The Evolution of the Concept of Development: from Economic - UCL

I

______________________________________________________________________________________ Research carried out by the Interuniversity Attraction Poles programme funded by the Belgian Science Policy IAP VI/06 - http://www.iap6/cpdr.ucl.ac.be Coordinator : Centre for Philosophy of Law - UCLouvain - http://www.cpdr.ucl.ac.be

Working Paper-PAI VI/06-FDI/HD-6

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The evolution of the concept of development:

from economic growth to human development

by Matthias Sant’Ana

Centre de Philosophie du Droit (CPDR) - UCLouvain

Draft Version – Do Not Circulate

______________________________________________________________________________________ Research carried out by the Interuniversity Attraction Poles programme funded by the Belgian Science Policy IAP VI/06 - http://www.iap6/cpdr.ucl.ac.be Coordinator : Centre for Philosophy of Law - UCLouvain - http://www.cpdr.ucl.ac.be

Working Paper-PAI VI/06-FDI/HD-6

Inter-University Attraction Pole VI/06

Democratic Governance and Theory of Collective Action

Sub-Network on Foreign Direct Investment and Human Development

RESEARCH NOTE

The evolution of the concept of development:

from economic growth to human development

[Deliverable FDI 1.2. – Part II]

Draft Version – Do Not Circulate

8 May 2008

_________________________________________________________________________________________ Research carried out by the Interunversity Attraction Poles programme funded by the Belgian Science Policy IAP VI/06 - http://www.iap6/cpdr.ucl.ac.be Coordinator : Centre for Philosophy of Law - UCLouvain - http://www.cpdr.ucl.ac.be

Working Paper-PAI VI/06-FDI/HD-6 3

1. Introduction...............................................................................................................................................3

2. Concept and Measurement of Development prior to the Human Development Reports ...................5

3. The Concept of Human Development: Inception and Evolution ........................................................11 3.1. The 1990 Human Development Report .............................................................................................11 3.2. Changes to the Human Development Index ......................................................................................15 3.3. Further UNDP Human Development-Related Indicators .................................................................18

3.3.1. Distributional considerations: income group and gender inequality..........................................18 3.3.2. Measuring deprivation: poverty in developing and developed countries ..................................22 3.3.3. Measuring Freedom: failures in quantification lead to rich qualitative insights........................25

4. Remaining Criticism to of the Human Development Concept and Index..........................................31

References....................................................................................................................................................34

“Although development has been a constant concern of government

policymakers, economists and other social scientists – and has touched the

lives of more people than ever before – there has been little agreement on

what constitutes development, how it is best measured and how it is best

achieved. One reason for this lack of agreement is that dissatisfaction with

the pace and character of economic and social change has instilled a desire

to redefine the aims and measures of development.” (UNDP 1990, 104)

1. Introduction

What is ‘development’? Although apparently a simple and straightforward question, defining the

concept in a precise manner has been a major theoretical and practical challenge. From this conceptual

indeterminacy competing ideas as to how to best measure and promote development have arisen.

‘Development’, as occurs with many other concepts, is a notion through which are expressed competing

ideological, theoretical and practical views of human well-being and agency.

In 1990, the United Nation’s Development Programme (UNDP) broke ground by introducing the

concept of ‘human development’. The 1990 Human Development Report (HDR) also introduced a

measurement tool, the Human Development Index (HDI), a multidimensional composite index which was



swiftly acknowledged as well-suited for the task of measuring progress in development over time, and

allowing meaningful comparisons between states. It is debatable whether the notion of human

development was truly original, as economists, social scientists and moral philosophers have from early

times discussed social well-being in very broad terms, and used different standards to measure it; but there

is no doubt that the UNDP’s initiative rapidly changed attitudes towards development, and challenged the

dominant view according to which per capita Gross National Product (GNP) or Gross Domestic Product

(GDP) 1 should be taken as the main indicators of a country’s level of welfare. It also helped challenge the

view that the pursuit of growth – as measured by GNP or GDP per capita – should be the ultimate goal of

economic activity, and the best strategy for development.2

The present research note discusses the evolution of the concept of human development within the

framework of the UNDP’s HDRs, and the critical response to it. The first section briefly overviews

previous attempts to conceptualize and measure development, and discusses the theoretical underpinnings

of these concepts (section 2). This sets the background against which the notion of ‘human development’

put forward by the UNDP is compared (3). The concept of human development contained in the 1990

HDR is presented (3.1). The modifications progressively incorporated into the HDI – reflecting the

UNDP’s responsiveness to critique, improved availability of data and a better understanding of the

components of the index – are then discussed (3.2). Finally, the UNDP’s attempts to develop other

indicators and include them in the HDRs are presented (3.3.). Reactions to the notion of human

development and to the HDI are then succinctly discussed (4).

Although this paper discusses the concept of human development, a considerable part of it will be

dedicated to discussing measurement tools. ‘Defining’ and ‘measuring’ are different operations with

1 The concept of Gross National Product, based on a system of national income accounts, was first introduced in the US in 1947 by Milton Gilbert, then chief of the National Income Division of the United State’s Department of Commerce (Stanton 2007, 10). In 1948, the United Nations adopted a ‘System of Statistical Tables’, that gave precise instructions for the establishment of consistent and comparable Systems of National Accounts [SNAs], the acceptance of which “facilitated international and inter-temporal comparisons, and generated a competitive preoccupation with economic growth, which continues among economists and economic historians to the present day” (Offer 2000, 4). GNP was ultimately supplanted by Gross Domestic Product as an overall measure of national income: GNP refers to the sum of all consumption, investment and government spending by a country’s nationals, regardless of where these occurred. GDP refers to all consumption, investment and government spending within the country, plus exports minus imports, regardless of the citizenship of the consumer or investor (Stanton 2007, 11). 2 The widespread view of per capita GNP/GDP as a measurement of welfare, and thereby a proxy to ‘development’ was a spurious use of the concept, as Offer explains: “the primary purpose of the SNA was not to monitor human welfare, but to provide an efficient measure of cyclical changes in total economic activity. In that role it is an enduring success.”. It’s very success though, caused its “…more problematic role as a welfare measure: during the 1950s and the 1960s, the output measure of GDP per head, or its annual rate of change, also became a normative benchmark for economic and even social performance, the higher the better.” (Offer 2000, 4)



different purposes and methods: the lack of a measurement tool is not an obstacle to an adequate definition,

nor is the existence of a broadly-accepted metric synonymous to definitional precision. In the field of

economics, with its emphasis on quantification, concepts that cannot be measured are of limited use. It is

because of this constraint that crucial concepts such as ‘utility’ or ‘well-being’ are taken to mean whatever

can actually be measured: proxies such as money, or GDP, are ‘shorthand’ version of more complex and

subtle concepts. In the development literature issues of measurement and definition are often conflated

and discussed together precisely because the existence (or lack) of measurement tools constrains the

conceptual debate.

2. Concept and Measurement of Development prior to the Human Development Reports

The ‘traditional’ approach to development has been to see economic growth as a proxy for

development: policies that led to growth were necessarily seen as pro-development and inherently good;

policies that had little, negligible or negative impact on growth were seen as necessarily improper. Little

consideration was given to the evolution of other factors, such as inequality, poverty or social well-being,

however defined. This ‘growth-based’ understanding of development was premised on the idea that other

things being equal, the growth of the economy produced and freed resources that could benefit the whole

of society, either by market-driven ‘trickle down’ effects, or by state-driven social policy. Whatever its

goals, and whatever the means to pursue these goals, a society would need first to produce the wealth

required to implement whatever objectives it gave itself. In this narrow sense, growth would always be a

necessary objective, and the more growth there was, the wider the ‘realm of possibilities’ became. This

attitude has rightly been considered the paradigm on which most economists operated until roughly the

last quarter of the XXth century (Fukuda-Parr 2003).

This view of development neatly mirrored the use of income as a proxy for utility in general

economic theory. ‘Utility’ meant an individual’s mental state of satisfaction, the satisfaction of his or her

needs and desires. Income was one, but by no means the only, means to obtain utility. More importantly,

income did not have per se any utility. Nonetheless, as income could be more easily measured and

compared – whereas methods for the aggregation of utility on a social scale were considered either

theoretically unsound, or flawed in practice –, income became the measuring stick for the capacity to

satisfy needs and desires, and therefore the proxy for utility. If the socially desired course of action was to



achieve the “greatest happiness for the greatest number” – i.e., to achieve the greatest possible aggregate

utility –, the key to an ethical society lay in amassing the highest possible income per capita.

Jeremy Bentham, one of the greatest exponents of utilitarianism, posited not only that maximizing

aggregate utility was an ethical imperative, but also the principle of diminishing marginal utility of goods,

i.e. that every extra unit of a certain good procured slightly less utility to an individual (Stanton 2007, 4).

