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Assessing Development

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There are a number of possible purposes in assessing the level of economic development of a country or part of a country. The assessment may provide an incentive for better development, particularly if it can be compared meaningfully with assessments for other countries.

It may help evaluate the effectiveness of economic policies and institutions. It certainly speaks to the people at large, even if most are unsure quite what it is saying, and might well influence their votes and other political actions.

When we look at the level of development in a particular year, we may want to ask what good the economy has done that year; or a rather different question, how much its people have enjoyed themselves that year. GDP is, I think, supposed to measure the first of these. I suggest that aggregate consumption, private and public, is supposed to measure the second. There are other possibilities. The assessment need not come down to a single number. It could instead be a whole battery of numerical measures and verbal reports. But there is a demand for single numbers, and it is interesting to consider how far we might get without being too arbitrary. For many years, the UNDP has been publishing estimates of a Human Development Index, and more recently an Inequality-Adjusted Human Development Index. These are single numbers for each country each year. They try to allow for aspects of development that are generally perceived to be neglected by national income aggregates, namely health, education and inequality. They have not attempted to correct for the neglect of the environmental and resource effects of development, nor do they do anything about the labour, employment and security side of the living experience. The Human Development Reports have not neglected these aspects of development, but they have not yet found a way to incorporate them in the indexes.

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