8.2.1

Measures of Development

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Indicators of Development

Economic development is a much broader concept than growth. Economic development could cover hundreds of measures, such as access to internet coverage, access to clean drinking water, years of schooling and so on.

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Human Development Index (HDI)

  • The most popular measure is the Human Development Index (HDI).
  • HDI is a composite index of life expectancy, education, and income indicators, which are used to rank countries.
  • To calculate the HDI, the following variables are used:
    • Life expectancy at birth (health).
    • Mean years of schooling and expected years of schooling (education).
    • Gross national income (GNI) per capita (PPP US$) (standard of living).
  • Each item is equally weighted.
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Limitations of HDI

  • The HDI is not a comprehensive measure of human development.
  • It just focuses on the basic dimensions of human development, excluding factors such as political freedom.
  • It does not reflect the input efforts in terms of policies, nor can it measure short-term human development achievements.
  • HDI is an average measure and so masks inequalities within countries.
  • But it is important to keep it simple with minimum variables to make sure its acceptable, understandable and predictable.
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Alternative measures

  • The Indian economist Amartya Sen sees development as being concerned with improving the freedoms and capabilities of the disadvantaged to enhance the overall quality of life.
  • While the standard set of freedoms could be around hunger, for example, you can also expand it to increasing political freedom, cultural and social freedom.
  • For example, if a woman cannot vote or drive a car, her level of economic development is a lot lower than HDI or other measures would imply.

Jump to other topics

1Introduction to Markets

2Market Failure

3The UK Macroeconomy

4The UK Economy - Policies

5Business Behaviour

6Market Structures

7A Global Perspective

8Finance & Inequality

9Examples of Global Policy

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