These basic ideas are still widely accepted. Amartya Sen, commenting on the ‘monoconcentrated’

perspective of utilitarianism – its focus on a single rather than a plural metric –, observed that

utilitarianism’s enduring success is due to having shifted the relevant question from ‘how one should

value alternative possibilities’ to the far more limited ‘which single variable should be used to evaluate

alternative possibilities’:

Indeed, once the need for having one — and only one — object of value is accepted, utilitarianism

has a much easier run than it would have if it had to deal with the contending claims of pluralist

rivals. If there must be, after all, only one good thing, then it seems plausible enough that this good

thing must be some version or other of happiness or desire fulfillment.” (Sen 2000, 19)

Sen argues that to understand the emergence of a capabilities approach to development, one must start

by understanding the reasons for the predominance of the utilitarian ‘quintessentially single-minded

approach to ethical accounting’ (ibid.). The Marginalist Welfare School can be seen as the antecedents of

today’s neo-classical economists. They held the beliefs, very much as Bentham or Mill, that an

individual’s goal was to maximize utility, and that utility was concave. The marginalists were also among

the first to use money as a ‘shorthand version’ of utility (Stanton 2007, 5). One of the corollaries of these

basic assumptions was that if income was the metric of utility, and utility was ruled by the principle of

decreasing marginal utility of goods, then income transferred to the poor produced more aggregate utility

than income transferred to the wealthy; this was a powerful moral argument in favor of redistribution of

income.

This school of thought was challenged by the so-called ‘Ordinalist Revolution’. Utility, ordinalists

alleged 3 , covered two different concepts: usefulness, the satisfaction of material necessities; and,

ophelimity, or subjective desire (ibid., 6). Ordinalists held that ophelimity could never be compared, and

that there could be no certainty regarding the validness of the notion of decreasing returns in the context of

subjective satisfaction. Furthermore, they considered that Marginalist theories of welfare had been

exclusively, and improperly, focused only on the ‘usefulness’ aspect of utility. There was, therefore, no

3 The original insight is attributed to Vilfredo Pareto (Stanton 2007, 6).



economic reason to consider that the utility of every additional unit of income decreased with increasing

wealth, and no scientific argument for redistribution.

The predominance of ordinalists in economic thought gradually led to the shift in welfare economics

from utilitarian conceptions of welfare to the use of ‘Pareto optimality’ as a standard4. This trend has been

strongly criticized for removing considerations of equity and ethics from the valuation of a given

allocation of resources, given that many distributions of goods can be Pareto optimal without being

socially and ethically acceptable5. This development, according to Stanton (ibid., 7) has been further

aggravated by the scientifically unsound combination of Pareto optimality with cost-benefit analysis in the

applied economics of social welfare: in project assessment, present and future benefits and costs (all

reduced to present values) are compared and if the net result is positive the project should be carried out.

This would mean that any increase to the size of the economy (net increase of wealth) is good, regardless

of the distribution of the costs and benefits. To avoid non-Pareto-optimal situations, a ‘compensation test’

was introduced into cost-benefit analysis. This consists in verifying whether the winners can potentially

compensate all losers and still have a net benefit: if this is found to be the case the situation would be

Pareto optimal. The fact that losers might in reality not receive any compensation would not invalidate the

cost-benefit analysis. Whereas Pareto optimality combined with a ‘compensation test’ provides the

theoretical underpinning for the widespread use of cost-benefit analysis in micro-economic welfare

assessment, at the macro-economic policy level, and based on the same assumptions, it resulted in the

widespread use of income per capita as a measure of development. As the argument goes, growth – like

the proverbial rising tide –, lifts all the boats.6

Despite the obvious advantage of simplicity, the limitations of the income approach are many. First,

per capita income can hide considerable differences in the distribution of wealth within a society. This

might occur not only between ‘classes’ – the poor and the rich, white collar and blue collar workers –, but

also between regions, and vary according to ethnicity or gender. Second, although many kinds of

preferences might indeed be achieved by using wealth, some ‘goods’ are not: social cohesion, family ties,

leisure, depend more on other determinants than they do on wealth. Wealth-maximizing strategies might

4 A ‘Pareto improvement’ is the movement from one allocation of resources to another allocation wherein at least one person is made better off without any person being made worse off. Pareto Optimality or Pareto efficiency is a situation where no further pareto improvements are possible. 5 The shift from an arrangement where no individual has any goods, to an arrangement where one person has all goods whereas others continue with nothing is Pareto optimal. Pareto efficiency by itself, therefore, is not a useful guide to defining whether a specific social allocation of goods is acceptable, desirable or good. 6 ‘A rising tide lifts all the boats’ was a statement used by presidential hopeful John F. Kennedy on 15 October 1960, in a speech in support of tax cuts for the wealthy. Although used in common parlance before Kennedy’s utterance, it has since then been generally associated with trickle-down economics.



actually lead to lesser levels of enjoyment of certain of these goods, as already empirically observed

(Offer 2000, 8; Sen 1999). Factoring in the ‘value’ of these goods has proven elusive, so far. Third, wealth

is particularly indispensable at lower levels of development, but seems to be less important at higher levels.

In other terms, “insufficient income is merely one dimension of under-development, so development

cannot be understood by only taking into account economic performance” (Bérenger & Verdier-

Chouchane 2007, 1260). Fourth, even if it were true that ‘aggregate utility’ is better served by increasing

national wealth, it is plausible to consider that certain goods – one would think of living a long, healthy

life or of having access to knowledge – would be prized by all. If progress in wealth creation is offset by

losses in the access to these other universally valued goods, then the society as a whole will not be better

off.

Early attempts to challenge the exclusive focus on income growth had limited success during the

early second half of the XXth century. One such attempt in the mid-1970s was the International Labor

Organization’s ‘basic needs’ approach to development, which focused on a bundle of essential services

and goods required for attaining a minimum standard of living, and tried to measure access to this bundle

in different countries. Another approach focused on human capital, the idea that development consisted in

improving the population’s access to, and outcomes in, educational attainment. This approach saw

educational accomplishment as basically a means to higher competitiveness and, therefore, was a variant

of the economic growth perspective.

Dissatisfaction with the dominant understanding of welfare applied to development economics grew

gradually and on different grounds. McNeill (2007, 10) points out to the discontent with structural

adjustment and associated growth-oriented policies. The debt crisis of the 1980s had displaced the center

of gravity in development thinking from the United Nations (UN) ‘family’ of institutions – organs such as

the UN Research Institute for Social Development and the UN Conference on Trade and Development –

to the Bretton Woods institutions and their one-size-fits-all prescriptions of the ‘Washington Consensus’

period. Failure of these policies to deliver stability, growth or development highlighted the need for a

different, and deeper, understanding of what development was, and how it could be achieved. Offer (2000,

4) points out that even in the ‘golden age’ of the real per capita income metric – identified as from the

1950s to the 1970s – the welfare gains of economic growth were already being widely challenged by

economists, the ‘counter-culture’ movement and anti-growth environmentalism.

Simultaneously, developments in the field of ethics since John Rawls’ A Theory of Justice (1971) –

including Amartya Sen’s and Martha Nussbaum’s development of the “capabilities” approach to human

welfare, and their focus on agency – produced the intellectual underpinnings for a number of innovative



approaches to the conceptualization and measurement of development7. These developments gradually

displaced the focus of development discourse from its focus on economic outcomes to a renewed interest

in process, agency and institutions. Fukuda-Parr (2003, 308) compares the real income, basic needs and

human development perspectives, and observes that “The policy implication of [the] evolution in the

prioritizing of capabilities is a corresponding shift in focus from social and economic policies to political

institutions and processes. Political reforms have become important aspects of the human development

policy agenda. This contrasts with the neoliberal and basic needs approaches. The neoliberal approach

emphasizes institutional efficiency – either in the market or in the provision of public services. These

concerns dominate the current debates on ‘good’ governance, while the human development approach is

concerned with governance for social justice, a governance that enlarges the participation, power, and

influence of the people, especially those who are disadvantaged, such as women, ethnic minorities, and the

poor.”. On the human capital perspective, she observed that “[it] is typically about individual agency for

material production. (…) But the idea of agency in human development is also about demanding rights in

decision-making. This can be individual in form (…) [b]ut it is also about collective agency in the public

sphere and in a political process. (…) Democratic governance through political institutions that expand the

power and voice of people, and ensure the accountability of decision-makers, is an important condition for

promoting human development.”(ibid., 309)

It has been sustained – among others by Mahbubul ul Haq himself – that one of the reasons of the

success of the income perspective was its reliance on an easy-to-grasp metric, and the failure of alternative

approaches to produce such a metric (Sen 2000, 21). The HDI’s success, relative to previous attempts, is

due, in great part, to the fact that it is a multi-dimensional composite index that bridges the gap between

academia and practical policy-making (McNeill 2007, 13). Avner Offer (2000, 6) identifies three

categories of alternative measurement tools that met varying degrees of success: (i) extended systems of

national accounts; (ii) social indicators; and, (iii) survey data on subjective well-being. Attempts were first

made to render Systems of National Accounts (SNAs) sensitive to certain development concerns. This

could be accomplished by eliminating ‘regrettables’, and including values for non-tradable ‘goods’ such

as leisure time, or household production. This approach tended to show that there were more welfare gains

to be had from non-market activities than from market ones. Another approach was to include

environmental degradation and non-renewable resource depletion to derive a sustainable economic

welfare accounting system. A further approach attempted to make inequality corrections to national

7 See Research Note FDI1.2, part 1.



accounts calculations, trying to measure the effect of income inequality on welfare8. More recent attempts

have been made to combine two or all three of these approaches, revealing that measurement is, at the

same time, the articulation of ‘a normative position on economic change’ (ibid., 10). The major

contribution of this approach to welfare measurement is to show that the pursuit of growth can be, and

often is, harmful to aggregate welfare.

