Measuring Development: The Human Development Index

Because income alone fails to capture whether people's lives are actually improving, development economists have long searched for composite measures that combine income with other dimensions of well-being. The most widely used such measure today is the Human Development Index (HDI), published annually by the United Nations Development Programme (UNDP). Rather than describing any country's current specific HDI value or global rank — which changes from year to year and is best looked up directly from the current UNDP report rather than memorised as a fixed textbook number — this section focuses on what the HDI conceptually measures and why it was designed the way it was.

The HDI is built from three broad dimensions of human development, each treated as equally important:

1. A long and healthy life — captured through life expectancy at birth, reflecting a population's access to nutrition, sanitation, healthcare and a safe environment.
2. Knowledge and education — captured through measures such as expected and mean years of schooling, reflecting a population's access to learning and skill-building.
3. A decent standard of living — captured through a measure of income (such as Gross National Income per capita, adjusted for purchasing power), reflecting command over resources needed for a reasonable material life.

Each dimension is converted into an index between 0 and 1, and the three dimensional indices are combined (using a geometric mean in the UNDP's current methodology) into the overall HDI, again a value between 0 and 1, with values closer to 1 indicating higher human development. The genuine insight behind the HDI is not the arithmetic itself but the underlying idea: a country's development cannot be judged by income alone, because two countries with similar per-capita income can have very different life expectancies or literacy levels depending on how that income is used and distributed. …