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The Human Development Index:"Handle with Care"ALLEN C. KELLEY

ECONOMISTS AND POLICYMAKERShave long questioned the emphasis ongrowth fgrossnationalproduct er capita (GNP/N) s thesingular oalandmeasure fnational evelopment. NP/Nails ocapture hedistributionof hebenefitsf conomic rogress-in articular,henumberndconditionofpersons iving n poverty; nd it abstracts rom multitudef specificfactors hatrelatedirectlyo humanwelfare-for xample, hebenefitsfhealth, ducation, nd political nd socialfreedoms.Theargumentsdvanced nfavor fusing heGNP/Noal andmeasurehavebeen itssimplicity,heassertionhat trepresents reasonableproxyfor everal imensions fhumanwelfare,ndmostmportantly,he bsenceof an alternativeinglemeasure hatbetterpproximates umandevelop-mentnthe ggregate.uchan alternative easurehasrecently eenofferedby the UnitedNationsDevelopment rogrammeUNDP) in itsHuman De-velopment eport1990 (HDR) (New York: OxfordUniversityress),whichunveils a "Human Developmentndex" (HDI). The UNDP appropriatelyrecognizes heconsiderable ifficultynconceptualizingndmeasuringhesomewhatnebulouscondition fhumandevelopment,nd thusnotesthattheHDI "opens the debate" (p. iii) thatwillresultn refinementsfboththeanalytical rameworknd theempiricalnputs ver time.I propose oparticipatenthatdebate. willchallenge heusefulnessoftheconceptual rameworkf "humandevelopment"s specificallyep-resentedn theHDI, illustratehe sensitivityf thismeasureto plausiblerefinements,nd arguethat t offersnly imitednsights eyond hoseob-tainedbysmallmodificationsosimplemeasures feconomic utput.Untilthe onceptual nderpinningsf heHDI aremore irmlystablished,nalystsand policymakersre better ervedby using muchsimplermeasures ndPOPULATION AND DEVELOPMENT REVIEW 17, NO. 2 (JUNE 1991) 315

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316 THE HUMAN DEVELOPMENT INDEXmethods or valuating umandevelopment.n themeantime,t s mportantthat henature ndpitfallsftheHDI be understood. contend hat heHDIis a tool of limited alue, and my goal is to stamp thisnew tool with aprecautionaryabel: "Handle withCare."Definition, easurement,nd assessmentof humandevelopmentDefinitionHumandevelopments definedntheHDR as "a process f nlarging eople'schoices" (p. 1). According o theHDR, this s accomplishedmostfunda-mentally y living long and healthy ife,being educated, nd havingadecent tandard f iving; nd it sboth ugmentedndfacilitatedypoliticalfreedom, uaranteedhumanrights,nd personalself-respect. hile thisrepresentsdefendableist fcomponentsor indicators)f ndividualwel-fare, hekey oappraisinghis ist swhetherhe ndicatorsan beaggregatedin a way thatpermits ssessment, nd thatexposes the impacts fpolicymanipulation.uchaggregationorceshe pecificationftradeoffsetweenthevarious ndicatorsfhumandevelopment.talsoresultsn an index hatispotentiallyapable of answering he central uestions:whenhas humandevelopmentccurred; o what evelorextent; ndwhat has caused it?MeasurementTo this nd,theHDR unveils "HumanDevelopment ndex,"a compositeof lifeexpectancyt birth,dult iteracy,nd realgrossdomestic roductper capita GDP/N).Because the HDI is thecenterpiecef theHDR's con-ceptual ramework,t s mportanthat hisndexbeunderstoodndassessed.Inparticular,ne seeksto knowhow theHDI differsrom heusualmeasureofdevelopment per capita GNP),whatare itsstrengthsnd weaknesses,and inwhatways tcan be improved.The most ommonly sed indexes fwelfare ndpovertyre based onan absolutestandard efinedn terms fa specified undle ofgoods andservices,ften iedto minimumaloricneeds. (For example, heWorldDe-velopmenteport 990 [WDR-1990]usesUS$370 GDP/Nn 1985 purchasing-power-parityollars.Thisrepresentsheupperrange f thepovertyines na number f ow-income ountries.ncontrast,heHDI is based ona relativestandardndrepresentsn assessment f theextent o whicheach countryis successfuln attaininghe maximum alue (described s "adequate" or"desirable")within specifiedange fvalues for ach humandevelopmentindicator.A calculation f the extent owhicha countryalls hort fthe