The selection and use of social indicators to measure development also has a long history. It is based

on the assumption that welfare requires access to certain goods and services, and that inevitably one must

choose a basket of such goods in order to assess progress, a necessarily normative choice. According to

Avner Offer, the use of social indicators had widespread acceptance in the developed world, in part as a

consequence of the ‘social-democratic consensus’ of the 1960s. When fiscal retrenchments in the 1970s

spelt the demise of profligate public spending, the consensus moved away from equality towards

competition (ibid. 12). Assessment of social welfare progress in the developed world started to rely less on

social indicators because, among other reasons, most of the indicators used had little relevance in

situations of affluence, and because the direction of causality – whether inequality, growth, or poverty

cause, or are caused by, development (as measured by social indicators) – was not elucidated by them. But

the use of social indicators as a yardstick for development continued unabated, not least in the developing

world. Prior to the HDI, both the ‘basic needs’ and the Physical Quality of Life Index (PQLI) approaches

relied heavily on social indicators.

The third and final class of welfare indicators discussed by Offer is that of psychological welfare

indicators. He divides these between static and dynamic approaches to measurement. Static ‘happiness’

measurements tried to capture the correlation between the availability of goods and subjective well-being

through surveys, and in general observed a very high level of satisfaction in affluent societies. The rate of

satisfaction did not have a linear relation with income, except at the lower levels of income. In studies

carried out in the 1970s, determinants other than income, such as quality of relationship or leisure, were

found to have far more impact on measured well-being, and this trend has been confirmed in more recent

studies (ibid. 21). Inequality in income though, seemed to be a more relevant determinant of subjective

well-being, with one’s relative position in the national income scale having considerable impact on well-

being, whereas absolute income had little or no impact. Genetic and cultural explanations for the relatively

constant subjective well-being measurements in affluent countries have been attempted. Studies with

8 The Atkinson formula, one of the most widely known attempts to create an inequality-corrected GDP index, would inspire the UNDP’s first attempts to introducing a measure of inequality into the HDI. The approach was eventually replaced by the ‘deprivation approach’ embodied in the Human Poverty Index (see below, section 3.3.1 and 3.3.2, p. 18, below)



separated identical twins have claimed that up to 80% of ‘happiness’ was hereditable. Although the level

of well-being was mostly constant over time, differences in subjective well-being between countries with

comparable income levels were considerable. Cultural explanations – such as ‘national character’,

‘hedonistic individualism’, and even the inter-generational variation of expectations – have been advanced

to explain these differences (ibid., 25). The ‘dynamic approach’ to psychological welfare measurement, by

shedding the assumptions of welfare economics – that the consumer is well-informed, self-aware,

consistent and acquisitive –, produces a more subtle understanding of the dynamics of satisfaction. Studies

have highlighted the asymmetric valuation of gains and losses and have shown that “satisfaction depends

on habituation, anchoring, contrast and temporal effects; that the experience of satisfaction varies with

time, and changes between decision, experience and retrospection” (ibid., 26).

It is in this highly fragmented state of intellectual effervescence that the concept of ‘human

development’ emerged. As is seen below, it swiftly became the focus of much criticism and the rallying

point of those unsatisfied with previous approaches.

3. The Concept of Human Development: Inception and Evolution

3.1. The 1990 Human Development Report

In 1990, the UNDP introduced the concept of human development as “a process of enlarging people’s

choices”. While recognizing the unlimited character of possible life choices, the report established that

broader scope of choice was only available to people who could lead long and healthy lives, acquire

knowledge and have “access to resources needed for a decent standard of living”. Income was seen as an

important option that people must have in order to realize their full potential but has not to be seen as an

end in itself. According to the UNDP, income was an inappropriate yardstick for development for three

main reasons: first, information on average income did not reveal the composition of wealth or it’s

beneficiaries; second, people “often value achievements that do not show up at all, or not immediately, in

higher measured income or growth figures” (UNDP 1990, 9); and finally, because there was no automatic

empirical link between income growth and the expansion of choice (i.e., there are high-income countries

which afford relatively low levels of choice – as expressed in longevity, or level of education – and,

conversely, there are low-income countries in which choices are relatively broad). Therefore,

“development must (…) be more than just the expansion of income and wealth. Its focus must be people.”

(ibid., 10).



The concept of human development refers not only to the process of widening people’s choices, but

also the level of well-being already achieved. It distinguishes between two sides of development: “One is

the formation of human capabilities, such as improved health or knowledge. The other is the use that

people make of their acquired capabilities, for work or leisure”. This broadened notion of development

allowed overcoming some of the limitations of the previous, ‘economic growth’-based concept of

development: it treated income as a means and not as an end; it challenged the erroneous assumption that

there was an automatic link between growth and progress in human development; it overcame the notion

that people are simply means of production, and focused on individuals as ends of the productive process;

it firmly established the idea of individuals as participants in – rather than beneficiaries of – the

development process, individuals having greater choice as to how they participate in the production of

goods, and how they satisfy their own needs; it also challenged the widespread notion that the expansion

of choice could only intervene in an advanced state of higher development, and that poorer countries

should focus exclusively on ‘basic needs’ (UNDP 1990, 11).

Broadening the definition of development entailed challenges related to the measurement and

‘operationalization’ of the concept. A broader concept of development should require, at least intuitively,

a broader set of measurement instruments: “Human deprivation and development have many facets, so

any index of human progress should incorporate a range of indicators to capture this complexity. But

having too many indicators in the index would blur its focus and make it difficult to interpret and use.

Hence the need for compromise – to balance the virtues of broad scope with those of retaining sensitivity

to critical aspects of deprivation.” (UNDP 1990, 13). Using a small set of indicators would therefore be

desirable in order to allow cross-country comparisons, and to keep policy-makers focused on the overall

trend of development progress.

Considering cross country data availability and pertinence, the UNDP selected three basic dimensions

of development to be the main focus of its analysis of development: longevity, as a proxy for health; adult

literacy, and later mean years of school enrollment, as proxies for education and learning; and per capita

income.

Based on this choice, the UNDP developed its main progress assessment tool, the Human

Development Index (HDI). From the outset, it was clear that these were only three dimensions of what

could be considered human development, and that other dimensions – such as political freedom, human

rights, or a fair distribution of income – were also highly relevant. Measurability of some of these other

dimensions, though, was a major difficulty: “The conceptual and methodological problems of quantifying

and measuring human development become even more complex for political freedom, personal security,



interpersonal relations and the physical environment” (UNDP 1990, 13). The 1990 report raised hopes that

as some of these additional dimensions of development became subject to quantification, they would be

included in the HDI, but the index has remained substantially the same since its inception. In the

meantime, the UNDP advised that qualitative considerations be taken into account along with the

quantitative approach embodied in the HDI: “The HDI thus has limitations. But the virtue of broader

coverage must be weighed against the inconvenience of complicating the basic picture it allows

policymakers to draw. These tradeoffs pose a difficult issue that future editions of the [HDR] will continue

to discuss.” (UNDP 1990, 16). As Amartya Sen put it, Mahbubul Haq hoped for “…a measure of the same

level of vulgarity as GNP—just one number—but a measure that is not as blind to social aspects of human

lives as GNP is” (UNDP 1999, 23). As a paradigm shifting concept, both human development and HDI

has had outstanding success in their professed aim of challenging the dominant, income-centered notion of

development. In the years following the creation of the HDI, the UNDP would experiment with other,

complementary indicators, as discussed later.

Beyond the issue of data availability9, the theoretical underpinnings of the choice of the HDI’s ‘core

indicators’ were quite straightforward. Longevity is closely correlated with adequate nutrition and good

health, and determines the amount of time available for people to realize their other life choices (UNDP

1990, 11). Education increased the range of capabilities available to people: the well-educated were in a

better position to find employment or earn better wages. Also, as entrepreneurs or public officials, they

would be better placed to innovate, manage and invest. In other terms, well-educated people “are more

valuable to society and better equipped to help themselves.” (UNDP 1990, 26). Although the first HDR

limited the education dimension to adult literacy, from 1991 onwards, the UNDP has integrated mean

years of school enrollment into this indicator10.

9 As stated in the first report’s technical annex, “[m]any indicators and subject areas were omitted simply because there were too few countries with comparable, reliable data. The more important omissions make a formidable list: wages, unemployment and underemployment, public expenditures in the various sectors by provincial and local authorities, development assistance to individual countries by sector, capital flight, prices of the main staple foods or any satisfactory indicator of food access, access and use of social services by various income group, the conditions of those living in urban slums, which is a rapidly growing problem, the internal allocations of health expenditures, the whole area of morbidity and health status, net secondary enrollment ratios, educational attainment (the stock of human development), educational achievement (the qualitative output of the education system), the brain drain, key rural-urban differentials such as income and age-specific mortality, health facilities, enrolment, dropout and literacy and key female-male differentials, such as income, age-specific mortality and health.” (UNDP 1990, 112) 10 The 1991 HDR introduced the ‘mean years of schooling’ component, arguing that “[a]lthough literacy is no doubt a basic requirement for the capability to acquire and to use information, there is more to knowledge and communication than literacy alone” (UNDP 1991, 90). In 1995, combined primary, secondary and tertiary school enrollment substituted mean years of schooling as the second element in the educational dimension of the HDI. Data availability was the main justification for the shift: “…the formula for calculating mean years of schooling is



The thorniest element of the HDI has always been its third component, “command over resources

needed for a decent living”. A proper measurement would require data not only on income, but on its

distribution, as well as the distribution of land, credit and other resources. Due to the scarcity of data,

however, the UNDP chose to use purchasing-power-adjusted real GDP per capita as an indicator of

overall access to resources. A further problem with this component – and according to some critics, with

the others as well11 – is the implementation of the principle of diminishing returns, i.e. the idea that the

utility of income diminishes as the stock of it increases and that, therefore, increases in income are to be

more important for low development countries than they are for high-development countries. As a

consequence of criticism, the calculation method for the income component of the HDI has been changed

a number of times, as discussed later.

