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The Human Development Index and the Inequality Human Development Index

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The Human Development Index and the Inequality Human Development Index Human development is defined as the process of enlarging people’s freedoms and opportunities and improving their well-being. Human development is about the real freedom ordinary people have to decide who to be, what to do, and how to live. The human development concept was developed by economist Mahbub ul Haq. At the World Bank in the 1970s, and later as minister of finance in his own country, Pakistan, Dr. Haq argued that existing measures of human progress failed to account for the true purpose of development—to improve people’s lives. In particular, he believed that the commonly used measure of Gross Domestic Product failed to adequately measure well-being. Working with Nobel Laureate Amartya Sen and other gifted economists, in 1990 Dr. Haq published the first Human Development Report, which was commissioned by the United Nations Development Programme. The Human Development Index was developed as an alternative to simple money metrics. It is easy-to-understand numerical measures made up of what most people believe are the very basic ingredients of human well-being: health, education, and income. The first Human Development Index was presented in 1990. It has been an annual feature of every Human Development Report since, ranking virtually every country in the world from number one currently Norway, to number 186 Niger. Like all averages, it conceals disparities in human development across the population within the same country. To account for this there is the Inequality-adjusted Human Development Index (IHDI). The IHDI takes into account not only the average achievements of a country on health, education and income, but also how those achievements are distributed among its citizens by “discounting” each dimension’s average value according to its level of inequality. While the HDI can be viewed as an index of “potential” human development that could be obtained if achievements were distributed equally, the IHDI is the actual level of human development (accounting for inequality in the distribution of achievements across people in a society). The IHDI will be equal to the HDI when there is no inequality in the distribution of achievement across people in society, but falls below the HDI as inequality rises. The loss in potential human development due to inequality is the difference between the HDI and IHDI, expressed as a percentage. In the 2013 United Nations Development Report the United States ranked number three on the HDI but number sixteen on the IHDI. Why was the effect of inequality was so striking in the United States? In high income countries, there are many countries in which the years of schooling that adults already have wouldn't vary that dramatically among, region, among gender, or ethnic minorities. In the United States, the opposite is true. All those variables have a huge effect. The average years of schooling that adults over 25 have in greater Boston as opposed to that in the Mississippi delta is going to be really different. The level of disparity is very unusual among high-income countries. The inequality-adjusted Human Development Index is an attempt to try to portray that. The United States isn't the only country that's affected but it's certainly one of the most seriously affected. To conclude this essay I will close with a quote that sums up why having something other than the HDI to measure development is necessary. ―The extent of real inequality of opportunities that people face cannot be readily deduced from the magnitude of inequality of incomes, since what we can or cannot do, can or cannot achieve, does not depend just on our incomes but also on the variety of physical and social characteristics that affect our lives and make us what we are.‖ (Sen, 1992 p.98)

Works Cited
SEN A. (1992) Inequality Reexamined. NY: Russell Sage Foundation.
UNDP (2012), The Real Wealth of Nations: Pathways to Human Development, Human
Development Report.

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