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Does the Inclusive Wealth framework have the firepower to replace the doddering, myopic GDP?

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Not every country or citizen has benefited from overall higher levels of economic welfare. The gap between the lowest and highest income countries remains large, with many countries in Africa, Latin America and Asia still below the global average. In addition, many countries experience significant domestic income inequalities between rich and poor. In new and rising economic powers such as China and India, millions have been lifted out of poverty, but often at a high environmental cost. “The economic growth of recent decades has been accomplished mainly through drawing down natural resources, without allowing stocks to regenerate, and through allowing widespread ecosystem degradation and loss” (UNEP 2011).

The Inclusive Wealth Report 2012 has been launched at the Rio+20 Conference in Brazil. The report presents a framework that offers a long-term perspective on human well-being and sustainability, “based on a comprehensive analysis of nations´ productive base and their link to economic development”.

Developed by the International Human Dimensions Programme on Global Environmental Change (IHDP), the IWR 2012 was developed on the notion that current economic production indicators such as gross domestic product (GDP) and the Human Development Index (HDI) are insufficient, as they fail to reflect the state of natural resources or ecological conditions, and focus exclusively on the short term, without indicating whether national policies are sustainable.

The IWR 2012 features an index that measures the wealth of nations by looking into a country’s capital assets, including manufactured, human and natural capital, and its corresponding values: the Inclusive Wealth Index (IWI). Results show changes in inclusive wealth from 1990 to 2008, and include a long-term comparison to GDP for an initial group of 20 countries worldwide, which represent 72% of the world GDP and 56% of the global population.

Key findings:

* 70 percent of countries assessed in the 2012 Inclusive Wealth Report present a positive Inclusive Wealth Index (IWI) per capita growth, indicating sustainability.
* High population growth with respect to IWI growth rates caused 25 percent of countries assessed to become unsustainable.
* While 19 out of the 20 countries experienced a decline in natural capital, six of them also saw a decline in their inclusive wealth, thus following an unsustainable track.
* Human capital has increased in every country, being the prime capital form that offsets the decline in natural capital in most economies.
* There are clear signs of trade-off effects among different forms of capital (manufactured, human, and natural capital) as witnessed by increases and declines of capital stocks for 20 countries over 19 years.
* Technological innovation and/or oil capital gains outweigh declines in natural capital and damages from climate change, moving a number of countries from an unsustainable to a sustainable trajectory.
* 25 percent of assessed countries, which showed a positive trend when measured by GDP per capita and the HDI, were found to have a negative IWI.
* The primary driver of the difference in performance was the decline in natural capital.
* Estimates of inclusive wealth can be improved significantly with better data on the stocks of natural, human, and social capital and their values for human well-being.

What is the inclusive wealth framework? It is based on social welfare theory “to consider the multiple issues that sustainable development attempts to address”. First, according to IWR 2012, the inclusive wealth framework “moves away from the arbitrary notion of needs” (about time too, not that the rank-and-file economists are going to be listening) and “redefines the objective of sustainable development as a discounted flow of utility” – this is not good, and does not in any way appeal to readers and practitioners who do not see organic development as automatically linked to some form of economic measurement – which, in this case, is consumption. Does this mean consumption (or not) is the central idea that underlies inclusive wealth? Let’s see. “The framework is flexible enough to allow consumption to include not just material goods, but also elements such as leisure, spiritual aspirations, social relations, and environmental security, among others”. Interesting and curious – spiritual aspiration as a consumption good? Family and clan or tribe ties as consumption?

How useful is the IWR 2012 shaping up to be? There is an “equivalence theorem whereby the framework allows the move from the constituents of well-being to their determinants”. Sounds profound. What does it mean? It refers to the various capital assets a country is able to accumulate – note they’re talking about country, not household, not social network. “This asset base is called the productive base of the nation. The productive base forms the basis for sustainable development and provides a tangible measure for governments to use and track over time”. Again, this is not so good – we want to see inclusive wealth as being easily understood by households (let’s say rural households) and by local administrations (like panchayats in India).

