4.8.3 Evaluating the Different Approaches (HL IB Economics)

Revision Note

Written by: Steve Vorster, Economics & Business Subject Lead

Reviewed by: Jenna Quinn, Head of New Subjects

All development indicators have limitations
Due to the multi-dimensional nature of economic development, it is necessary to use a range of indicators in order to gain insights into the many dimensions of quality of life, well-being, human development and happiness
Composite indicators provide better insight than single indicators
Single indicators can be useful in targeting just one aspect - or in prioritising different aspects of development
Qualitative data is used to measure many aspects of economic development and this can be subject to bias and errors in data interpretation
It requires time to gather qualitative data and this means that the data often lags reality by several years
Data collection and statistical reporting is subject to political agendas and often the data presented has to be questioned in light of these e.g. many Middle East countries moved from the bottom third to the top third in the Gender Inequality index (GII) in 2017, a very unlikely transition in such a short time period

The Advantages and Disadvantages of Using the HDI

Advantages

Disadvantages

It is a composite indicator which provides a more useful comparison metric than single indicators do
It incorporates three of the most important metrics for households i.e. health, education and income
It is widely used all over the world which provides an opportunity for meaningful comparisons
It provides a goal for governments to use when developing their policies e.g. it may help identify that the education levels are holding back improvements to the HDI and government policy can target that
It provides citizens with an understanding of how their quality of life compares to other countries

It does not measure the inequality that exists as it uses the mean GNI/capita
It does not measure or compare the levels of absolute and relative poverty that exist
For many countries it does not provide useful short-term information as gathering the data required for the calculation is difficult. This means the data often lags reality by several years

Data shows that economic growth often has a very positive impact on economic development
Economic growth can lead to higher income, however, the equity in the distribution of this income influences the level of economic development that occurs as a result
- Where the equity in distribution is higher, economic development is greater
- Where the equity in distribution is lower, economic development is lower
In most cases growth precedes development, but his is not always true e.g. Bangladesh used a range of strategies (including micro-finance) to transform the quality of life for many households
In some cases (usually in developing countries) economic growth is tied to one industry & generates so many negative externalities of production that the standard of living decreases for many even as growth increases

Last updated: 19 March 2024

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