Measuring Development
How it is different as an economic indicator. the Human development index. other measures of development.
What is development?
Development is slightly different to boosts in economic growth or improvements in unemployment or inflation. Development is probably the most important indicator of them all. This is because while development is concerned with human welfare unlike the other economic indicators. When economic development occurs, there are boosts to the welfare of our society and ultimately this is what we all want. Think about this: what good is an increase in GDP if education levels remain the same, death rates remain the same, the extra income earned by the country isn’t fairly distributed etc. Development is the only indicator that determines whether or not we are better off as a country.
An example of this is the differences between China and the UK. China is the 2nd largest economy in the world. They completely obliterate the UK when it comes to their GDP, but is their country more developed. Are the inhabitants of their country better off as individuals than we are? The short answer is no - while the whole country earns more income, the UK is a more developed one. The average citizen in the UK enjoys a higher standard of living than the average citizen in China.
So how do we measure development?
It’s a complicated one to be honest. Because welfare is difficult to measure. Everybody’s derives welfare from different things. I, for instance, derive welfare from technological advancement. Improvements in the transport network, telecommunications network and the like are really important for me as an individual. But others get welfare from other things e.g. less pollution in the air, nice scenery etc. So different people have a different view of what welfare is and there are so many things you get your welfare from.
But, most of us can recognise the really important attributes of welfare which benefits us together. This is what is used to calculate the HDI (Human Development Index). It is an index which aims to categorise countries by how developed they are. It is calculated by using the following broad indicators of welfare:
Health (life expectancy)
Education (average expected years of schooling)
Average Income (GNI per capita)
Why is the HDI a good measure of development?
Well, it is a widely used measure of development for starters. It is used to compare development data all over the world. Secondly, it is a good measure because it is quantifiable. The data collected is made into an index number which makes it easy for us to compare.
Countries ranked at 1 are the highest, while 0 is the lowest possible score.
Broadly speaking:
Countries with a score of 0.8 or over are developed
Countries with a score between 0.5 and 0.8 have a medium level of development
Countries with a score of lower than 0.5 have a low level of development
Does HDI have any negatives?
Yes, it does. If we look at the factors below, we can find some negatives:
Health (life expectancy)
Doesn’t indicate the quality of life while people are alive. Doesn’t tell us about the working conditions, pollution levels etc that people are exposed to, or how they are treated by their own governments.
Education (average expected years of schooling)
Expected years of schooling doesn’t tell us the quality of schooling or anything about the grades achieved at school.
Average Income (GNI per capita)
How fairly income is distributed is not taken account of. An average income is just that - an average. Some people may be extremely rich and others extremely poor and yet the average income will still probably look acceptable.
There are also some inaccuracies that can occur. Any income earned via the hidden economy would not be used in calculating the HDI. In less developed countries there is a high proportion of income earned from the hidden economy.
So, if HDI is not the perfect measure of development, what else is there?
Level of technology: a good indicator of this is how many mobile phones per thousand
Percentage of agricultural workers: the more workers there are, generally the less developed the country
Some more for you to think about:
Disease
Newspapers bought
Energy consumption
Human Rights
Government Welfare System
Access to Clean Water
So in summary, what have we learned?
Development is different to other economic indicators but it is probably the most important for us
HDI as a broad indicator of development
The Pros and Cons of HDI
Other Measures of Development
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