Maximizing Human Development
AbstractThe Human Development Index (HDI) is widely used as an aggregate measure of overall human well-being. We examine the allocations implied by the maximization of this index using a standard growth model. Maximization of the HDI leads to consumption (excluding education and health expenditures) being pushed to minimal levels. It also leads to the overaccumulation of education and/or health capital and possibly physical capital, relative to the standard golden rule. We propose an alternative speciﬁcation of the HDI, where permanent consumption replaces income as the proxy for a decent standard of living. Maximization of this alternative index yields a "human development golden rule" which balances consumption, education and health expenditure in promoting human development. We also advocate the method of optimization subject to constraints for revealing the consequences of taking a policy measure seriously and testing its congruence with its underlying philosophy.
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Bibliographic InfoPaper provided by The Rimini Centre for Economic Analysis in its series Working Paper Series with number 30_12.
Date of creation: Jun 2012
Date of revision:
Economic growth; Human Development Index; Planning;
Other versions of this item:
- O21 - Economic Development, Technological Change, and Growth - - Development Planning and Policy - - - Planning Models; Planning Policy
- O15 - Economic Development, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-06-25 (All new papers)
- NEP-DEV-2012-06-25 (Development)
- NEP-HAP-2012-06-25 (Economics of Happiness)
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