[N] Human Development and Institutions
Coordinators: Pasquale De Muro
University of Rome Tre, Italy
German Development Institute, Germany
According to the United Nation Development Programme (UNDP) definition, which takes inspiration from Amartya Sen’s work, human development is a process of enlarging people’s choices and it is achieved by expanding human capabilities and functioning. Clearly, Human Development and Institutions, defined as “a set of social rules that structure social interactions”, are strongly linked.
In order to expand human capabilities institutions are needed. Moreover, institutions need to be rightly oriented, providing opportunities to poor and to people in general. Values and social norms such as equality, solidarity and cooperation shape formal institutions and choices. In turn, capabilities are enlarged by institutions. In fact, institutional policies, consequence of prevalent norms and institutions, would allow for improving the three essential capabilities for human development: i.e. leading long and healthy life, being knowledgeable and having a decent standard of living. If these basic capabilities are not achieved, many choices are simply not available and many opportunities remain inaccessible.
The research area proposed, i.e., Human Development and Institutions, will try to fill a vacuum in the EAEPE Research areas. Recently this approach has been used by several heterodox economists and scholars, as an useful means not only for the analysis of developing economies but also for transition economies and large part of population in developed economies (see Heterodox Economics Newsletter, Issue-35, November 20, 2006, by Lee Frederic). A Human development approach questions the neoclassical assumption that GDP is the best indicator of people well-being. Theoretical and empirical evidences of this critic abound today in the economic literature.
In fact several problems can arise with the use of GDP. Firstly, GDP per capita is an average indicator and does not represent the personal level of income or the distribution of income. Secondly, GDP is a hardly comparable indicator among countries, since it is a weighted sum of goods and services, where the weights are the prices which can vary consistently among countries. Moreover, GDP does not include non-market transactions. Therefore we need some indicators which can tell us more about the real life condition of people: ie., health, education, access to resources, etc.
A Human Development approach
A Human Development approach proposes more sophisticate and interdisciplinary tools and methodologies able to enrich the heterodox streams of development. First of all, it proposes some indicators which can better capture the “development” of people generally speaking. Morris (see Morris D.M., (1979). Measuring the condition of the world’s poor: the physical quality of life index. NY Pergamon Press) was among the first to elaborate an index of socio-economic development (“the physical quality of life index”), which was built on the basis of three indicators, i.e.: infant mortality, literacy and life expectancy.
Performances of countries in terms of GDP can be very different from basic development indicators. The United Nations (UN) were always very sensitive about the socio-economic development level reached by countries. According to the UN, it was clear that “development” does not mean “economic growth”. During the seventies, the UN started to study a different economic development approach according to which developing countries should satisfy some “basic needs”, through public policies. A subsequent theoretical contribution by Amartya Sen (see Sen A., (1981). Poverty and Famines: An essay on entitlement and depression. Sen A., (1985). Commodities and Capabilities, Amsterdam: North Holland. Sen A., (1987). The standard of Living, Cambridge: Cambridge University Press.) and his “capability approach” was crucial to further investigations into development indicators. In 1990, the UNDP published its first Human Development Report where an index of human development (HDI) was presented.
The UNDP Human Development Index is a composite index, ranking between 0-1. It is the combination of two non-income dimensions of people’s life and one income dimension. The first one is life expectancy at birth which also reflects infant mortality. The second one is educational attainment which is a combination of primary, secondary and tertiary educational level and adult literacy rate. The third element is an adjusted GDP index which reflects income per capita measured in Purchasing Power Parity (PPP) at US$.
A great deal of empirical evidence shows that both in developing and in developed economies some countries have relatively high GDP per capita but very low indicators of development such as literacy, access to drinking water, rate of infant mortality, life expectancy, education, etc. This is in part due to the fact that wealth is unequally distributed. Vice versa, there are cases of relatively low GDP per capita and high indicators of development in countries where income is more equally distributed. As a result, the UNDP taxation of Human Development Indexes and GDP rank is not at all coincident.
Suggestions for fields of research
Combining institutional analysis and human development is an ambitious objective which the proposed research area aims to. Further analysis of the relation between institutions and human development is needed. Institutions matter, but which one? How? Theoretical and empirical problems that need to be addressed include:
- Is human development is a consequence of GDP growth or can one have GDP growth without human development?
- Conversely, is human development is a condition for economic growth?
- Is GDP growth is a means or a final aim?
- Is Human development is the final aim?
Countries of analysis can be developing and developed countries and transition economies, most of which, during the transition from planned to market experienced a dramatic worsening of human development indicators. Finally, improvement of the human development indicators, methodological aspects, and related interdisciplinary problems, would be important issues in the field.