                                                              13.2 ─ 0

  -Expected Years of Schooling Index (EYSI) = EYS ─ 0
                                                                             20.6 ─ 0                                                                            

  1. Income Index (II) = ln(GNIpc) ─ ln(163)_
                                      ln(108,211) ─ ln(163)
      Finally, the HDI is the geometric mean of the previous three normalized indices:

LE: Life expectancy at birth

MYS: Mean years of schooling (Years that a 25 year old person spent in schools)

EYS: Expected years of schooling (Years that a 5 year old child will spend with his education in his whole life)

GNIpc: Gross national income at purchasing power parity per capita

Let’s calculate the HDI for Turkey for the year 2005 with the goal post set by UNDP during 2005.

  1. Calculating the life expectancy index

The life expectancy index measures the relative achievement of a country in life expectancy at birth. For Turkey, with a life expectancy of 71.4 years in 2005, the life expectancy index is 0.773.

Life Expectancy Index = 71.4 – 25 = 0.773
       85 – 25

  1. Calculating the education index

The education index measures a country's relative achievement in both adult literacy and combined primary, secondary and tertiary gross enrolment. First, an index for adult literacy and one for combined gross enrolment are calculated. Then these two indices are combined to create the education index, with two-thirds weight given to adult literacy and one-third weight to combined gross enrolment. For Turkey, with an adult literacy rate of 87.4% in 2005 and a combined gross enrolment ratio of 68.7% in 2005, the education index is 0.812.

Adult Literacy Index = 87.4 – 0 = 0.874
   100 - 0

Gross Enrolment Index = 68.7 – 0 = 0.687
      100 – 0

Education Index = 2/3(adult literacy index) + 1/3(gross enrolment index)
     = 2/3(0.874) + 1/3(0.687)
     = 0.812

  1. Calculating the GDP index

The GDP index is calculated using adjusted GDP per capita (PPP US$). In the HDI income serves as a surrogate for all the dimensions of human development not reflected in a long and healthy life and in knowledge. Income is adjusted because achieving a respectable level of human development does not require unlimited income. Accordingly, the logarithm of income is used. For Turkey, with a GDP per capita of 8,407 (PPP US$) in 2005, the GDP index is 0.740.

GDP index = log (8,407) – log (100)
log (40,000) – log (100)

       = 0.740

  1. Calculating the HDI

Once the dimension indices have been calculated, determining the HDI is straightforward. It is a simple average of the three dimension indices.
HDI = 1/3 (life expectancy index) + 1/3 (education index) + 1/3 (GDP index)

        = 1/3 (0.773) + 1/3 (0.812) + 1/3 (0.740)

        = 0.775

Disparity Index (GeDI):

It is a measure to illustrate whether overall human development is being shared equitably by women and men. This disparity in literacy rate between female and male can be estimated using the following formula:

Disparity Index = {Percent female litracy} X 100
           Percent male litracy

Poverty Measurements:
The Human Poverty Index (HPI) is an indication of the standard of living in a country, developed by the United Nations (UN). For highly developed countries, the UN considers that it can better reflect the extent of deprivation compared to the Human Development Index.
If human development is about enlarging choices, poverty means that opportunities and choices most basic to human development are denied. Thus a person is not free to lead a long, healthy, and creative life and is denied access to a decent standard of living, freedom, dignity, self-respect and the respect of others. From a human development perspective, poverty means more than the lack of what is necessary for material well-being.
For policy-makers, the poverty of choices and opportunities is often more relevant than the poverty of income. The poverty of choices focuses on the causes of poverty and leads directly to strategies of empowerment and other actions to enhance opportunities for everyone. Recognising the poverty of choices and opportunities implies that poverty must be addressed in all its dimensions, not income alone.
The Human Development Report 1997 introduced a human poverty index (HPI) in an attempt to bring together in a composite index the different features of deprivation in the quality of life to arrive at an aggregate judgment on the extent of poverty in a community.

The three indicators:

Rather than measure poverty by income, the HPI uses indicators of the most basic dimensions of deprivation: a short life, lack of basic education and lack of access to public and private resources. The HPI concentrates on the deprivation in the three essential elements of human life already reflected in the HDI: longevity, knowledge and a decent standard of living. The HPI is derived separately for developing countries (HPI-1) and a group of select high-income OECD countries (HPI-2) to better reflect socio-economic differences and also the widely different measures of deprivation in the two groups.

