The UN's Human Development Index: A Critique--Posner
When nations are ranked by gross national income per capita, the United States comes in sixth, after Luxembourg, Norway, Switzerland, Denmark, and Iceland, confirming one's general impression that the United States is the wealthiest large country; none of the countries ranked ahead of the U.S. have more than a fortieth of the U.S. population (Switzerland, the most populous of the group, has a population of 7.5 million). But when countries are ranked by the United Nations' Human Development Index, which rates 177 of the world‚Äôs 193 countries, the United States falls to 12, Denmark to 14, and Luxembourg to 18; and among the nations promoted above the United States are Australia, Canada, Sweden, Japan, the Netherlands, France, Finland, and Spain (in that order).
The composition of the Index reflects dissatisfaction with income as a measure of well-being. And of course it is a limited measure; income is not the only argument in a person's utility function. The Human Development Index is an attempt to develop a better measure of well-being. It is a composite of three indexes: GDP per capita (computed on a purchasing power parity basis, to correct for distortions introduced by using currency exchange rates); life expectancy at birth; and a combination of the adult literacy rate and the combined primary, secondary, and college/university enrollment rate, with the adult literacy rate being weighted twice as heavily as the enrollment rate. For each component index, the value of 0 is assigned to the minimum level of the development indicator (income, life expectancy, and enrollment) and 1 to the maximum, and each country's score is the percentage of the maximum level that it achieves. A country's Human Development score is the simple average of its scores on the three indexes.
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.
A less obvious objection, but a general problem with rankings, is that from a sensible evaluative standpoint the distance between ranks is more important than the number of ranks that separate two countries. The wealthiest nation has a per capita income twice as great as that of the 20th wealthiest nation. That is a big difference. But now consider life expectancy at birth. Japan is number 3 with a life expectancy at birth of 82 years; the United States is only number 44, with a life expectancy at birth of 78. A four-year difference in life expectancy is not trivial by any means; but compare it to the difference in per capita income between the third richest country, Switzerland, and the 44th, Palau: the Swiss income per capita is almost eight times as great as the per capita income of Palau.
If a country devotes resources to improving life expectancy, it has to give up some other good. It is hard to say that the United States is making a mistake in not spending more resources on extending life expectancy; many Americans think that we spend too much on health care already. One reason (though by no means the only one) that the United States ranks only 44th in life expectancy is that our large black population has an abnormally high death rate; the average life expectancy of black male Americans is only 69. This shockingly high death rate reflects deep-seated problems of American blacks that would probably cost an enormous amount of money to solve. The political will to expend those resources does not exist. This may be a misfortune, a tragedy, or even a sin, but to use it to push the United States down in an index of human development is a political judgment, rather than anything determined by neutral social science.
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.
But the more serious problem with rank ordering is the arbitrariness of weighting different quality measures to come up with a composite ranking. It is well illustrated by the college, law school, and business school rankings done annually by U.S. News & World Report. Unlike the UN, the editors of that magazine do not rank the different measures they use (such as SAT or LSAT scores and ratio of applicants to admits) equally; but the weightings are just as arbitrary. They are worse in one respect than the Human Development Index: they are manipulable. A school can (and many schools do ) increase its ratio of applicants to admits by blurring its admission criteria or reducing its application fee, thus increasing the number of applicants without increasing the number of admits. It is unlikely that a nation would try to improve its ranking in the Human Development Index by reallocating resources to activities that influence the rankings.