The IWR 2012 goes on to say that “more importantly, the framework provides information for policy-makers – particularly planning authorities – on which forms of capital investment should be made for ensuring the sustainability of the productive base of an economy”. Again not good, because the IWR 2012 has mentioned spirituality and social ties ande environmental security – so why return like a lost child to “the productive base” when ‘productive’ can continue to mean what it does today? A closer reading will no doubt provide answers.

The IWR 2012 has said, predictably and quite justified, that traditional indicators such as gross domestic product (GDP) per capita and the Human Development Index (HDI) have been the main determinants used to measure the progress of nations. “GDP per capita was developed just after World War II by economist Simon Kuznets. It was constructed by Kuznets to measure the level of economic production and to provide guidance to policy-makers on which sectors of the economy are growing and which are slowing, and the throughput that is used by the economy” – a concise definition of GDP worth keeping in mind to see why it has so needed replacing for at least the last generation.

GDP was always meant to be used strictly as an indicator for economic production. Somewhere along the line, GDP came to be used by policy-makers to measure the overall progress and performance of a nation (they were lazy, to begin with, and the gradual realisation of environmental costs from the pursuit of progress made alternatives politically inconvenient to adopt, especially when these implied the well-being of citizens). “This caused some fundamental problems, not with the indicator itself, but with the way it has been used. Increases in total economic production do not translate into improvements in well-being. They might increase employment and might increase the income of individuals, but all these are just possible outcomes and not automatic consequences of economic growth.” That is a truth well worth repeating at every available forum. From a very cursory reading, the IWR 2012 is a very well-conceived beginning to find a Grand Indicator that will once and for all consign GDP to the corner in which it belongs.

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Written by makanaka

June 18, 2012 at 11:55

At 21, the Human Development Report and its message of equity in 2011

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Today, the United Nations Development Programme (UNDP) will release its 2011 Human Development Report, the 21st in the annual series that lets us know how well – or not – the populations in countries are doing. Whether on education, health, income, poverty, cost-of-living the human development indices are now well-constructed and evolved measures of the well-being of people. Today, we’ll know a little more about how 7 billion people live on our Earth.

This year’s ediition is called  ‘Sustainability and Equity: A Better Future for All’. The HDR website has said the report will call for the urgent global challenges of sustainability and equity to be addressed together – and that the 2011 HDR identifies policies on the national and global level that could spur mutually reinforcing progress towards these interlinked goals.

These introductory articles are uniformly boring and uniformly useless to all those who deal with real questions, hard quetions and tough decisions every day. They say things like “bold action is needed if the recent human development progress for most of the world’s poor majority is to be sustained” and things like “the benefit of future generations as well as for those living today”.

The excitingly squiggly colourful HDI lines that debuted in 2010

This is irritating, but has become part of the HDI furniture. For some perverse reason top politicians and top UN agency muckamucks seem unwilling to cut the waffling and get on with it. Anyway. we’re interested in the rest of the report, the data, the statistics, the methodologies, the background studies and a whole bunch of related research – so that’s what this and related HDI posts will dwell on in the weeks to come.

The HDR website has mentioned that the 2011 report will talk about living standards. Here’s a sentence I want to read more about when the big package opens up: “Yet the 2011 Report projects a disturbing reversal of those trends if environmental deterioration and social inequalities continue to intensify, with the least developed countries diverging downwards from global patterns of progress by 2050.” What are the numbers that led to this prickly insight, I would very much like to see.

Look for these in the 2011 edition:
UNDP HDR 2011 International Consultations
UNDP HDR 2011 Advisory Panels
UNDP HDR 2011 Human Development Seminars
UNDP HDR 2011 Commissioned Research

Let’s look back. A year ago, in 2010 November, UNDP when releasing the HDR 2010 said that “most developing countries made dramatic yet often underestimated progress in health, education and basic living standards in recent decades, with many of the poorest countries posting the greatest gains”. HDR 2010 cautioned that “patterns of achievement vary greatly, with some countries losing ground since 1970”.