  • The first deprivation relates to survival: the likeliness of death at a relatively early age and is represented by the probability of not surviving to ages 40 and 60 respectively for the HPI-1 and HPI-2.
  • The second dimension relates to knowledge: being excluded from the world of reading and communication and is measured by the percentage of adults who are illiterate.
  • The third aspect relates to a decent standard of living, in particular, overall economic provisioning.  
For the HPI-1, it is measured by the unweighted average of the percentage of the population without access to safe water and the percentage of underweight children for their age. For the HPI-2, the third dimension is measured by the percentage of the population below the income poverty line (50% of median household disposable income).
In addition to the three indicators mentioned above, the HPI-2 also includes social exclusion, which is the fourth dimension of the HPI-2. It is represented by the rate of long term unemployment.
The Human Development Reports summarizes this as "A composite index measuring deprivations in the three basic dimensions captured in the human development index — a long and healthy life, knowledge and a decent standard of living." The formula for calculating it is:

  • HPI-1 =
P1: Probability at birth of not surviving to age 40 (times 100)P2: Adult illiteracy rateP3: Unweighted average of population without sustainable access to an improved water source and children under weight for age
α: 3

The Human Development Reports summarizes this as "A composite index measuring deprivations in the three basic dimensions captured in the human development index — a long and healthy life, knowledge and a decent standard of living — and also capturing social exclusion." The formula for calculating it is:

  • HPI-2 =
P1: Probability at birth of not surviving to age 60 (times 100)P2: Adults lacking functional literacy skillsP3: Population below income poverty line (50% of median adjusted household disposable income)P4: Rate of long-term unemployment (lasting 12 months or more)
α: 3

Gender Development Index:
The Gender Development Index (GDI) is an indication of the standard of living in a country, developed by the United Nations (UN). It is one of the five indicators used by the United Nations Development Programme in its annual Human Development Report. It aims to show the inequalities between men and women in the following areas: long and healthy life, knowledge, and a decent standard of living.


Calculating the GDI involves three steps. Step 1: Unit-free indices between 0 and 1 are calculated for females and males in each of the following areas:

  1. life expectancy,
  2. education (the adult literacy rate and the combined primary to tertiary gross enrollment ratio),
  3. estimated earned income (at purchasing power parity US$).

  • Female Life Expectancy Index =
  • Male Life Expectancy Index =
  • Female & Male Education Indices =
  • Female & Male Income Indices =
Step 2: For each area, the pair of gender indices are combined into an Equally Distributed Index that rewards gender equality and penalizes inequality. It is calculated as the harmonic mean of the two indices.

  • Equally Distributed index =
Step 3: The GDI is the unweighted average of the three Equally Distributed Indices: Equally distributed life expectancy index, Equally distributed education index, Equally distributed income index.
The UN uses a different standard for male and female life expectancy, basically assuming that it is natural that women should live about 5 years longer than men. If the life expectancy index was set at an equal age of 85 years, the GDI calculated would increase, reflecting the superior life expectancy of women in almost all countries. Just replace 87.5 years and 82.5 years with 85.0 years and replace 27.5 years and 22.5 years with 25.0 years to equalize it. Iceland, for example, would have a GDI of 0.992 instead of 0.962 under this method. The cause of the disparity in life expectancy between men and women is not completely understood.

      The Human Development Index has been criticized on a number of grounds, including failure to include any ecological considerations, focusing exclusively on national performance and ranking, and not paying much attention to development from a global perspective. Two authors claimed that the human development reports "have lost touch with their original vision and the index fails to capture the essence of the world it seeks to portray”. The index has also been criticized as "redundant" and a "reinvention of the wheel", measuring aspects of development that have already been exhaustively studied. The index has further been criticized for having an inappropriate treatment of income, lacking year-to-year comparability, and assessing development differently in different groups of countries.

      Economist Bryan Caplan has criticized the way HDI scores are produced; each of the three components are bounded between zero and one. As a result of that, rich countries effectively cannot improve their ranking in certain categories, even though there is a lot of scope for economic growth and longevity left. "This effectively means that a country of immortals with infinite per-capita GDP would get a score of .666 (lower than South Africa and Tajikistan) if their populations were illiterate and never went to school." He argues, "Scandinavia comes out on top according to the HDI because the HDI is basically a measure of how Scandinavian your country is."

