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The Human Development Index (HDI) measures socioeconomic development and serves as an alternative to the Gross Domestic Product (GDP) per capita as an indicator of material advancement. The HDI incorporates three dimensions of human progress: a long and healthy life, knowledge and education, and a decent standard of living. The HDI for nearly all countries has been reported annually since 1990 in the United Nations Development Programme’s Human Development Report (HDR).

The HDI emerged out of economists’ frustration with the use of a single indicator—GDP per capita—as a proxy to measure economic development and thereby rank countries comparatively and assess their progress over time. GDP per capita essentially measures annual real income per capita. Advocates of using GDP per capita to judge development favored it as an indicator, as it is frequently and consistently measured and reported. However, critics, including future Nobel Laureate in Economics Amartya Sen, pointed to many drawbacks of using GDP per capita for comparing development cross-nationally.

Sen, regarded as the intellectual father of the HDI, argued that the goal of development should not be simply to encourage the growth of national income, but rather to promote human capabilities and freedom. Mahbubul Haq, the Pakistani economist who founded the HDR for the UNDP in 1990, stated that the real goal of development must be to “enlarge people’s choices” in all areas of human life: economic, political, and cultural. Haq, with consultation from Sen and Meghnad Desai (and, later, several other noted development economists), created and edited the HDI for the first HDR.

Three component indices—life expectancy, education, and GDP—form the HDI. The indices are generated by comparing a country’s actual performance to minimum and maximum goalposts on a particular indicator. For example, the life expectancy index intends to capture the development goal of a long and happy life. For an individual country, it is calculated by the following ratio:

where 25 and 85 years are the minimum and maximum goalposts.

The education index serves to measure the development goal of knowledge. It is computed by this formula:

2/3(adult literacy rate) + 1/3(gross enrollment rate).

Zero and 1.0 serve as goalposts for the education indicators.

The GDP index serves as a proxy for the decent standard-of-living goal. For an individual country, it is determined by this method:

The GDP per capita measure used is at purchasing power parity (PPP).

The HDI is then calculated as the mean of those three indices (i.e., it is the sum of the component indices each multiplied by one third).

When the UNDP ranks United Nations member countries by HDI, those societies that have effectively promoted health care and universal education tend to rank higher on the HDI than on a GDP per capita ranking. Other countries with high per capita incomes but poor social services provision—such as many petroleum exporters—rank lower on the HDI than if the list were ordered by GDP per capita. The United States tends to rank lower on the HDI than on a GDP per capita standing, while the European welfare states usually achieve higher positions.

Some critics of the HDI have argued that since it highly correlates with GDP per capita, the HDI offers little new information about societies’ comparative economic progress. Other critics, including its principal architects, lament the HDI’s inability to capture other important human capabilities, including political freedom or differences in living standards for men and women. Still others criticize the equal weighting of the life expectancy, education, and income components of the HDI, offering various suggestions for improvement. In contrast, Sen has lauded Haq for putting together an index that is easy to understand and can be computed easily with data that are available for most nations. Indeed, the UNDP has produced time series for the HDI that extend back to 1975. Responding to critics, the UNDP has created and now publishes a human poverty index, a gender-related development index, and a gender empowerment measure.

Bibliography:

Haq, Mahbub ul. Reflections on Human Development. New York: Oxford University Press, 1995.
Sen, Amartya. Commodities and Capabilities. Amsterdam: North-Holland, 1985.
“A Decade of Human Development.” Journal of Human Development 1, no. 1 (2000): 17–23.
Srinivasan,T. N. “Human Development: A New Paradigm or Reinvention of the Wheel?” American Economic Review 84, no. 2 (1994): 238–243.
Streeten, Paul. “Human Development: Means and Ends.” American Economic Review 84, no. 2 (1994): 232–237.
United Nations Development Programme. Human Development Report. New York: United Nations Development Programme, 1990–2006.

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