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ALLEN C. KELLEY 317maximum alueyields "deprivationndex.") n thecase of ife xpectancyand literacy,hisrange s simply he owest nd highest aluesfor he 130countriesn theUNdata sample.For ife xpectancy,herangeof values s36 years the differenceetween78 yearsforJapan and 42 yearsforAf-ghanistan, thiopia, nd Sierra eone in 1987); for iteracy,he range s 88percent thedifferenceetween 100 percentn severaldeveloped ountriesand 12 percentn Somalia n 1985).The range n the GDP/N ndicator s $4,641 (the differenceetweenZaire'sGDP/N f$220 and $4,861, the verage fthepoverty-line easuresinseveral eveloped ountries,enoted s the "Northminimum urchasingpower").The GDP/Nmeasure s constructedy using "purchasing owerparityndex"tobetter eflectonsumer uying ower cross ountries;ndit s transformednto ogarithmso provide onsiderablyess weight o im-provementsn spending power at higher evels of income. (HereafterGDP/Nstaken o be inpurchasing-power-parityollars.)Thismathematicaltransformationaptures he widely mbraced nd importantconomichy-pothesis fdiminishing arginal tilityf ncome-the notion hat he hap-piness"or"utility" ainedfromn additional ollarof ncome sgreatertlower thanat higher evels of income.Both adjustmentsre analyticallyappropriate,lthoughmany of the purchasing-power-parityndexfiguresare stillof dubious quality, nd thespecificogarithmicransformationsnecessarilyrbitrary.'The calculation f a country's DI startswiththe computation fa"deprivationndex" for ach indicator fhumandevelopment. hese cal-culations rebestexplainedwith n example.Kenya's ife xpectancy ep-rivationndex s 53 = (78 - 59)/(78 - 42). Thisvalue ndicates hatKenya,with life xpectancyf59, isapproximatelyalf-waynthe ife xpectancyrange etween heworst42) and bestperformance78) worldwide. imilarindexes or dult iteracyndGDP/Nre compiled.A "composite eprivationindex" ofthethree ndicatorss obtained y simple veraging.Technically,GDP/N eprivations zero for ountries hose GDP/N xceedsthe assumedpovertyine.) Since the owest ttainable alueof zerorepresentso depri-vation and correspondinglyhe highestevel ofhumandevelopment),heHDI is obtained y subtractinghecomposite eprivationndexfrom nity.Japangetshighest onorswith n HDI value of 996; Niger s lowestwith value of 116; and theUnited tates cores 961. Some44 countrieswith combined opulation f 1.47 billion re classifieds having low"humandevelopmentHDI values essthan 5); 40 countries ith combinedpopulation f2.06 billion re classifieds having medium"human devel-opment HDI valuesbetween5 and .79); and46 countries ith combinedpopulationf1.47 billion reclassifiedshaving high"humandevelopment(.8 orhigher).No defenses offeredor hese pecific utoffs,lthough heyprovide oughly qual numbers f countriesn each category.


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318 THE HUMAN DEVELOPMENT INDEXAssessing hemeaning ndusefulness fthe HDI can be madeon twogrounds: heextent owhich t s based on an appropriateonceptual rame-work nd isproperlymeasured, nd theextent o which t provides ew ormodifiednsightsntodevelopment.

