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Maximizing Human Development

Merwan Engineer () and Ian King ()

Working Paper series from Rimini Centre for Economic Analysis

Abstract: The 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.

Keywords: Economic growth; Human Development Index; Planning (search for similar items in EconPapers)
JEL-codes: O15 O21 (search for similar items in EconPapers)
Date: 2012-06
New Economics Papers: this item is included in nep-dev and nep-hap
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Journal Article: Maximizing human development (2013) Downloads
Journal Article: Maximizing human development (2013) Downloads
Working Paper: Maximizing Human Development (2010) Downloads
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