Shaktichakra, the wheel of energies

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Posts Tagged ‘Stiglitz

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.