All three components of the HDI are normalized via scaling (Jahan 2002, 5). This ensures that values

expressed in different metrics – age, percentages and currency units – are each coherently reduced to a

single value between 0 and 1, which can then be aggregated into the final, composite index. In order to

accomplish the scaling, maximum and minimum values had to be set for each of the components. In

earlier editions of the HDR, the minimum and maximum values for the components were values observed

in the sample of that year. This caused problems of temporal comparability. A revision of the calculation

method in 1994 established fixed minimum and maximum values for all three component indices.

The Human Development concept has been widely adopted and expanded. At the global level, the

methodology and themes of the HDRs have varied considerably since the first edition: by having each

HDR focus on specific issues12, the HDR Office of the UNDP was forced to develop further assessment

tools and carry out new analysis of development-related themes. Furthermore, governments, national

development agencies and the UNDP have cooperated in the preparation of over 450 national and regional

human development reports, covering 135 countries, since 1992. These country-owned processes often

focus on issues that are seen as crucial for local or regional development, generally disaggregating data

complex and has enormous data requirements. Data on mean years of schooling are not provided by any (…) international organization. As a result, estimates must sometimes be used, which are not always acceptable. The combined enrollment ratio overcomes both these problems.” (UNDP 1995, 134). 11 See below, section 4, p. 31. 12 The full list of these themes includes: concept and measurement of development (1990); national and international strategies for development (1991); international trade (1992); citizen’s participation in development (1993); human security (1994); gender inequality (1995); economic growth (1996); poverty (1997); consumption (1998); globalization (1999); human rights (2000); new technologies (2001); deepening democracy (2002); the millennium development goals (2003); cultural liberty (2004); aid, trade and security (2005); the global water crisis (2006); and, climate change (2007-2008).



according to the country’s own concerns: different kinds of inequalities (gender, ethnic, regional, etc.),

disparities between rural and urban areas and other such criteria have been used to refine the analysis.13

The ‘human development’ approach’s main accomplishments can be said to be the challenging of the

‘monoconcentrated’ approach to development, to use Sen’s expression, and the articulation of a pluralist

view, focused on the expansion of individual’s choices. This shift in discourse, though not truly original,

entailed far more than a formal renaming of the concept: it brought about a qualitative review of what

elements should be taken into consideration when assessing the state of development of a country. It also

helped dispel some widely held, but ultimately inaccurate, notions about what was required to ensure

development: contrary to general belief, the human development reports revealed that growth does not

automatically translate into progress in other dimensions of development, that progress in said dimensions

does not necessarily require vast amounts of funds, and that the State had an enormous role in facilitating

the process of development. The right balance should be found between market freedom – which is

generally wealth-enhancing – and targeted State interventions to guide the process of increasing people’s

capabilities.14

3.2. Changes to the Human Development Index

As already mentioned, since its inception, the HDI has not been substantially modified. This reflects

the overall soundness of the concept of human development that it embodies, as well as the practical

13 See UNDP, HDR2003, p. 47 for an overview. An example of the relevance and impact of such national reports can be seen in the UNDP’s Brazilian office 2005 Human Development Report, focusing on racism, poverty and violence. The report disaggregated data according to race for each state and municipality, and therefore could provide human development indices disaggregated by race and territorial unit. The report found that real income per capita of blacks in 2000 were still half the real income of whites in 1980, and that the percentage of black men with a university degree in 2000 was still lower than that of white men in 1960. National racial disparities were very wide: whereas Brazilian whites had an HDI equal to Costa Rica’s (44th), Brazilian blacks had an HDI equal to El Salvador’s (104th). But Regional disparities were even more impressive: the HDI of whites in the most affluent state was 89 ranks higher than the HDI of blacks in the least affluent state. These and many other findings shattered multiple myths about racial integration in Brazil, and greatly influenced debates on the need for the adoption of affirmative action measures in multiple sectors of society. 14 See Research Note FDI 1.3, part 1. The links between economic growth and human development are complex, follow multiple causal pathways – some sufficiently supported by empirical evidence, others still hypothetical – and operate in both senses: economic growth is both cause and consequence of human development, and vice-versa (Ranis, Stewart & Ramirez, 2000, p.198; UNDP 1996, 113). It has been empirically shown that lop-sided development – characterized by high economic growth with low human development, or the contrary – is usually unstable; moreover, escape from a vicious cycle performance (where low growth and low human development occur simultaneously) is much more frequent when countries focus human development enhancing policies, rather than growth-enhancing ones (Ranis, Stewart & Ramirez, 2000, pp. 208-213).



utility of having an aggregate index which is simple to grasp, and yet considerably more revealing than its

main rival, income per capita. Nonetheless, ever since its inception, criticism of the HDI, UNDP’s novel

measurement tool, lead to a number of revisions of its calculation methodology. Technical as these

changes might seem at first sight, the discussion of the best method of calculation revolved around the

question of the impact that higher income has on overall well-being.

In the second edition of the HDR, the methodology used to calculate the HDI was adapted in order to

respond to criticism regarding the implementation of the decreasing returns principle on the income

component. In the first calculations, incomes contribution to development was considered to ‘max out’ at

the official poverty line of nine industrial countries (UNDP 1990, 13), i.e. any additional income would

not improve a country’s HDI. In the 1991 report, the UNDP adopted a less radical solution, continuing to

use the industrial countries’ poverty line, but allowing for marginal returns for incomes above this line,

ensuring that “the higher the income relative to the poverty level, the more sharply the diminishing returns

affect the contribution of income to human development” (UNDP 1991, 90). Changes in calculations lead

to 13 countries – out of 130 – shifting 9 or more positions in the HDI rank (ibid., 15).

In 1994, a considerable modification of the HDI calculation method was carried out. All components

of the HDI were given fixed minimum and maximum values – 25-85 in life expectancy, 0-100% in adult

literacy, 0-15 in mean years of schooling, and 200-40,000US$ in per capita PPP income –, whereas in

prior methodologies minimum and maximum values were defined by the best and worst countries for

which data was available for the current year. The cutting point for considerations of decreased returns in

income was the global average real GDP per capita (PPP$ 5,120), dropping the industrial countries’

poverty line as the standard.

Two further changes to the HDI took place in 1995. Regarding its income component, the lower limit

of income was reduced to PPP$ 100. This was done to ensure that the GDI and HDI minimum income

levels were the same: in some countries, empirically observed female income was half that of the poorest

male incomes, of 200 US$ PPP. For the education component, mean average years of schooling were

replaced in favor of the annual combined gross school enrollment, an aggregate of primary, secondary and

tertiary educational enrollment. Better quality data were available for the new indicator, whereas the

UNDP had to estimate mean average years of schooling for many countries, raising doubts as to the

quality of this indicator (UNDP 1995, 134).

Figure 1. Graphic representation of the contribution of income to HDI according to calculation method. In the older formula, GDP per capita above 5000 had nearly no impact on HDI, and returns for low GDP per capita decreased linearly. (Source: UNDP 1999, 159)

The last modification to the HDI was carried out in the 1999 report. It involved changes in the

calculation of the income dimension of the index, and consisted of replacing the older formula – which

involved a very strong decrease in return for incomes above the world average – with a different formula

which implemented the decreasing return of

income for all levels of income, and in a less

severe manner, i.e. with a smoother curve. This

change of calculation method – the benefits

of which are extensively explained else- where

(Anand and Sen 1999) – had the result that

mid-level development countries had their HDI

considerably affected by increases of income

beyond the global average of GDP per capita

(see figure 1).

As can be seen from the brief

discussion of the modifications carried out to the

HDI, most of the debate has centered around

the issue of how to integrate the income

dimension of human development into the index. Although other concerns regarding the index have been

raised – for instance, the fact that its additive aggregation method creates the false impression that these

components are substitutable, i.e. that an increase of 1 year in longevity is ‘equal to’ (or ‘worth as much

as’) an increase of say, 500 PPP$ per capita income, or a 3% literacy rate increase – revisions of the HDI

have mostly focused on the ‘decent standard of living’ dimension. This might be due to the fact that at

high levels of development, the HDI is a weaker measurement tool: distance in level of development

between the United Kingdom and Belgium, for instance, are not very stark. At high levels of income, and

with GDP per capita being severely discounted, making progress in human development means increasing

the literacy rates or longevity – which are already very high – by small amounts. The new calculation

methods experimented by the UNDP seem to attempt to correct this by giving somewhat greater

importance to income.