Assessment: The conceptual ndmeasurementframeworkAn examination f some oftheunderlyingssumptionsnd featuresf theHDI at once illustrateshedifficultynconstructinguchan index, nd thecaution hatmustbe exercisednusing t.First,heHDI isbasedon a country'sosition long range fmaximumand minimumaluesfor ach indicatorfhumandevelopment.hespecificweight f that ndicatorn the HDI can be sensitiveo thechoice of theseendpoints,orwhich heHDRtends oselect xceptional alues.For xample,an adequate/desiredife xpectancys chosen to be 78, a value attained yonlyone country Japan).A less exceptional, ut reasonablevalue mighthave been 73 (the average fthedeveloped ountriesn 1987),oreven71,thevaluefor hese ountriesn 1975. (Adoptinghe atter alue would raiseChina's HDI from72 to .78, placing tcloseto thecutoffor high"humandevelopment.)twouldhave been usefulhad the HDR ncluded ests f thesensitivityfHDI rankingsoalternativendpoints.Infact, heHDI turns utto be quite ensitive othe hoiceofmaximumlife xpectancy. sanexperiment,set he dequate/desirableife xpectancyat age 73 and evaluated he mpact. hisraised22 countries rom low" to"imedium" human developmentand raised another ten countriesfrom me-dium" to "high" human development.Second, s implemented,heHDI effectivelyssumesthat ittle rnoprogressn humandevelopmentan be madebythedevelopedcountries.Theyall are close to themaximumvalues in literacynd lifeexpectancy,and most xceed the "Northminimum urchasing ower."The HDI valuesfor hedeveloped ountries ary rom 96 to 1.00. As a result, he HDI hasoperationalmeaning nlyfor hedeveloping ountries.TheHDI valuesforthose countries aryfrom12 to .95.) This s a disappointingeature hatmight eovercomenthefutureytheuse of mprovedndicatorsfhumandevelopment. orexample, urely heattainment f educationbeyondtheliteracyevelhas a favorablempact n"enlarging eople'schoices."Possiblyyears feducational ttainment,r a proxy hereofe.g.,enrollmentates),would betterapture hebenefits fexpanded ducation n humanchoice.2Third, he various ndicatorsf humandevelopment re givenequalweight.While a priorit s difficulto ustify nysetofweights, estinghesensitivityftheHDI to alternative eightswould have been useful.Thegreatest roblem ccurswiththerelativelyow weight ccorded o GDP/N


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ALLEN C. KELLEY 319inmoderate- o high-incomeountriesincethevariablemeasuredbythisparticularndicatorincome)can be used to acquireand/or roduceeitherof heotherwo ndicatorsimproved ealth r education). ossibly weightroughly eflectinghe acquisition/production-transformationould havebeenappropriate nder hepremise hat n somecountriesndividualsmaywell haveelected ouse theirncome oexpandchoices nwaysthatdo notresult n,say, mprovedducation rhealth. ndeed, tmight e argued hatthecapacity o choose among many dimensions f humandevelopmentaccorded yexpanded ncome nparticularmerits iving relatively igherweight o this ndicator.Alternatively,heproduction-transformationetweenncomepercap-ita and otherhumandevelopment ndicatorsmay be nonlinear,nd thusmightustify nequal or evenvariableweights y ncome evel.Forexample,relatively mall expendituresn immunizationf children ikelyconveymuchgreater mpacton lifeexpectancy t birth and thushuman devel-opment ' a HDI) thanrelativelyarge xpendituresn life-supportystemsto sustain ndividualsn old age. TheHDR neitherustifiesheuse of oga-rithms o transformncomeper capita on thesegrounds, orprovides nyempirical vidence o reveal thenatureof thisproduction-transformation.Indeed, heHDR effectivelyreats hethreendicatorss independent foneanother.Giventhe ikelihood fstrong ependence s noted n the aboveexample, nintended iases e.g.,unintended eights ccorded o thethreeindicators) an be introduced hat meritdetailed scrutinyn subsequentrevisions f the HDI.Fourth, here sasymmetrynthechoiceofthe GDP/N ndpoint alue(thedevelopedcountries' overtyine) and theendpoints or iteracyndlife xpectancyhealth), aken s thehighestountry alue worldwide. om-putationally,hismplicitlyrovides reater eight oliteracynd longevitythan o GDP/N.f,nfact,he ogarithmicransformationfGDP/Ndequatelycaptures iminishing arginal tilityf ncome, henwhynotuse themax-imumvalue for his ndicator, ralternatively,he"average" GDP/N f thehigh-incomeountries? ven thisprocedure oes not equally weight hethree ndicatorsn a welfare ensebecause there s plausiblydiminishingmarginaltilityohealth ndeducation xpendituresswell.Aconsiderationofthecomplexityf thesefundamentalonceptual ssues, nd the arbitrar-inessof nysetofweights,ikely ccounts or he ack of nydefense fferedintheHDR for heequal-weightssumption.To test hesensitivityf the HDI to thespecificogarithmicransfor-mationofGDP/N, recalculated he HDI using$12,952 as theadequate/desirablendpoint alue,which orrespondsothe verage f hedevelopedcountries'GDP/N. histwofoldncrease n incomepercapitahad a muchsmallermpact hanexpected.For example,onlyfourcountrieswere re-classified rom medium" to "low"; and onlyfivecountrieswere reclassified