Overall, HDR 2010 showed that life expectancy climbed from 59 years in 1970 to 70 in 2010, school enrolment rose from just 55 percent of all primary and secondary school-age children to 70 percent, and per capita GDP doubled to more than US$10,000 (sorry, but this last is a particularly meaningless number). Life expectancy, for example, rose by 18 years in the Arab states between 1970 and 2010, compared to eight years in sub-Saharan Africa. The 135 cuntries studied include 92 percent of the world’s population.

The visual designing coup of 2010

Within the pattern of overall global progress, the variation among countries is striking, said HDR 2010. Over the past 40 years – that is, tilll 2010 – the lowest performing 25 percent experienced less than a 20 percent improvement in HDI performance, while the top-performing group averaged gains of 54 percent. Yet as a group, the quartile of countries at the bottom of the HDI scale in 1970 improved faster than those then at the top, with an average gain of 61 percent. Somewhat zanily, HDR 2010 then advised us that “the diverse national pathways to development documented … show that there is no single formula for sustainable progress”. Umm, we did somehow notice that, all by ourselves actually.

What was enormously useful in HDR 2010 were three new indices that the world’s rambunctious and usually argumentative development community has still not grasped firmly with opposable thumbs. These are:
• The Inequality-adjusted Human Development Index (IHDI) – For the first time, this year’s Report examines HDI data through the lens of inequality, adjusting HDI achievements to reflect disparities in income, health and education. The HDI alone, as a composite of national averages, hides disparities within countries, so these adjustments for inequality provide a fuller picture of people’s well-being.
• The Gender Inequality Index (GII) – The 2010 Report introduces a new measure of gender inequities, including maternal mortality rates and women’s representation in parliaments. The Gender Inequality Index is designed to measure the negative human development impact of deep social and economic disparities between men and women.
• The Multidimensional Poverty Index (MPI) – this is the equivalent of the 400-pound gorilla for all HDI-related stuff – it complements income-based poverty assessments by looking at multiple factors at the household level, from basic living standards to access to schooling, clean water and health care. About 1.7 billion people—fully a third of the population in the 104 countries included in the MPI—are estimated to live in multidimensional poverty, more than the estimated 1.3 billion who live on $1.25 a day or less.

So, while waiting for the goodies from HDR 2011, there are some questions that still smoulder from earlier editions. Here’s one: what does the evidence from the past 40 years tell us about the relationship between growth and changes in human development? The two-panel chart which accompanies this post (below) presents the basic result. The left panel shows a positive association — though with substantial variation — suggesting that growth and improvements in human development are positively associated.

Remember, however, that income is part of the HDI; thus, by construction, a third of the changes in the HDI come from economic growth, guaranteeing a positive association. That’s why a far more useful exercise is to compare income growth with changes in the non-income dimensions of human development (gift economies would be wonderful subjects). This has been done using an index similar to the HDI but calculated with only the health and education indicators of the HDI to compare its changes with economic growth. The non-income HDI is presented in the right panel of the chart – looking for the correlation? Remarkably weak and statistically insignificant, as they said so themselves.

That will deliver a smart kick in the collected pants of the G20 muckamucks when they assemble (what? again!) in France (Cannes) for a new episode of creative bullshitting fiscal sophistry. But, here’s the strange thing. Previous studies have found the same result. One of the first scholars to study this link systematically was US demographer Samuel Preston, whose landmark 1975 article showed that the correlation between changes in income and changes in life expectancy over 30 years for 30 countries was not statistically significant. As ideas such as ‘sustainability’ and ‘environmental’ began gaining traction from the early 1970s onwards – think ‘Limits to Growth‘ – more data became available, and other researchers obtained the same result. In a 1999 article, ‘Life during Growth‘, William Easterly found a remarkably weak association between growth and quality of life indicators such as health, education, political freedom, conflict and inequality. Easterly’s work was ignored by the bankers and their compradors for years thereafter.

Next, François Bourguignon, director of the Paris School of Economics, and several African and European colleagues concluded that “the correlation between GDP per capita growth and nonincome [Millennium Development Goals] is practically zero”. That should have been turned into a poster and hung on the wall of every bloody finance minstry from Abuja to Auckland. More recently, World Bank economist Charles Kenny recently confirmed the lack of correlation between improvements in life expectancy and growth, using both a large sample of countries over 25 years and a smaller sample covering a much longer period. I advise his still-serving colleagues to dust off his file and read his work, for the first time for them.

