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Maximizing human development
Author(s) -
Engineer Merwan,
King Ian
Publication year - 2013
Publication title -
canadian journal of economics/revue canadienne d'économique
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.773
H-Index - 69
eISSN - 1540-5982
pISSN - 0008-4085
DOI - 10.1111/caje.12021
Subject(s) - maximization , human capital , economics , proxy (statistics) , consumption (sociology) , index (typography) , econometrics , human development index , measure (data warehouse) , human development (humanity) , public economics , microeconomics , computer science , economic growth , mathematics , statistics , sociology , social science , database , world wide web
The Human Development Index (HDI) is widely used as a measure of well‐being. We examine the allocations implied by the maximization of this index using a standard growth model. Maximization 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 for the HDI, where consumption replaces income as a proxy for decent standard of living. Maximization of this alternative implies a ‘human development golden rule’ which balances consumption, education and health expenditure. We advocate the method of optimization subject to constraints for revealing the policy implications of taking an achievement measure and its underlying philosophy seriously.