Reply to Posner: Is HDI "Dubious" and "Senseless"?

♠ Posted by Emmanuel in ,, at 12/17/2007 01:51:00 AM
While preparing material for the post above on measuring the progress of societies, Google pointed me in the direction of a recent post made by Richard Posner on the popular Becker-Posner blog which features his thoughts as well as those of Nobel laureate Gary Becker. Judge Posner makes it amply clear that he does not think much of the United Nations Development Program's Human Development Index (HDI). What follows are a few excerpts from his post in which he accuses the HDI of being "dubious" and "senseless":
I cannot myself see the value of the Human Development Index. Not that per capita income, life expectancy at birth, and level of education as proxied by adult literacy and school enrollments are unimportant; a ranking of each of these aspects of human development might be a good first step in identifying areas of weakness that a society might wish to devote additional resources to improving. It is the combining of the indexes and announcing that the combination offers a ranking of nations by the degree of their "human" as distinct from narrowly defined "economic" development that strikes me as dubious, and indeed as senseless. The obvious objection is to the equal weighting of the three indexes, and to the omission of a host of other important dimensions of development, such as housing quality, pollution, tax rates, adult life expectancy, crime rates, unemployment, inflation, quality and variety of goods and services, economic growth, and quality of education--though including them would exacerbate the weighting problem, and some involve serious measurement problems...

The Human Development Index is an example of ranking mania that has the United States tightly in its grip, so maybe Americans shouldn't complain about the Index. One cannot generalize about the value of rankings. There are pluses and minuses. The major plus is that a ranking is an economical method of presenting information. The related minus is that it often presents it in a misleading way--that is my earlier point that the distance between ranks is more important than the number of ranks that separates the persons (nations, etc.) being ranked. The more compressed a distribution--of ability, health, income, etc.--the less meaningful rank ordering is.
These criticisms are relatively easy to address. Three things immediately occur to me. First, Posner has taken the HDI out of context. Second, he says there is "ranking mania" at play which is at variance with the UNDP's attempts to come up with more sensible measures of human development. Third, he implies that HDI is a slight to the economic approach (as exemplified by the Chicago School which he is a part of). Let me expand on these three points:

(1) While Posner does identify the UN as the main sponsor of this report, he does not specifically say that the UN Development Program is the agency responsible for it. This distinction is important for the main purpose of the HDI is to provide an admittedly rough comparison of the developmental progress of various countries, especially less-developed ones. Another Nobel Prize winner in economics, Amartya Sen, helped create the index together with the late Mahbub ul-Haq. In fact, Sen admits that HDI, an intellectual brainchild of his, is a "vulgar measure." This paper sponsored by the EU adds more color and highlights why the HDI is, again, not really as well suited for comparing developed countries as that was not its original intent:
HDI is a composite measure of life expectancy, literacy & education, and GDP per capita. The index was developed in 1990 again by Amartya Sen (initially as a spin-off of the capability approach) and Mahbub ul Haq. HDI is mainly used in a development context, to verify progress on key indicators of developing countries. It is used by the World Bank and the UN.

The trade-off that we have sketched above, namely between simplicity and accuracy shows up nicely here. Sen even calls his child a "vulgar measure", since it is a simple average between life expectancy at birth, knowledge (2/3 literacy, 1/3 education) and GDP per capita. The 'vulgar' quote can be explained by the fact that HDI is more suited for developing countries (hence the 2/3 weight on literacy in the knowledge pillar), the weights are totally ad hoc and HDI does not contain many aspects that would be part of well-being. One (not easy to avoid) consequence is that if literacy shoots up but life expectancy goes down there could still be measured progress, but the same numerical result might be obtained if both go up a bit, arguably to be preferred. Yet it has a lot of merits in its simplicity and applicability. Certainly for developing countries it is a more useful way of assessing progress than just GDP per capita. For Europe the HDI is not that useful, since all European countries are in the top group. Also, the challenges that Europe faces are not well picked up by HDI.
Posner notes that the HDI would be more informative than it is if it included several other measures which have some bearing on well-being. Nobody will disagree with him. Given the HDI's emphasis on developing countries, however, another important consideration is whether this rich data is as plentiful in impoverished developing countries where governments have limited means for collecting such data as it is in the United States. It probably is not. Again, it is important to take the context of this measure into account outside of an Amerocentric point of view.

(2) The analogy to American "ranking mania" is false, and worse yet, harmful. Unlike rankings such as those for colleges which Posner compares them to, the HDI by the UNDP is not out to sell a product. The UNDP is a non-profit international organization, not US News & World Report or Forbes which put out rankings to help attract advertisers or sell print and online subscriptions.

Indeed, if the UNDP is promoting a form of "ranking mania" with the HDI, then the organization would not be looking for ways to improve on this admittedly rough measure. As I have noted, however, the UNDP is one of the organizations working on the "Measuring Progress in Societies" project which seeks to come up with a better measure of well-being. Shouldn't the UNDP be protecting its sole status as the leading purveyor of alternatives to income-based measures if its interest was in capturing rents from "ranking mania" spawned by the HDI?

(3) To imply that the HDI is a slight to economists because it emphasizes "human" instead of "economic" development is hard to justify. Who came up with the HDI in the first place? Those who are in the least bit familiar with the HDI know that the late economist Mahbub ul-Haq did together with Nobel Prize winner in economics Amartya Sen. As such, it is hard to argue that there was a slight intended when these well-respected economists came up with the HDI.

In conclusion, I would say that the HDI is neither dubious nor senseless. It is a compromised indicator of well-being and even its creators would not argue otherwise. Yet, the measure has done a number of things whose value is not controversial. Highlighting the multifaceted nature of human well-being at the international level is one. Even Posner admits, by using economic parlance, that income is not the only determinant of a person's utility function. (Money isn't everything.) The HDI should be seen in light of what it aims to do--quantify well-being even in less data rich developing countries--instead of just what it actually does. It is a stepping stone to more elaborate and hopefully more informative measures that Posner would like to see. as with what the OECD is working on in conjunction with the UNDP and others. Given this context, it does little good to knock well-intentioned initial attempts at developing more holistic measures of well-being. The HDI has been a legitimate and sensible step in the right direction.

As an expert in the field of law, Judge Posner should be exceedingly familiar with the importance of being well-briefed on the case at hand before making a judgment. Unfortunately, he seems not to have done simple research on the HDI which could have easily addressed his points on its acknowledged shortcomings. In light of the evidence, HDI is acquitted from charges that it is "dubious" and "senseless."