Well, ’nuff said. Let’s wait till the HDR 2011 starts streaming towards us, tweets and video and all.

Joining the dots between economics, income, health and poverty

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The concerns about recession and its impacts on poverty are seen commonly as a question mark over household incomes, over food security and often involve debates about social protection. An aspect that all too often gets ignored in this equation – no doubt because of its complexity – is health and in particular the health of women and children.

Changes in neonatal mortality rates between 1990 and 2009. The map illustrates the change in NMR between the years 1990 and 2009 for each of the 193 countries estimated. PLoS Medicine 8(8): e1001080

This is linked very closely to poverty, however we measure it, and the conditions that either cause poverty to persist (leading to chronic poverty) or cause households at risk to lapse into poverty every now and then (shock). The human development index methodolgy, which is from this year using multi-dimensional indices for poverty for the first time, helps us link health, poverty, income and economic growth (or its opposite).

The question is: is this new understanding, which is more in tune with the way households actually carry on with their lives and are actually affected by wider trends concerning economy, helping integrate the connections? If there is one good reason to ask this question, it is the new study on ‘Neonatal Mortality Levels for 193 Countries in 2009 with Trends since 1990: A Systematic Analysis of Progress, Projections, and Priorities’.

[The World Health Organization (WHO) has a report and summary of the study on this page – ‘Newborn deaths decrease but account for higher share of global child deaths’]
[The full study is available on PLoS Medicine, 1 August 2011 (Volume 8, Issue 8)]

This has shown that every year, more than 8 million children die before their fifth birthday. Most of these deaths occur in developing countries and most are caused by preventable or treatable diseases. In 2000, world leaders set a target of reducing child mortality to one-third of its 1990 level by 2015 as Millennium Development Goal 4 (MDG4). This goal, together with seven others, is designed to help improve the social, economic, and health conditions in the world’s poorest countries. In recent years, progress towards reducing child mortality has accelerated but remains insufficient to achieve MDG4.

“In particular, progress towards reducing neonatal deaths – deaths during the first 28 days of life – has been slow and neonatal deaths now account for a greater proportion of global child deaths than in 1990. Currently, nearly 41% of all deaths among children under the age of 5 years occur during the neonatal period. The major causes of neonatal deaths are complications of preterm delivery, breathing problems during or after delivery (birth asphyxia), and infections of the blood (sepsis) and lungs (pneumonia). Simple interventions such as improved hygiene at birth and advice on breastfeeding can substantially reduce neonatal deaths.”

Neonatal mortality rates in 2009. The map illustrates the NMR in year 2009 for each of the 193 countries estimated. PLoS Medicine 8(8): e1001080

The researchers used civil registration systems, household surveys, and other sources to compile a database of deaths among neonates and children under 5 years old for 193 countries between 1990 and 2009. They estimated NMRs for 38 countries from reliable vital registration data and developed a statistical model to estimate NMRs for the remaining 155 countries (in which 92% of global live births occurred).

They found that in 2009, 3.3 million babies died during their first month of life compared to 4.6 million in 1990. More than half the neonatal deaths in 2009 occurred in five countries – India, Nigeria, Pakistan, China, and the Democratic Republic of Congo. India had the largest number of neonatal deaths throughout the study. Between 1990 and 2009, although the global NMR decreased from 33.2 to 23.9 deaths per 1,000 live births (a decrease of 28%), NMRs increased in eight countries, five of which were in Africa. Moreover, in Africa as a whole, the NMR only decreased by 17.6%, from 43.6 per 1,000 live births in 1990 to 35.9 per 1,000 live births in 2009.