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320 THE HUMAN DEVELOPMENT INDEXfrom high" to "medium."The HDI does not appear to be particularlysensitive o the poverty-lineutoff, disquieting inding.t is difficultobelievethat such a large increase n income per capita,from$4,861 to$12,952, would haveonlya small mpact n "enlarging eople'schoices."Fifth, verallhuman developments advanced not onlyby improve-ments nthevarioushumandevelopmentndicators, ut also by theirmoreequal distribution.his s a commonpropertyf welfare ndexesbased onrelative riteria. n exampleof this propertys useful.SierraLeone's lifeexpectancyt birthncreased ignificantlyetween1960 and 1987-by some31 percent, rom 2 to 42 years. urprisingly,ohumandevelopment ouldbe attributedo this ccomplishmentytheHDI sinceSierra eone'srelativeposition idnotchange.Apparently,ivingmuch onger snot sufficientoregistern improvementnhuman development.These examples xpose vividlyhestrongweight ccorded o thedis-tributionnd the relative anking f countries yhuman developmentn-dicatorsn theHDI. Thisspecificweighting equiresdetailed ustification,aboutwhich heHDI issubstantiallyilent. uch considerationsed theWorldBank (WDR-1990) to select n absolutemeasureof"poverty,"ince

[p]overtys not thesame as inequality. . Atmaximumnequalityneperson as everythingnd, learly,overtyshigh. utminimumnequality(wherell areequal) spossible ith eropovertywhere o one spoor) swell s withmaximumovertywhere ll arepoor). p. 26)

Andsuch considerationsave led the nternationalabourOrganizationoemphasize n absolutemeasureof "basic human needs." Ofcourse, venusingan absolute measuredoes not sidestep he conceptualproblemofreconcilinghe mpact f mprovementsnabsolute nd relativehanges nwelfare nless relative hangesdo not countat all-an assumption epre-sentingheopposite xtreme rom heHDI. However, ince theconcept frelative eprivation-the ssenceof theHDR's framework-constituteshedistinguishingeature ftheHDR vis-'a-vishepoverty/human-developmentassessmentsfthe WorldBank,the nternationalabourOrganization,ndmostnationalgovernments,his conceptmeritsmuchmore detailedandconvincingefense han s provided.Other ualificationsfthe HDI can be made,but the above shouldbesufficiento recommend aution nusing hepresentndex.TheHDR iden-tifies everal reas in whichthe index can be improved,mostnotablybyincludingndicatorsf political reedomnd humanrights,nd bytakingintoaccountthe distributionfindicators fhuman developmentwithincountries. asedon additional atacollection,heUNDPplansto introducemodifiedndicatorsf human deprivationn subsequentssuesoftheHDR.