The UNDP has recognized from the outset that the HDI did not capture human development in its

entirety, but was a multi-dimensional measurement tool that introduced a richer notion of development, as

compared to the dominant tool used until then. It could be considered a first step in the broadening of the

understanding of what constituted ‘development’ but was by no means sufficient, or final. To palliate _________________________________________________________________________________________ Research carried out by the Interunversity Attraction Poles programme funded by the Belgian Science Policy IAP VI/06 - http://www.iap6/cpdr.ucl.ac.be Coordinator : Centre for Philosophy of Law - UCLouvain - http://www.cpdr.ucl.ac.be




some of its shortcomings, the UNDP has experimented with other kinds of measurement tools, taking into

account other factors, such as levels of deprivation and distributional considerations. We now turn to the

consideration of these initiatives.

3.3. Further UNDP Human Development-Related Indicators

Three aspects of development, not captured by the HDI, have nonetheless been consistently

considered crucial for development analysis by the UNDP. First, it has long been acknowledged that

national averages – particularly of income, but also of the two other components of the HDI – could, and

often did, hide remarkable distributional problems: women, rural populations, certain ethnic groups, or

people living in disadvantaged regions were often worse off in their access to, or participation in, the basic

components of human development. Second, increases in HDI – an index that measures attainment – are

not, in themselves, a sufficient sign of success when, at the same time, particularly vulnerable groups fail

to make progress. A measurement of deprivation – focusing on the poor and deprived – is therefore a

useful complement to the HDI’s ‘conglomerative’ and ‘unfocused’ perspective to development (UNDP

1997, 15). A final aspect is the issue of freedom and human rights, and of the difficulty of measuring and

assessing progress in these fields: if human development is to genuinely be the ‘expansion of people’s

choices’, they must not only be materially capable of exercising meaningful choices, but must also be

allowed to chose the life choices of their preference. Of the three aspects mentioned, the latter is the only

one for which no index has been developed.

3.3.1. Distributional considerations: income group and gender inequality

Figure 2. Distribution of global income in 2005, in US$ PPP, ranking 126 countries and groups within them, by deciles (figure taken from Sutcliffe 2007, p.3)

such

with

such

s

From its very first edition, the HDR acknowledged that one of the HDI’s weaknesses was that

distributional issues were not integrated into the HDI (UNDP 1990, 12). Choices are generally not

available in equal terms to all persons, and considerable discrepancies in income, access to education and

health have been widely documented between men and women, income level, rural and urban populations,

different ethnic and racial groups, and

between regions in a same country. But

even the most widely accepted

indicators of income distribution –

as the GINI index15 – were available

respect to only a small part of the

countries covered in the reports.

Lack of world-wide coverage

militated against making

distributional corrections to the HDI,

even though once accounted for,

corrections showed a far gloomier

picture for certain States. As can be een

in Figure 2, global distribution of

income is extremely unequal both

between states, and between income groups within states, a fact that is veiled by the HDI’s average

approach to income. Distributional effects on other components of the HDI were considered less important,

due to the lower upper limits of both longevity and literacy or school enrollment. In the 1990 report, a first

attempt was made to calculate the impact of income and gender inequality on HDI (UNDP 1990, 12, 110).

In the 1991 report – and in most reports until the GDI/GEM indexes were introduced in 1995 – the

exercise was repeated for a broader group of states, and considering both gender and income group

distributional effects (UNDP 1991, 92; UNDP 1992, 92; UNDP 1993, 101). In 1995 the UNDP introduced

two gender disaggregated development measurement tools.

__________________________________ Research carried out by the InterunvIAP VI/06 - http://www.iap6/cpdr.ucl.ac.be

15 The Gini Coefficient is a measure of statistical dispersion used to measure inequality, and particularly income inequality. It is expressed as a number between 0 (perfect equality; all income is equally divided among all persons) to 1 (perfect inequality; all income is held by one person). Although a useful inequality indicator, a same Gini Coefficient can represent very different economic realities: for instance, a country where half the population has no income, and the other half shares total income equally among them would have the same coefficient as a country where half of the income is shared equally, except for one person who would own the other half of national income.

_______________________________________________________ersity Attraction Poles programme funded by the Belgian Science Policy

Coordinator : Centre for Philosophy of Law -

UCLouvain - http://www.cpdr.ucl.ac.be




A further measurement of income-group adjusted HDI was carried out in the 2006 Report. The

disaggregation of HDI by income quintiles was carried out for 13 developing and two developed countries

that had collected data by household and demographic and health surveys (UNDP 2006, 47, 269ff). The

exercise reveals stark contrasts between the top and bottom quintiles: Bolivia’s upper class ranked 87

positions higher than its poor; In Indonesia the difference was of 99 ranks, and in South Africa 101 ranks;

even in the United States the difference was of 50 ranks. These differences translate into severe capability

deprivations in all three dimensions of human development. Both attempts to introduce an income-

distribution element into the HDI were not integrated in a durable manner in the UNDP’s annual reports16.

Despite this shortcoming, the UNDP’s main focus in distributional matters has been the gender

distribution of capabilities.

The Gender-related development index is a human development index adjusted for gender inequality,

correcting a country’s average achievement on the basis of gender disparity. It was designed to represent

the comparative female enjoyment of basic capabilities and living standards. The GDI uses the same

dimensions of the HDI, but with adaptations: (i) the longevity dimension is adjusted to reflect the average

higher life expectancy of women; (ii) no adjustments are required to the literacy component; and, (iii) the

income dimension is achieved by comparing both average non-agricultural wage ratios17 (how much the

average female worker earns, as compared to male workers) and the percentage share of the economically

active population (how many women are employed, as compared to men) 18. By comparing the female

share of income to the female share of the population, one arrives at an estimate of gender inequality in

16 Information on income difference in the access to certain services is, nonetheless, included in the 2007-2008 report (as in previous reports since 2001). In its latest edition, HDR Tables 8 (Inequalities in maternal and child health) and 15 (Inequality in income and expenditure) disaggregate data according to income group, but there is little if any analysis of the discrepancies revealed in the body of the report. 17 The use of employment wages to calculate women’s access to income is not without controversy. Whereas the HDRs have systematically attempted to focus on the uses of income, the GDI is forced to use a measurement of earnings because of the lack of data on income use, disaggregated by gender, as most surveys of household consumption do not target within-family division of income (UNDP 1995, 128). 18 In the calculation of GDI a few risky assumptions are made, due to the lack of gender-disaggregated data. Average wage ratios for men and women working in the non-rural sector are available for some countries, but not all. For those where data is not available, the world average of roughly 75% is used. Even the ratios for countries that do collect data are assumed to be conservative, though, as they fail to include other income-disparities based on non-labor resources, such as physical capital and property. The female wage ratio is then multiplied to the female percentage share of the economically active population, which is assumed to be equal to the level of female employment. This of course, assumes that unemployment is equally distributed, which is rarely the case. Finally, per capita GDP is multiplied by the total population, and then divided in male and female shares, to give estimated female and male per capita incomes. (UNDP 1995, 130).



income: if there were no gender inequality, gender-adjusted income would simply coincide with the mean

per capita income19.

The GDI is not an independent indicator, or a simple measure of gender inequality: “it is to be

interpreted as the HDI discounted for gender disparities in its components and should not be interpreted

independently of the HDI. The gap between the HDI and the GDI is to be interpreted as the loss of human

development due to gender inequality and the size of penalty given to gender inequality” (Schüler 2006,

163).

The introduction of the GDI revealed a complex picture of gender inequality. No country, regardless

of its level of development, ensured equal treatment of men and women. This was the case in 1995 and

continues to be the case in the latest report, although both top- and low-ranking countries have made

progress in GDI20. A second observation that can be drawn from the GDI is that gender equality does not

depend on a society’s income level: although twice its per capita GDP, Saudi Arabia is ranked ten

positions lower than Brazil; at roughly the same per capita income level, Uruguay is fifteen ranks higher

than Brazil, and Turkey nineteen ranks lower in GDI21. The conclusion is that gender equality must be a

policy goal of development, and cannot be considered an automatic byproduct of economic growth. The

1995 Report also observed a marked average progress in GDI from 1970 to 1992 – an average 48%

increase in GDI among the 79 countries for which data were available – but observed that improvements

in GDI were due, mostly, to improvements in the health and education dimensions, whereas the income

dimension progressed at a much slower pace, or not at all22. The GDI has been a constant feature in the

19 This is a somewhat simplified view of the index. The technical note in which the GDI was originally described (UNDP 1995, 125) also clarifies the concept of ‘aversion to inequality’, or ‘equity preference’. It would be easy to compare the situation of two countries in which absolute achievements are equal but gender-relative achievements are unequal. In this case, the ‘preferable’ situation – from a human development perspective – is that in which gender inequality is smallest. But what happens when the mean levels of achievement are different? Is it preferable to have a higher mean level of achievement with high-levels of gender inequality, or to have a slightly lower mean level of achievement with less gender inequality? The answer will vary considerably depending on the level of inequality that is considered tolerable. This led the UNDP to establish an adjustable parameter ‘∈’ that represents the “penalty for inequality” (UNDP 995, p.74). The higher the value of ∈, the higher the intolerance to inequality, to the point where only increases in female human development would affect the GDI. The standard value for ∈ is 2, which represents a ‘moderate’ aversion to gender inequality (UNDP 2007, 359; Anand and Sen 1995) 20 Compare, for instance, HDR 1995, p.76, and HDR 2007, p. 326. Perfect gender-equality would result in a GDI of 1; in 1995 the best performance was 0.919 (Sweden), and the worst performances were 0.169 (Afghanistan) and 0.195 (Sierra Leone). In 2007-2008, the best performance was 0.962 (Iceland), and the worst was 0.320 (Sierra Leone) 21 See tables 14 and 28 of the latest HDR (UNDP 2007, 277-281, 326-330). 22 For instance, the women’s share of earned income in the United Arab Emirates was just 4%, and in 1992 it was still only 7%. In Botswana, although its adjusted real income increased 1500% over the period, the women’s share of



HDRs, and its methodology was reviewed in 2006, resulting in additional information on gender and

development being made available in the 2007-2008 report23.