To return to my question concerning the understanding of economics, income, health and poverty, does most current analysis see to integrate these elements, or is it still GDP-income driven? A new (2011 May) paper released by the Brookings Institution indicates that the GDP-income route is still favoured. The paper, ‘Two Trends in Global Poverty’, Geoffrey Gertz and Laurence Chandy, has said that while the overall prevalence of poverty is in retreat, the global poverty landscape is changing. “This transformation is captured by two distinct trends: poor people are increasingly found in middle-income countries and in fragile states. Both trends – and their intersection – present important new questions for how the international community tackles global poverty reduction.”

The two charts show the trajectory of 20 developing countries along three dimensions: number of poor people, degree of fragility and real income per capita. These 20 countries collectively account for 90 percent of the world’s poor in 2005, and thus largely define the evolving state of global poverty. Graphic: Brookings Institution

“The increased prevalence of poverty in middle-income countries is in many ways a trend of success. Over the past decade, the number of countries classified as low-income has fallen by two fifths, from 66 to 40, while the number of middle-income countries has ballooned to over 100. This means 26 poor countries have grown sufficiently rich to surpass the middle-income threshold. Among those countries that have recently made the leap into middle-income status are a group of countries  –  India, Nigeria and Pakistan  – containing large populations of poor people. It  is their “graduation” which has brought about the apparent shift in poverty from the low-income to middle-income country category.”

This categorisation of middle, low and high income was to an extent useful in the 1970s, when the idea of a human development index was being discussed, but we’ve come a long way since. We know that even in smaller countries (rather, countries with populations that are relatively small compared to those whic bear the sort of burdens studied in the PLoS Medicine research) there is a great deal of income disparity. ‘Income’ itself is a condition with a bewildering number of inputs – social science is quite inadequate to the task of being able to recognise all of these, let alone quantify them and rationalise them across countries and regions – which is exactly what studies like this try to do unfortunately.

“In 2005, when more than half the world’s poor lived in such countries, it made some sense to think about fighting poverty in terms of a single developing country paradigm, based on what worked in countries such as Ghana, Tanzania, Mozambique or Vietnam,” Gertz and Chandy have said. “This logic was evident in two of the major events of that year which continue to shape today’s development agenda: the G8 meeting at Gleneagles and the High Level Forum on Aid Effectiveness in Paris. It was also apparent in Jeffrey Sachs’ influential 2005 best-seller, ‘The End of Poverty’. The legacy of these ideas is scattered throughout the work of the international development community in the design of traditional aid instruments and the standard methods of country engagement.”

The authors of the Brookings paper have said that this approach remains relevant for some countries, but with 90 percent of the world’s poor living in different settings today, its broader application can no longer be justified. Yet they have found that such an admission poses a dilemma. The dilemma exists because one of the reasons the stable low-income paradigm has persisted is because it characterizes an environment in which the international development community feels most comfortable and has the most experience. “The role of external actors in supporting poverty reduction in stable low-income countries is well understood and the standard tools of external assistance – financial and technical assistance – are well suited to them.”

Maplecroft's 2011 food security risk index

What does this mean? Does it give us a hitherto obscured insight into the inner world of aid agencies and international development departments and how they see ‘poor’ countries’ populations? Does it mean that we are burdened with three decades worth of simplistic labelling of populations at risk simply because labelling them any other way makes it difficult to help them? That’s what it looks like to me and I’d like to thank Gertz and Chandy for revealing this. But it’s way past high time this sort of categorisation was ditched, once and for all. It would do us and the battalions of development professionals a huge amount of good to simply be able to say, every so often, “we don’t know enough”.

It is worth being honest about the state of our knowledge concerning the lives of the the majority of households in ‘developing’ countries. Some of the reasons why such honesty will help in the long term are contained in a thoughtful new publication from the World Bank (whose army of development professionals will benefit from its reading). This collection is entitled ‘No Small Matter: The Impact of Poverty, Shocks, and Human Capital Investments in Early Childhood Development’ (The World Bank, 2011) and it has said that, as the 2008 global financial crisis has again demonstrated, economic crises are an unfortunate recurring event in the world and can have severe consequences for household livelihoods.