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ALLEN C. KELLEY 321Hopefullyherewillbe improvementsn otherdimensions f the ndex aswell-for example, better roxyforeducational ttainmentshanadultliteracya rather rudemeasure)and a better roxyforhealththan lifeexpectancyt birth.Whilethesemodificationsan be useful, heywillnotresolve he thornyonceptual ifficultieselatingo the selection f appro-priate dequate/desirabletandards or ach index,the combining f indi-catorswithweightshat reboth nterpretablenddefendablenameaningfulwelfare ense, nd especially he assessment fhuman development asedon theconcept f relative eprivation.Having said this,one shouldnot downplay he bold attempt f theUNDP,with tsproposedHDI,to broaden ur viewofdevelopment eyondtheusualGNP/Nmeasure.However, iven hehigh osts nd monumentaldifficultiesndevisingn improvedmeasure fhumandevelopment,twouldbeappropriatetthis tage oassess hebenefitsf uch n effort.n particular,what new and/ormodifiednsights ave we obtained rom se ofthe HDI?AssessmentI: New or modifiednsightsThe main and likely hemost robust nsight hatfollowsfrom he HDI isdisplayed ere s Figure (basedon Figure .2 ntheHDR), which omparesa ranking f countries ytheHDI and theusualmeasureof economicde-velopment-gross ationalproduct er capita GNP/N), onvertednto USdollarsusingexchangerates.As noted bytheUNDP,substantial isparityFIGURE 1 Ranking of countries by HDI and GNP/N

200.9 -180.8 - - 160.7- HDI - 14 mGNP/N0.6 - - 12 z0.5 101l 80.4- 60.3 -40.2 -20.1 I - 00 10 20 30 40 50 60 70 80 90 100 110 120 130

Countryrank


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322 THE HUMAN DEVELOPMENT INDEXexists etween he twomeasures, specially t low rankingswhereGNP/Nrises nly lowlywhilethe HDI traces ut a strong pward rend. his eadsto the majorconclusion hat There s no automatic inkbetween he evelofper capita ncome na country nd the evel of tshumandevelopment"(p. 15).Rephrasinghis onclusion n a dynamic ontext,nd based on otherdata presentedn the report,we may say that human development asprogressedmuchmore rapidlyn thedeveloping ountries haneconomicdevelopment, s proxiedby thegrowth fGNP/N.While this s a usefulinsight,t s notparticularlyovel, t leasttospecialistsnthe field.ndeed,it s a stylized act f recenthistorysunumarizedn the HDR,butstandardindevelopmentextbooks s well) that mprovementsneducation nd lifeexpectancy ave faroutstrippedhegrowth f GNP/Nn thethirdworld,andthat mprovementsnthese ocial ndicators aveproceeded aster ndat an earlier tageofdevelopment han nthenow-developedworld.Possiblymore nterestingo our appraisalofthe HDI is the frequentallegation hatthe "trickle own" ofGNP/N rowth o themasses of thethird orldhas beendisappointing.hus,notonly sthepreoccupation ithGNP/N s a measureofeconomicdevelopmentnappropriate,utwe alsoneed a broadermeasureof humandevelopmentliketheHDI?) to rectifythisdeficiency.ronically, hiletheHDI-GNP/N omparisons eem tocastdoubton GNP/N s a measure fhumandevelopment,t now appearsthattrickle own sdramaticallynderstatedyGNP/Nf heHDI istaken s thenorm.mprovementnhumandevelopment,ccording o theHDI, is muchbetterhanGNP/N rowthwouldsuggest.Or is it?Anotherwayofevaluating hecontributionf the HDI tomeasuringwelfare nd humandevelopments to compare twith the logarithmfGNP/N. fterll, thehypothesisfdiminishingmarginal tilityf ncomeis widely cceptedby all economists.Whilenonspecialistsmightwell useGNP/N s a linear pproximationowelfare, eachers fdevelopmentnddevelopmentextbooks ouldcaution tudentsgainstnterpretinghe wel-fare"or"happiness"oftheSwiss,with 1987 GNP/Nf$21,330,as being165 times hat ftheaverageEthiopian,with GNP/N f$130.In Figure2, therefore,compareHDI withthe ogarithmfGNP/N.ThenotabledisparityetweenHDI and GNP/N,s highlightedn theHDR,vanishes. ndeed, og GNP/Nppearsto represent reasonable verall p-proximation o the HDI.3 Ofcourse, here re conspicuous xceptions orspecificountries-mainlyheoil-exportersithhighGNP/Nwhose HDI isoverstated,ome socialist ountrieswithhigh iteracynd/orow mortalityrateswhoseHDI is understated,nd a fewothers.However, n the devel-opment extbooks,nd nmost esearch asedoncross-countryomparisons,these countries re almost lwaysviewed as outliers r specialcases. TheHDI mainly onfirmshis lassification.