       The following are common criticisms directed at the HDI: that it is a redundant measure that adds little to the value of the individual measures composing it; that it is a means to provide legitimacy to arbitrary weightings of a few aspects of social development; that it is a number producing a relative ranking which is useless for inter-temporal comparisons, and difficult to compare a country's progress or regression since the HDI for a country in a given year depends on the levels of, say, life expectancy or GDP per capita of other countries in that year. However, each year, UN member states are listed and ranked according to the computed HDI. If high, the rank in the list can be easily used as a means of national aggrandizement; alternatively, if low, it can be used to highlight national insufficiencies. Using the HDI as an absolute index of social welfare, some authors have used panel HDI data to measure the impact of economic policies on quality of life.

       Ratan Lal Basu criticizes the HDI concept from a completely different angle. According to him the Amartya Sen-Mahbub ul Haq concept of HDI considers that provision of material amenities alone would bring about Human Development, but Basu opines that Human Development in the true sense should embrace both material and moral development. According to him human development based on HDI alone, is similar to dairy farm economics to improve dairy farm output. To quote: ‘So human development effort should not end up in amelioration of material deprivations alone: it must undertake to bring about spiritual and moral development to assist the biped to become truly human.’ For example, a high suicide rate would bring the index down.

       A few authors have proposed alternative indices to address some of the index's shortcomings. However, of those proposed alternatives to the HDI, few have produced alternatives covering so many countries, and that no development index (other than, perhaps, Gross Domestic Product per capita) has been used so extensively – or effectively, in discussions and developmental planning as the HDI.

       However, there has been one lament about the HDI that has resulted in an alternative index: David Hastings, of the United Nations Economic and Social Commission for Asia and the Pacific published a report geographically extending the HDI to 230+ economies, where the UNDP HDI for 2009 enumerates 182 economies.

Status of India on human development index:

      Rapid economic growth of the past decade has ensured India a place among the top 10 movers on GDP growth, but the country ranks a low 119 among 169 countries on the 2010 Human Development Index. China has been ranked much higher at 89 on the index published annually by the United Nations Development Programme.

       And the reasons should be obvious. India compares very poorly with countries with high level of human development on all indicators such as life expectancy, education and per capita income. For instance, life expectancy at birth is 64.4 years in India.

       In comparison, people living in countries such as Norway, Australia, New Zealand and many countries across Europe are expected to live beyond 80 years. The world average is 69.3 years. The Chinese are expected to live about 73.5 years. Similarly, the number of years a person has spent in school is a dismal 4.4 years for India as compared to global average of 7.4 and 4.6 for South Asia.

       The only bright spot here is the mean years of schooling children are expected to complete. The HDI 2010 pegs that at 10.3 years, which compares reasonably well with world average of 12.3 years. However, in the rich nations represented by Organisation for Economic Cooperation and Development (OECD) group that number is a high 15.9 years.

       Lastly, the gross national income (GNI) per capita measured on purchasing power parity terms for Indian was less than a third of the world average at $3,337 in 2008. Now that does not mean that India has not made much progress on each of these indicators.

       Over 30 years beginning 1980, India’s HDI values has increased from 0.320 to 0.519, an increase of 62%. In the same period, life expectancy at birth increased almost 9%, mean years of schooling by close to three years, and expected years of schooling by four years and per capita GNI by 254%.

       Yet India is a laggard, as many others have moved faster on the measured indicators, some more rapidly on non-income ones while others such as China and many south east Asian nations on income indicators.

       At the global level, the HDI tell a optimistic story, the report noted. “Overall, poor countries are catching up with the rich countries... the HDI gap between developing and developed countries narrowed by about a fifth between 1990 and 2010 and about a fourth since 1970,” it said.

       The latest Human Development Report (HDR) has also tried to look deeper into the indicators to establish various inequalities. These inequalities arise due to disparity in distribution of incomes, gender inequality and mutli-dimensional poverty. Thus, India’s score could fall by a steep 30% due to multi-dimensional inequalities, HDR 2010 notes.

       High prevalence of gender inequality too could pull down India’s rank on HDI as would multi-dimensional poverty. As much as 55% of the population suffers multiple deprivations while an additional 16% are vulnerable to multiple deprivations, according to the report. The breadth of deprivation in India, which is the average percentage of deprivation experienced by people in multi-dimensional poverty, is 54%.


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