Progress in key health indicators, UN Human Development Report 2010

‘No Small Matter’ defines economic crises as sharp, negative fluctuations in aggregate income, these being especially common in developing countries, and the frequency with which they occur has been increasing in recent history. We know that declines in household and community resources are not the only risks that arise from an economic crisis because of its aggregate nature. We also know – from fieldwork and by hearing those whom we would wish to help – that at the same time as households cope with the possibility of reduced income from aggregate economic contractions, vital public services may also experience a decline in quality or availability, which in turn may have an additional impact on skill development among children. This is happening now, in more countries than ever before. The economic crisis that hit Latin America in 1982 led to a decrease in public health spending and had a disproportionate effect on the poorest groups. In 2011, the decrease in public health spending exists in many more countries.

A chapter in ‘No Small Matter’, ‘The Influence of Economic Crisis on Early Childhood Development: A Review of Pathways and Measured Impact’, by Jed Friedman and Jennifer Sturdy, is particularly useful.

This has said that “conservative estimates suggest that over 200 million children under five years of age living in developing countries fail to reach their cognitive development potential because of a range of factors, including poverty, poor health and nutrition, and lack of stimulation in home environments”. It is possible, the chapter’s authors have said, that this burden increases during times of crisis as poverty increases and food security is threatened. However, to investigate this claim more carefully it is necessary to understand the pathways through which poverty influences skill acquisition in children.

“The most severe condition affecting ECD (Early Childhood Development) is infant and early child mortality. Sharp economic downturns were associated with increases in infant mortality in Mexico, Peru and India. The mortality of children born to rural and less educated women is more sensitive to economic shocks, which suggests that the poor are disproportionately affected during most economic crises, and perhaps the poor face important credit constraints that bind in tragic ways during large contractions.

Weak relationship between economic growth and changes in health and education, UN Human Development Report 2010

The mortality of girls is also significantly more sensitive to aggregate economic shocks than that of boys. This gender differential exists even in regions such as Sub-Saharan Africa that are not particularly known for son preference and indicates a behavioral dimension where households conserve resources to better protect young sons at the expense of daughters.”

Finally, a further note about the extremely valuable PLoS Medicine study ‘Neonatal Mortality Levels for 193 Countries in 2009 with Trends since 1990: A Systematic Analysis of Progress, Projections, and Priorities’. The authors are: Mikkel Zahle Oestergaard1, Mie Inoue1, Sachiyo Yoshida, Wahyu Retno Mahanani, Fiona M. Gore1, Simon Cousens, Joy E. Lawn and Colin Douglas Mathers (on behalf of the United Nations Inter-agency Group for Child Mortality Estimation and the Child Health Epidemiology Reference Group – World Health Organization, Department of Health Statistics and Informatics; World Health Organization, Department of Child and Adolescent Health and Development; London School of Hygiene & Tropical Medicine; Saving Newborn Lives/Save the Children).

Children of poor households are more likely to die, UN Human Development Report 2010

The study found that of the 40 countries with the highest NMRs in 2009, only six are from outside the African continent (Afghanistan, Pakistan, India, Bhutan, Myanmar, and Cambodia). Among the 15 countries with the highest NMRs (all above 39), 12 were from the African region (Democratic Republic of the Congo, Mali, Sierra Leone, Guinea-Bissau, Chad, Central African Republic, Burundi, Angola, Mauritania, Mozambique, Guinea, and Equatorial Guinea), and three were from the Eastern Mediterranean (Afghanistan, Somalia, and Pakistan). Throughout the period 1990–2009, India has been the country with largest number of neonatal deaths. In 2009, the five countries with most deaths accounted for more than half of all neonatal deaths (1.7 million deaths = 52%), and 44% of global livebirths: India (27.8% of deaths, 19.6% of global livebirths), Nigeria (7.2%, 4.5%), Pakistan (6.9%, 4.0%), China (6.4%, 13.4%), and Democratic Republic of the Congo (4.6%, 2.1%). The top five contributors to the 4.6 million neonatal deaths in 1990 were: India (29.5% of deaths, 19.8% of global livebirths), China (12.3%, 18.0%), Pakistan (5.4%, 3.4%), Bangladesh (5.0%, 2.9%), and Nigeria (4.8%, 3.3%).