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ALLEN C. KELLEY 323FIGURE 2 Ranking of countries by HDI and log GNP/N

4.20.9 40.8 - HDI 3.80.7 -3.6

-0.6 t / Log GNP/N 3.43.2Z0.5 -30.4 -2.8

2.60.3- 2.40.2 2.20 1 r i I | i a l l I I | X 20.0 10 20 30 40 50 60 70 80 90 100 110 120 130

Countryrank

The bottom ineThe HDI contributesnlymodestly o providing ew or modified nsightscomparedwith heusual measure feconomicdevelopmentGNP/N)f helatter s transformednto ogarithmso capture, orwelfare urposes, hewidely mbraced onceptof diminishingmarginal tilityfincome. TheHDI does ndeedunderscorehe mportancef hishypothesis henmakingwelfareassessments.) Moreover,most of the "exceptional" countries (e.g.,the OPEC states) reusually reated s outlierswithout he use of theHDI.As a result,fthe HDI is to make a majorcontribution,t mustdo so byproviding useful uantitativessessment fabsolutechanges n humandevelopment. owever, onsiderable autionmust be exercised n inter-pretinguch bsolute hanges, iven hequestionableonceptual oundationofa relativewelfarendex, hearbitraryssumptions sed to establish heendpointsf he ndicatorsndthe pecificmannernwhich hey reproxied,and the ackofan analytical asis for electing pecificweights o combinethe ndicators. dditionally,hepresentndex provides nly imited nfor-mation n thedistributionf ndicators ithin ountriesnd fails o includesystematicnformationn,and an analysis f,political reedomsndhumanrights.4lausiblyt s inthese atter wo areas wherenotable mprovementsover heexistingndvery implemeasures fhumandevelopmente.g., ogGDP/N) re ikely obemade. thereforeonclude hat t thepresent ime,5thehumandevelopmentndex ontributesittle otheassessment fhuman


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324 THE HUMAN DEVELOPMENT INDEXdevelopment,nd maywell distract rom henewly aunched ndotherwisevaluableHumanDevelopmenteports, hichrepresent useful ddition othegrowing istof annualmonitoringxercises n the status f worldde-velopment.Notes

1 Using hepurchasing-power-parityn-dex rather hanofficial xchange rates canhave sizable mpactn the anking f pecificcountries. orexample, ased on officialx-change rates,GNP/Ns $130 and $150 (in1987) for Zaire and Ethiopia,respectively;based on thepurchasing-power-parityndex,GDP/Ns $454 and $220, respectively.2 This s recognized ytheWorldBankin its measurementsf "poverty." or ex-ample, WDR-1990p. 29) uses enrollmentrates, ife xpectancy,nd under-five ortal-ity s social indicators ualifyinghe simplepoverty-line easuresbased on GDP/N n1986purchasing-power-parityollars.

3 To evaluate this assessment uantita-tively, DI was taken s a linearfunctionfGNP/N,nd ogGNP/N,or he ample f130countries, ielding2s f 40and .71, respec-

tively. he og transformields substantiallyimprovednd reasonable tatisticalit.4 The UNDP plans to incorporate heseadditionsnfuturemodificationsf the HDI.5 As an interimmeasure, recommendusing ither1) GDP/Nnpurchasing-power-parity ollars,withcountries lassified ntohigh to low humandevelopment evels byincomecutoffs hatprovide ess weighttohigherncomes, r 2) GDP/Nnpurchasing-power-parityollars, ransformednto oga-rithms. his singlemeasure hould then bequalified ymeasures f ntra-countrybso-lutepoverty, lus a fewselected ndicatorsrelatingo health, ducation, ife xpectancy,politicalfreedom,nd the like. The WorldBank uses thefirstroceduren ts nalysis fpovertyntheWDR-1990.

kelley 1991

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