Surviving Economics

So I started studying for my exam on Monday and you know how it goes, right?  Studying for an exam cannot not include the urge to check all your virtual accounts. Except this one just made me realize I wasn’t doing a very good job at surviving Master’s. So, here is my second post about what I learn in class.

So what I learnt today is a little about the Human Development Index (HDI).

So first, what is HDI? It is basically a country’s report card on human development. So the class is human development but what are the subjects? The subjects are long and healthy life, access to knowledge and decent standard of living. Now, why are these the subjects? Look, it kind of works like school. While calculus is a much more advanced form of maths, they don’t teach you that in first grade. Why don’t they? Because it will be hard to, perhaps even impossible. So they build the basics first. Similarly, while development includes way more than just these “subjects”, for instance it includes things like gender equality and political participation, it is currently hard to form an index based on ALL of those factors. So we start with the basics. How are these the basics? Because if you live only for say 20 years you will miss out on a lot of experiences, you will miss out on a lot of things you could have learnt and used at an older age but most importantly you probably wouldn’t even become capable enough to earn and feed yourself and thus, survive. Similarly if you live for as many years as you want but know nothing, you wouldn’t have developed, other people would be earning more and getting access to better expriences etc. And if you are poor, then you prolly can’t get enough food to be living a long and healthy life  or getting access to knowledge. So these form the base.

The second question is: how do you measure these things? How do you know someone is living a long and healthy life? You know this by looking at their life expectancy. What life expectancy does is this- when a baby is born, you look at things like how long he was in mommy’s tummy, how much food mommy got, how much food the baby is likely to get, how long did other people born and brought up in the same conditions as this baby live. And based on that information, you predict how long the baby will live. When you do this for different babies and take the average, you get a general idea of how long people tend to live in that country. 

How do you know how much access someone has to knowledge? What is knowledge? knowing things. How do you know things? You learn them somewhere. Where do you learn mostly from? School. Bingo. So you calculate how much time people from a country spend in school on an average. For people who’re now out of school, you calculate how much time they spent in school i.e mean years of schooling and people who are not, you calculate how much time they are likely to i.e expected years of schooling. 

How do you know someone has a decent sandard of living? When can you have high standards of living? When you can spend on anything you want. And when can you do that? When you have money. So this one is measured by how much income people in a country on average have.

Again, you take an average of these three and you get your country’s HDI. It gives you your rank among all countries.

Now here are a few facts I learnt:

1. HDI uses GM instead of AM. Because airthmetic mean means the three subjects are perfect substitues, which is not the case.

2. The indices are normalized. Normailzation is the process of transforming our index from its values to values between 0 and 1. This is done so as to set goalposts.

3. Literacy rate used to be the measure of access to knowledge, this has been changed because it is a binary variable with no gradation and is inadequate in measuring level of knowledge achievement.

4. 2010 and 2011 ranks are not comparable due to data revisions and addition of 18 more countries to the list.

5. India is in the medium to low human development quartile, it’s current HDI is 0.54 and rank is 134 out of 183 countries. (Sri Lanka is 37 ranks higher).