As the risk of children dying before the age of five has fallen, the proportion of child deaths that occur in the neonatal period has increased. This increase is primarily a consequence of decreasing non-neonatal mortality in children under five from infectious diseases such as measles, pneumonia, diarrhea, malaria, and AIDS. Globally, 41% of under-five deaths now occur in the neonatal period. Over the 20 y between 1990 and 2009, the proportion of global neonatal deaths that occurred in Africa increased. Although Africa is now the region with the highest NMR, the proportion of under-five child deaths that are neonatal remains relatively low in Africa—the fraction increased from 26% to 29% between 1990 and 2009. This apparent anomaly reflects the fact that Africa accounts for approximately 90% of child deaths due to malaria (0.7 million under-five deaths) and HIV/AIDS (0.2 million under-five deaths), resulting in relatively higher post-neonatal child mortality than other regions.

New, improved human development indices

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Now where did I put that new index?

Policymakers and commentators are constantly looking for new ways to measure development, writes Martin Ravallion, Director of the Development Research Group of the World Bank, in his column at VoxEU. In his comment, titled ‘Your new composite index has arrived: Please handle with care’, he warns against embracing new composite indices with little guidance from economic or other theories. Ravallion then talks about the strengths and weaknesses of using what he calls ‘mashup’ indices of development (a ‘mashup’ is a web term, which means to mix data in a new way using a new ‘app’ that presents it to users).

“A host of indicators are used to track development. The World Bank’s annual World Development Indicators presents hundreds of such indicators. The United Nation’s Millennium Development Goals are defined using a long list of indicators. Faced with so many indicators – a “large and eclectic dashboard,” as the Stiglitz report nicely puts it – there is an understandable desire to form a single composite index.”

You want to index our work? Surely you're joking.

“For some of the composite indices found in practice, economic theory provides useful clues as to how the index should be constructed (GDP, for example). This is not the case for another type of composite index that is becoming popular. For these, neither the list of underlying data nor the aggregation technique is informed by theory or practice. The maker of the composite-indicator has free roam and is largely unconstrained by economic or other theories intended to inform measurement practice.”

Having referenced in his article the Multidimensional Poverty Index (MPI) of the Oxford Poverty and Human Development Initiative, developed by among others Sabina Alkire and Maria Emma Santos, Alkire has commented on Ravallion’s musings. “I am grateful for the interest shown in our Multidimensional Poverty Index (MPI) that we developed as an experimental series for the 2010 UNDP Human Development Report that will be released 4 November.”

This paper recycling shop in Mumbai is not yet a beneficiary of the human development indexing effort

“In sum, I agree with Martin’s statement in his Mashup paper, “The lesson to be drawn from this review is not to abandon mashup indices.” I agree equally with the emphasis of this article: that we need to handle composite indices of all kinds with care and curiousity, to understand exactly their construction, their robustness, their legitimate policy interpretations, and their oversights. For that reason Maria Emma Santos and I have stated explicitly the strengths and limitations of the new Multidimensional Poverty Index, and undertaken thorough robustness tests and quality checks, and found it was indeed robust to a number of plausible changes to the indicators, thresholds, and changes in the poverty cutoff. We also have highlighted the areas which do require further research, are undertaking that work and hope others will contribute.”

Well, an index is only as good as the intention that guides it. It will be most useful if it helps the right questions to be framed, and indicates where the answers may be found. Indices of poverty and human development which command most attention are also those that are global in scope. As Ravallion says, these help people – policymakers among them – see where their country stands when compared with others. That’s well and good, but much of our work is within countries, not across them, and much of our work involves dealing with realities that are highly subjective and fluid, open always to a variety of forces and influences.

Poverty for example may be deepened just as much by barriers of caste or environmental degradation as it is by ill health and natural calamity. How does one capture caste biases and environmental degradation as it affects a sub-tribe in a particular locale? An index that attempts to do this will be both dreadfully complex and not portable. Perhaps it is best for locals to develop their own means of measurement, comparison and rating. In that, the lessons provided by Ravallion, Alkire and the host of social scientists on whose shoulders they rest can be put to use.