The GDI is complemented by a Gender Empowerment Measure (GEM), also introduced in the 1995

report. This indicator focuses on the participation of women in economic, political and professional lives

of their countries, and emphasizes opportunities, rather than capabilities. The GEM is composed of three

dimensions: (i) power over resources, represented by women’s unadjusted estimated earned income24; (ii)

access to professional opportunities and economic decision-making, represented by the share of women in

jobs classified as professional and technical25; and, (iii) access to political decision-making, as expressed

by the percentage share of parliamentary seats. As with the GDI, and adjustable level of equity preference

is included in the GEM, allowing policy-makers to decide how intense penalties for inequality will be in

the calculation of the index 26 . The introduction of this indicator also revealed that empowerment of

women was a major challenge, with even the top-ranking countries in GDI obtaining much lower values in

GEM, and only nine out of 116 ranked countries obtaining a value above 0.6 (the number has increased to

44 out of 159 in the latest report). It was also observed that there was no link between level of economic

development and level of empowerment of women, even though income should play a much greater role

in raising GEM values (as compared to HDI or GDI) (UNDP 1995, 83).

3.3.2. Measuring deprivation: poverty in developing and developed countries

The HDI provides a measure of a country’s attainment in human development, of how much progress

has been accomplished. In 1996, the UNDP first attempted to introduce a measurement of deprivation. Its

goal, “rather than examining the average state of people’s capabilities, [was to] reflect the percentage of

the labor force decreased from 45 to 35%, and the literacy rate gap between men and women widened (UNDP 1995, 81-2). 23 Tables 20 and 21, on employment in OECD and non-OECD countries now contains disaggregated data on female employment and unemployment (UNDP 2007, 298-301). Table 32 now details differences in work and time allocation for men and women in selected countries (UNDP 2007, 342). 24 This reflects the different natures of what is to be measured by GDI and GEM: the income dimension in the GEM is expected to reflect not income’s capacity to satisfy basic human development needs, as in the GDI, but rather it’s role as a “source of economic power that frees the income-earner to choose from a wider set of possibilities and exercise a broader range of options” (UNDP 1995, 82). For this reason, and in contrast with both GDI and HDI, income above a certain threshold is not discounted in GEM calculations, it being assumed that the value of wage earnings in gender empowerment does not have decreasing returns. 25 In later editions of the HDR, this dimension was broadened to include a separate indicator revealing the share of women in managerial positions, exercising legislative or senior officials functions. 26 See footnote 19, above. As with the GDI, ∈ is set to 2, considered a moderate level of aversion to inequality.



people who lack basic, or minimally essential, human capabilities” (UNDP1996, p.27). This Capability

Poverty Measure (CPM) was the UNDP’s first attempt to broaden the notion of poverty: whereas so far it

was seen mainly as income poverty, the CPM attempted to measure capability poverty. It was explicitly

conceived as a complement to measures of income poverty, and not a replacement. To reflect this

broadened scope the CPM was designed with three dimensions in mind: (i) the capability of being well

nourished and healthy, represented by the percentage of children below the age of five that were

underweight; (ii) the capability of healthy reproduction, represented by the percentage of births unattended

by trained health professionals; and, (iii) the capability to be educated and knowledgeable, represented by

female illiteracy. As can be seen by the indicators chosen to compose the CPM it was also a strongly

gendered indicator of deprivation.

The next year’s report carried out a considerable revision of the methodology and established a

different deprivation indicator, the Human Poverty Index (HPI) (UNDP 1997, 17ff, 117). The report

highlighted the ‘deprivational perspective’ embodied in the indicator: “development is judged by the way

the poor and the deprived fare in each community. Lack of progress in reducing the disadvantages of the

deprived cannot be ‘washed away’ by large advances – no matter how large – made by better off people.”

(Ibid., 15). The HPI was considered to reflect three different perspectives on poverty, including income

poverty – income below a poverty line –, ‘basic needs’ – representing the deprivation of a basket of basic

material needs – and capability poverty – the absence of an individual’s basic capabilities to function. As

one commentator put it, the HPI “provided a single measure of the multidimensionality of poverty [and]

also established that if income is not the sum total of human lives, lack of it cannot be that sum total of

human deprivation either” (Jahan 2002, 14).

The three components of the HPI mirror the dimensions of the HDI: (i) survival, as measured in the

percentage of people expected to die before age 40; (ii) exclusion from knowledge, measured by the

percentage of illiterate adults; and (iii) standard of living, as expressed by three sub-components

(percentage of people with access to safe water, to health services, and malnourishment for children under

age 5). Private income was not included in the deprivation measure because of the difficulties in

separating public and private income in the aggregate income per capita data available, and because of the

difficulty in establishing transnational and coherent poverty lines (a problem already experienced in the



first formulations of the HDI income component). This difficulty was not overcome, and the HDRO

continues to exclude income data from its HPI-1 calculations27.

When introduced, the HPI was calculated for 78 developing countries for which data was available. It

revealed that some countries had been more effective in reducing income poverty than human poverty,

and vice-versa. There was a very weak relationship between reductions in income poverty and human

poverty, suggesting the need for specific policies to combat the latter. It was also noticed that overall

progress in HDI did not necessarily entail significant reductions in HPI: the Arab States had reduced

income poverty to a mere 4%, while human poverty was still at 32%; in Latin America and the Caribbean,

the contrary was the case, with human poverty at 15% and income poverty at 24% (UNDP 1997, 23). In

the 2008 Report, the HPI for developing countries was calculated for a total of 108 countries, and allowed

basically the same conclusions to be drawn: income poverty does not directly determine capability poverty

and vice-versa, and capability poverty reduction can, and must, be efficiently carried out at all levels of

development.

In 1998 a specific human poverty index for developed countries was created (HPI-2). It focuses on the

same three basic dimensions as the HPI-1 set at higher levels, and adds a fourth dimension, social

exclusion, to the mix. The first dimension sets life expectancy at 60 years, rather than 40. The second

dimension measure functional illiteracy, rather than the brute illiteracy rate. The third dimension,

measuring the standard of living, is proxied by income. The different approach to the ‘standard of living’

dimension is justified on three different grounds. First, whereas the standard of living component in the

HPI-1 focused on both public and private provisioning of goods conducive to a decent living standard,

HPI-2 must focus on private income because in most advanced industrial countries the provision of

minimum public goods is widely ensured, and that – unlike in developing countries –, expenses with food

absorb only a small part of private income. Second, rather than use an arbitrary poverty line for all

countries, HPI-2 establishes a poverty line adapted to each country, being 50% of the country’s median

personal disposable income. Third, reliable income poverty data were not widely available for the

majority of developing countries, but were more easily found for developed countries. The new

component introduced for the HPI-2 was a measure of social exclusion, the percentage of long-term

unemployed persons (UNDP 1998, 27ff). This new measurement tool contributed in two major ways to

the study of human development: it enabled the differentiation of the human development situation among

27 The current formulation of HPI-1 also dropped the access to health services component in 2001, due to lack of updated information on this indicator (UNDP 2001, 241).



countries whose level of human development was very close; and, it demonstrated that poverty was still an

important issue in developed countries. The HPI-2 has suffered no major adjustments since its inception.

Both HPIs are not simple arithmetic means of the three (or four) deprivation levels that compose it:

the calculation method ensures that the aggregate index tends towards the dimension with the highest level

of deprivation. This ensures that the index is weighed towards the worst performance in a given country,

and that improvements in this sub-component are more effective in improving the aggregate index than

are the improvements on the other sub-components.28

3.3.3. Measuring Freedom: failures in quantification lead to rich qualitative insights

A persistent and irreducible issue in the elaboration of consecutive HDRs has been the inclusion of

human rights and liberty as components of the concept of human development. Since the very first report,

it was clear to the drafters of the HDRs that human freedom was one of the fundamental capacities that

should be promoted by the process of development29. But the technical difficulties of integrating this

perspective were daunting for, as one expert put it, “the literature on human rights is overwhelmingly

prose-rich and data-poor” (Kaufmann 2005). This section details the attempts made to tackle the problem.

