Economic development measures the quality of growth, rather than merely an increase in incomes. In order to measure the quality of growth we may take into account access to resources, living standards, the ability to make choices and the sustainability of growth. Composite indicators such as the Human Development Index (HDI) have been developed by the United Nations to combine the advantages of GDP measures and non-GDP socio-economic indicators.
The HDI is a measure of standards of living used since 1990. It comprises of three equally weighted elements: one third health (measured by life expectancy at birth), one-third education (of which one third is school enrollment ratio and two-thirds is adult literacy), and one-third GDP per capita at purchasing power parity. This means tat the rate of conversion of the local currency into US dollars is such that the same basket o goods and services could be bought in each country.
There are two ways in which you might come across the Human Development Index. One is a rank, where 1 is the top and the counties get worse as the number rises. The other way is an index, where the number 1 means the best and – is the worst. In an examination you are most likely to see the index, and you should know that 1 to 0.9 is considered very high (developed countries), 0.9 to 0.8 considered high (developing countries), 0.8 to 0.5 is medium (under-developed) and below 0.5 is low.
Assessing the HDI
THe HDI is a helpful measure of development because it uses reliable and fairly easy-to-obtain figures, takes income into account but qualifies income in terms of the cost of living. The figures chosen have been judged to be those that can be recorded wit the most consistency.
However, the HDI has some problems: it gives no indication of the distribution of incomes, and an indication of deprivation might me more useful. For example, the Human Poverty Index is an index developed in 1997 which records that people go without rather than what they have. This might be more useful for governments or donors. Life expectancy is easy to measure, but it does not give any indication of the quality of the life that was lead. The literacy measure might be seen as placing too much emphasis on academic knowledge such as reading and writing. Practical knowledge, such as computer literacy, might have a a greater impact on livelihoods and quality of life. Years o schooling might be unreliable if it means that students are repeating years as they could not make progress.