Anyway, the whole confrontation got me thinking about measuring wealth and wellbeing, especially regarding socio-economical circumstances and the equality of citizens. As a result, I started thinking about HDI, as I remember that it was the abbreviation for Human Development Index. However, apart from the name I had no idea what it was about. So, a little research was due. The point of sharing this is purely the fact that I found this a very interesting subject, and hope to spark someone else's imagination as well.
What is it used for?
HDI is, as the name suggests, an index, valued from 0 to 1. UN makes yearly calculations of the index and publishes the list of countries sorted by HDI. It serves as a rough estimate of the socioeconomical situation in the country and can be used to evaluate, how good the circumstances in a given country are for the purposes of having a long, healthy and economically stable life.
How is it computed?
HDI is a composite index, consisting of three components:
- life expectancy index
- education index
- standard of living index (GDP index)
- Life Expectancy Index =
LE = Life Expectancy (in years)
- Education Index =
- GDP =
GDPpc = Gross Domestic Product per capita (in USD)
After the subindices have been calculated, HDI is established simply by taking the arithmetic mean of the subindices, meaning
HDI = (LEI + EI + GDP) / 3
As a single idex value, HDI is not really all that informative. It only measures the average human development in a country, and reveals nothing about problems relating to socioeconomical inequality related to race, gender or place of living, for example. That's why UN calculates also disaggregated HDI values, meaning HDI indices that are calculated for coherent groups in a country, separated by race, for example. Obtaining the disaggregated HDI values for groups separated in different ways can reveal a lot of useful information about the equality in a country, and can potentially tell which groups are left outside the social security system and which are doing better.
Naturally, HDI has its problems. Unless the disaggregated values are computed, it reveals nothing about social equality. Neither does it take into account environmental development in any way. The exploitation of the environment usually only increases a country's GDP, as environmental protection incurs costs on businesses and therefore lowers GDP. As most environmental exploitation is (thank goodness) not dangerous enough to affect the life expectancy of citizens it completely avoids HDI analysis.