Early attempts at quantification

28 This aspect of HPI-1 and HPI-2 was operationalized by the use of a higher order mean between the subcomponents (UNDP 1997, 117ff). A simple arithmetic mean (α=1) would imply perfect substitutability between components: any improvement, in any subcomponent of the aggregate index, would have the exact same impact on the aggregate. By using a higher order mean (i.e., by applying an exponential function to each of the subcomponents, averaging them, and then applying a n-root to the average) the result is that there is no longer perfect substitutability between components of the HPI, progress in the area with highest deprivation has greater effects on the aggregate index. At the current (α=3) setting, an improvement in the worst subcomponent has four times more effect than a similar increase in another subcomponent. 29 See, for instance, the 1990 HDR: “Human development is incomplete without human freedom. Throughout history people have been willing to sacrifice their lives to gain national and personal liberty (…) Any index of human development should therefore give adequate weight to a society’s human freedom in pursuit of material and social goals.” (UNDP 1990, 16). But the report recognized that “[t]he conceptual and methodological problems of quantifying and measuring human development become even more complex for political freedom, personal security, interpersonal relations and the physical environment. But even if these aspects largely escape measurement now, analyses of human development must not ignore them. The correct interpretation of the data on quantifiable variables depends on also keeping in mind the more qualitative dimensions of human life. Special effort must go into developing a simple quantitative measure to capture the many aspects of human freedom.”(ibid., 13)



Expanding on this recognition of the centrality of human freedom, two attempts – ultimately

unfruitful – were made to capture this dimension in the early years of the human development reports. In

1991, a Human Freedom Index (HFI) was created using a database on human rights for 88 countries30 and

40 different internationally recognized freedoms, and then adapted – abandoning a scale system to adopt a

simple ‘yes’ or ‘no’ format of freedoms available to each country – to suit the purposes of the HDR. The

exercise was admittedly limited in scope: there were serious problems of availability and timeliness of

data – human freedom being far more volatile than the subcomponents of the HDI (UNDP 1991, 21).

A second attempt to create an index came in 1992, with the Political Freedom Index (PFI).

Abandoning the HFI altogether, the UNDP attempted to create a composite index based on five political

freedoms and their sub-components: personal security (measured in terms of the prevalence of arbitrary

arrest and detention, torture, arbitrary killings, and disappearances), rule of law (fair and public hearings,

impartial tribunals, access to legal counsel, review of convictions, and impunity), freedom of expression

(restrictions in law and practice, media censorship, media ownership, freedom of speech proper), political

participation (freedom of association and of assembly, free and fair elections, continuity of the democratic

system, community and local decision-making), and equal guarantees (legal guarantees of equality,

violence and harassment of particular groups, political and economic participation of vulnerable groups).

Each of these five dimensions of political freedom were assessed by separate groups of experts, based on a

fixed list of sources, and given values from 0 to 10. Aggregation for each country was done by the

summing and averaging of the five components, resulting in the composite PFI. As with the HFI, the

drafters of the 1992 HDR recommended caution in the interpretation of the resulting ranking, and further

refinement of the PFI and its methodology.

These early efforts were not pursued. According to the UNDP, both abortive attempts to establish a

composite index of freedom ultimately failed because they: (i) were based exclusively on qualitative

judgments; (ii) attempted to reduce complex issues to summary answers (binary or scaled), with no

supporting data or analysis that would empower readers to understand the qualitative judgments made;

and, (iii) did not identify specific areas of concern, and could therefore not be translated policy advocacy

due to the lack of information beyond the index itself (UNDP 2000, 91).

The 2000 HDR – refocusing on a qualitative approach

30 Prof Charles Humana’s 1986 World Human Rights Guide was used as the basis for the UNDP’s calculations of a freedom index. Technical note 6 of the 1991 HDR explains why this database was selected – among a few others available at the time – and how it was adapted in the HDR.



The UNDP returned to the issue of human rights and freedom nearly a decade later, and completely

changed its approach. Rather than attempt a ranking or quantification of human freedom based on faulty

but available sources of information, the 2000 report focused on systematically exploring the links

between human rights and human development from a theoretical perspective, on all levels, illustrating it

with relevant data when these were available, and identifying priority areas in the action to simultaneously

promote human development and human rights31. The idea of establishing a human-freedom corrected

HDI was dropped, in favor of a meaningful – and exclusively qualitative – discussion on the relationship

between human rights and human development.

The first major contribution of the 2000 HDR was to draw the attention of both the human

development and human rights communities to the commonalities in their fields of action and policy-

making, and the means by which the different sets of goals – rights and entitlements on the one hand and

capabilities on the other hand – interact. Thus,

“the ideas of human development and those of human rights are linked in a compatible and

complementary way. If human development focuses on the enhancement of the capabilities and

freedoms that the members of a community enjoy, human rights represent the claims that

individuals have on the conduct of individual and collective agents and on the design of social

arrangements to facilitate or secure these capabilities and freedoms” (emphasis added; UNDP 2000,

20)

The concept and protection of human rights can reinforce that of human development by providing a

clarification on the obligatory nature of the realization of some, if not all, aspects of human development.

Whereas human development goals can be valued both for being useful (instrumental perspective) and for

being socially good (moral perspective), they are not considered entitlements from a legal perspective.

The notion that realizing certain development goals is a duty rather than an option modifies both the nature

of the goal, and the allocation of responsibility among social actors (state, corporations, civil society and

individuals). Therefore, human rights provide a new analytical tool: capability deprivation, often a multi-

causal phenomenon, when seen through the lens of human rights, can be analyzed in terms of attribution

of responsibility. By affirming that a development goal is an entitlement, human rights language

empowers actors to make claims against obligation debtors and force them to act against all types of

31 The trend was already clearly initiated in the 1999 report, in which Chapter 5 was integrally devoted to the necessary reforms of global governance, and the need to put humankind at the center of global development policy. This was admittedly a reaction to the global financial crises of the late 1990s and deeply inspired the subsequent work of the HDRO.



capability-constraining obstacle, from lack of resources to discriminatory social mores. Moreover, a

human rights approach to development calls for an analysis of both the ends and the process of

development, and particularly sets limits to, or otherwise orients, the policies that can be carried out in the

pursuit of development goals. In this light, policies of a discriminatory nature – even when theoretically

conducive to improvements in overall human development attainment – are not only ineffective in

reducing deprivation (as, for instance, expressed in the HPI), but are also to be seen as illegal. A final

contribution of a human rights approach to development thinking is that human rights assessment focuses

not only on progress made so far in the fulfillment of rights, but also on the “extent to which the gains are

socially protected against potential threats”, i.e. safeguards progress in human development (ibid., 23).

Conversely, the human development approach makes important contributions to human rights

research and advocacy. First, the vast cumulative experience in development analysis – mixing

quantitative and qualitative approaches, and different forms of information treatment – can provide

insights to human rights analysis. Second, the promotion of certain rights might require the assessment of

how different policy choices might impact the fulfillment of the right in question, or of other rights.

Resource-constrained states must set priorities in public spending, and at the same time human rights

policies should ensure that all rights are respected, protected and fulfilled. Human development analysis

can help establish different scenarios resulting from different policy sets, and their different expected

impacts on rights. In other terms, human development analysis can help clarify what the human rights

costs of policies will be. Third, while human rights focus on individual or collective entitlements, human

development analysis has traditionally focused on ‘enabling environments’ and their conditions of

existence. This offers human rights promoters a realistic understanding of what the resource and

institutional constraints are at a given moment in time, and how to tailor human rights policies around

these constraints. Finally, development analysis is focused on the dynamics of change, and this

perspective calls for looking at human rights over time, and sequencing the improvements to the

fulfillment of any given right. This should provide clarity on the notion of progressive realization

embodied in human rights analysis, and particularly the study of economic social and cultural rights.

After elucidating the links between human rights and human development thinking, the 2000 report

sets off on the considerable task of translating the synergies identified into practical prescriptions. First,

the report identifies seven areas in which human freedom must be fulfilled: freedom from discrimination,

want, fear and injustice; freedom for the realization of one’s human potential, for decent work, as well as

freedom of participation, expression and association.



Second, the report discusses the link between democracy and the realization of human rights,

specifically highlighting the need for free and fair elections, respect for the rule of law, freedom of

expression and an open, inclusive civil society. These requirements can be violated both by political action

(or omission), and by economic factors such as inequality and poverty. Therefore, preventing or

addressing the violation of these requirements involves a number of deliberate policies: the protection of

minorities and the struggle against ‘horizontal’ discrimination; the widening of participation and

expression at all levels; the implementation and strengthening of the separation of powers; and, the

incorporation of human rights into economic policy.

Third, the report focuses on poverty as a violation of both human rights standards and human

development goals. As a particularly acute form of capability and rights deprivation, poverty must be

tackled by the pursuit of human rights both as means and as ends. In this sense, the empowerment of the

poor – by the guarantee of civil and political rights – is seen as a necessary means to achieve the full

realization of economic, social and cultural rights. But the promotion of civil and political rights is also the

end goal of development, an expansion of capabilities. Focusing on poverty as a rights violation entails the

attribution of responsibility to different actors: state policy is required to fulfill the rights of the least

privileged with priority, and to do so in a manner that ensures participation of stakeholders in policy-

making. But non-state actors are identified as duty bearers as well. The Bretton Woods institutions and the

World Trade Organization, having considerable say in policy-making by member-states, and in global

economic policy, can promote pro-poor policies or at least refrain from knowingly prescribing poverty-

inducing policies. The report also suggests manners in which multinational corporations, world-wide

media, and international non-governmental organizations can contribute to the fulfillment of the freedom

from want. Finally, the report calls for the allocation of resources in priority social spending areas, but

underlines the fact that there is no automatic link between growth (and increased public spending), and

improvements in human development, or in the fulfillment of rights.

The report sees both mutual self-interest and ethical obligations as driving forces for the design of

pro-poor global economic and social policies, but recognizes that “little binds or encourages national

governments, corporations, the media and other global actors to do so under current arrangements for

global governance” (UNDP 2000, 82). This systematic failure is attributed to gaps in incentives,

jurisdiction and participation. Poverty eradication, particularly that carried abroad, is generally not seen by

states and multi-national corporations as in their own national or corporate interests. Filling this incentives

gap depends on making clear the linkages between the global economic environment and poverty, a task

for both activists and scholars. At a second level, global economic activities often fail to promote human



rights because of a double failure of human rights enforcement machinery: the mechanisms are both

institutionally weak, and nearly exclusively focused on domestic performance, whereas many human

rights violations are the result of international forces producing local effects. The report suggests that

more attention must be paid, preventively, to the potential impact of economic international agreements

and rules on the enjoyment of human rights worldwide. At a third and final level, participation by the

‘global disenfranchised’ is a necessary condition for the emergence of a fairer set of global economic rules,

and yet has been sorely lacking.

The fourth aspect of the report is its focus on the use of indicators for monitoring human rights and

devising better policy. The report clarifies the extent of the human rights obligations to respect, protect

and fulfill, and suggests means of capturing all three dimensions of these obligations through the use of

indicators. The end goal of human rights indicators is to answer four general questions: do states respect,

protect and fulfill rights, i.e. to what extent is state responsibility implemented? Are all rights being

implemented without discrimination, with adequate progress, with people’s participation and with

effective remedies? Are the social norms, institutions, laws and ‘enabling economic environment’

ensuring that development outcomes are translated into fulfillment of rights? And, finally, are non-state

actor’s impacts on human rights being identified?

In order to optimize the use and impact of indicators in the field of human rights four priority areas

are suggested: increasing and improving data collection, and making data more widely available;

diversifying information sources; setting benchmarks for performance; and, strengthening accountability.

The report briefly discusses how to pursue each one of these objectives. One of the most interesting

aspects of the discussion is to be found in the annexes, wherein the methodology of the human

development reports is applied to select human rights issues. It highlights the need to use indicators that

allow the understanding of a human rights or development situation in terms, simultaneously, of averages

(like the HDI), deprivations (as the HPIs) and inequalities (as the GDI and GEM). These three

perspectives of the situation must be seen in terms both static – ‘what is the situation now?’ – and dynamic

– ‘how has the situation evolved over time?’. This approach to a human rights or development issue has

steep requirements – disaggregated, reliable and regularly updated data – but offers the key to a far

wealthier analysis of any given situation, in stark contrast with the prominent ‘event-based, violation

approach’ that has traditionally characterized human rights discourse.

Moving from diagnosis to action, the last part of the 2000 HDR focuses on national and international

actions required to further the cause for human rights. At the national level, the report identifies five

priorities. States should (i) carry out independent national human rights assessments; (ii) align national



legislation with international standards; (iii) promote human rights norms through education, sensitization

of public authorities, and media campaigning; (iv) strengthen a network of human rights institutions; and,

(v) promote a rights-enabling economic environment, by focusing public action where it is most effective

and necessary, integrating human rights considerations into economic policy-making, and involving

private non-state actors in human rights promotion. At the international level, the UNDP advocates a

further five priority areas: (i) reduce global inequality and marginalization by, most notably, strengthening

a rights-based approach to development cooperation (without conditionality) and improving global

economic rules; (ii) prevention of conflict, by embarking on new efforts for peace-making, peace-building,

and peace-keeping; (iii) strengthening the international human rights machinery; (iv) strengthening

regional human rights approaches; (v) and mobilizing the support of private international actors for human

rights.

Facing the great number of priority areas and focuses that are called for by the report would require, if

taken literally, a massive, long-term commitment by numerous actors at both the national and international

level. Unfortunately, the methodology and proposals contained in the report – although a huge

contribution to both the human rights and development fields – were not systematically followed-up on by

states or international organizations, although a number of less ambitious approaches have started to

evolve, taking – explicitly or implicitly – the report as their starting point.

Since 2000, no UNDP report has delved in-depth on the issue of human rights and development. This

is certainly due to the fact that there is little to add to the analysis already made, but also to the fact that

the report produced considerable effects in the form of a renewed interest in the human rights approach to

development – particularly in the advocacy, academic and international organizations spheres. The HDRO

has continued to discuss human rights and freedom in the context of its activities, and the table of

ratifications of major international human rights instruments has become a permanent fixture in later

editions of the HDR.

4. Remaining Criticism to of the Human Development Concept and Index

The previous discussion shows that the major focus of criticism has been the issue of measurement of

human development. The concept of human development itself has faced very limited criticism, and most

of it related to the difficulties of truly implementing Sen’s capability approach into an operational metric.

Sen himself was initially skeptical of the use of the HDI as a measure of capability (Jahan 2002, 4). Most

importantly, however, the concept itself was not in question.



With respect to the UNDP sponsored indicators, and particularly the HDI, questions have been raised

on a number of different levels and the HDRO has made considerable efforts to dialogue with critics and

improve the indexes. A first issue is that of the quality and reliability of nationally produced social

indicators. If this is indeed a problem, it is a problem with statistical data at multiple levels and would

invalidate any social indicator. The HDRO has regularly called for improvements in data collection,

treatment and in procedures for estimations. The three non-income indicators used – longevity, literacy

and school enrollment rates – combine both near universal coverage, and overall reliability.

The first set of more substantial questions raised with respect to the HDI has focused on what

‘dimensions’ of human well-being are included in the composite index. As pointed out by Stanton (2007,

17), this involves two issues: some critics have claimed that other indicators – e.g. for political freedom, or

environmental degradation – should be included; others have claimed that the ones that are included, are

not adequate, either because they are redundant, or because other indicator better captures that dimension

of human development. The issue of redundancy lays on the suspicion that one or more of the components

are strongly correlated to a third. It has, for instance, been suggested that both longevity and educational

attainment are strongly correlated to per capita GDP, and therefore add very little information to the HDI

(ibid., 22). On deeper analysis, however, this is proven to be false, as Offer (2000, 15; also Stanton 2007,

22), describes. Regarding the need to introduce other components into the HDI, the HDROs response has

been, on the one hand, to devise thematic HDRs that tackle specific issues such as poverty, inequality, or

political freedom; and on the other hand, to develop distinct indicators such as those on deprivation or

gender inequality. These initiatives have been supplemented by the preparation of hundreds of national

reports that focus on more specific, or regional, issues.

Still under the general title of the HDI’s inclusiveness is the matter of how each dimension is

standardized before aggregation, of whether the maximum and minimum values should be fixed based on

expert judgment (as they currently are) or based on the observed values in the sample (as in the original

design of the HDI). The discussion above32 showed how the HDRO handled the issue of the income

component’s calculation – and the decision not to integrate the principle of diminishing returns to the non-

income components of the HDI –, and how maximum and minimum values were set for all components.

Some critics hold that diminishing returns should apply at least to the longevity dimension, given that if

increased age provides more time for the exercise of one’s capabilities, after a certain point health-related

issues reduce the added welfare value of an additional year of life. The same was also claimed with

32 See section 3.2., above.



respect to the education dimension33. In general though it is accepted that implementing diminishing

returns in the non-income components results in far smaller variations of that dimension’s value, as

compared to income.

A second major set of critiques relate to the question of whether the HDI should be a composite index

at all, and if it must be a composite index, how should the aggregation be carried out. The first aspect of

the question was responded in the affirmative by the UNDP in its first HDR, and has not wavered since:

the HDI is supposed to be a summary view of the state of development in a given country, and having

three different indexes would reduce the efficiency of the concept in the policy-making field. Regarding

how the aggregation should be accomplished, the major objection has been that by aggregating through a

simple average, the HDI creates the impression that there is perfect substitutability between its

components. Alternatives have been proposed, such as the multiplication of the different indexes is used

(Sagar and Najam 1998, 252), which would result in a composite index much more sensitive to the lower-

performance dimension. This was, as seen above, incorporated in the human poverty index but not in the

HDI. Nonetheless, both the HDR itself (UNDP 1993, 109) and other studies have concluded that changing

the aggregation rule does not result in substantial changes in rank between countries.

Overall, the HDRO has handled criticism by either testing and refining its existing indexes, or

creating different indexes to represent other dimensions of development. The two major issues that are

admittedly relevant but for which proper solutions are still to be found are those of income inequality and

freedom. Early attempts to create a inequality-adjusted HDI or a measure of global inequality (UNDP

1992, 96) were both discontinued. The failures of the quantitative approaches to human freedom, on the

other hand, produced a change in strategy that resulted in an extremely detailed study of the relationship

between human rights and human development.

Matthias Sant’Ana

33 On this point Stanton (2007, 20) quotes Farhad Noorkbakhsh: “It may be argued that the principle of diminishing returns also applies to educational attainments. To put it in a positive context, under similar conditions the early “units” of educational attainments to a country should be of much higher value than the last ones. In the context of policy-making in a country with 30% adult literacy, improvements in literacy are of far greater urgency than the same for a country with 90% adult literacy.”



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