the well-being of people varies greatly
across the world so how can we measure
well-being in a way that reflects the
quality of people's lives does income
equate to well-being gross domestic
income or GDR a is often used as a
measure of well-being sweden in the
united states have similar GDI per head
and yet the experience of well-being
particularly among the poor in these
societies is very different dr. crystal
Lunt works in a special ward for
chronically ill homeless people in
Sweden our ward was created for those
too ill through drug abuse or mental
illness to partake in Sweden's generous
welfare and health care systems because
the main part of these homeless people
we have in Sweden they are M on drugs
and have psychiatric diseases or one of
these or both and they are really sick
dr. lund works with the most difficult
patients imaginable with psychosis
addiction and chronic illness they can
come in however they are because they
are very severe sickness nuh so the
alternative is to throw them out in the
street again and that's not very
feministic so
in the USA around fifteen percent live
in poverty and there are estimates that
three-quarters of a million are homeless
anywhere from a half a million people
every night are without shelter to maybe
2 million people the estimates are
really wide because again the data is
not that great but somewhere between a
half and two percent probably of the
population are either experiencing
homelessness or will soon or have in the
very recent past in the US the
government plays a relatively small role
in dealing with homelessness funding for
the homeless comes largely from charity
the country has a lot of wealth
relatively speaking when you think about
just square footage of housing per
person the fact that there's so many
people who sleep on the streets because
they can't find shelter it just doesn't
seem right so as a responsibility as a
community to take care of that the
people who can't find shelter when
there's so much shelter that could be
available I think it's the right thing
for a community to do the shelter for
the homeless receives most of its
funding from private donations the
government's aren't providing for a
whole lot of money towards homeless
shelters we're tapping into the
community getting community dollars you
know individuals giving us checks for
fifty hundred dollars a month and we're
utilizing that to provide housing for
people in weather wise wouldn't have it
we rely to it timaya disgraceful a
disgraceful reliance on the generosity
of individuals in this country we don't
take care of our poor or afford them the
opportunities that would help them so
can we make realistic comparisons
between countries using such statistics
when there's so much variation it will
be
in among countries and within countries
GDI is most often used and many argue
that GDI is a good measure in market
societies because the prices people pay
for goods reflect the values people
place on those goods when we add up all
the output of the society and divide it
by the number of people the resulting
amount has a good claim to be a useful
measure of well-being
prices reflect the value we place on
output for instance a Mercedes has a
higher price than a Ford because we
value the engineering technology
aesthetics and style of the Mercedes
more let's look at how building and
consuming a car adds to the GDI this is
about 60,000 pounds worth of motor car
now want that 60,000 about 20,000 say
went on buying inputs from other
industries Bastille the rubber the
leather so what they did was to add
value of 40,000 pounds what do they do
with that 40,000 pounds some of it went
on wages some of it went on interest
payments some of it was profits to the
company which was distributed to the
shareholders in the form of dividends
and so on in other words all of the
value added represents somebody's income
the national product is identically
equal to the national income there are
many problems with using GDI as a
measure of well-being but some of the
main ones of these first it often fails
to pick up the problems created by
pollution and damage to the environment
these costs are not priced into
conventional GDR estimates second GDI /
head gives us a mean average standard of
living the modal living standard in most
countries is way below this with many
living in poverty what others are very
comfortably off the extent to this
problem varies considerably between
countries and we'll explore the issue
more fully in a later film
a third problem is the existence in some
societies of a substantial nan market
economy subsistence agriculture in many
less developed economies means that
people live at a higher standard of
living than implied by the GDI figures
such subsistence output doesn't appear
in the national accounts the simple GDI
measure doesn't tell you the kind of
output that's being produced income can
be used to build hospitals schools
universities parks which will still
further enhance people's lives and
well-being or it can be used to fight
wars build weapons of mass destruction
and the traffic of people and drugs it's
a very imperfect measure I mean it's
been born recognized but some of the
imperfections have become more important
over time we don't you measure the time
that people spend outside of working for
income it's always been true that a
large part of our time majority of our
time is spent not working for income but
spent it leisure activities taking care
of a family cleaning a house
conversations even taking care of
children etc another thing we don't
measure national income accounts
people's increase longevity of course we
measure the income if they're working
longer and they're getting more income
that comes in the fact that people put
an enormous value on living longer and
having higher quality lives and that
this has changed so much in all
countries of the world during the last
century and still changing that we don't
measure these are just a couple of
examples of things that we should
and could be measuring but we're not
doing that as yet largely as a result of
these problems with conventional GDI
estimates a relatively new measure the
Human Development Index or HD I was
launched in 1990 it's commissioned by
the United Nations and is launched every
year in a human development report that
tracks nations developing not only in
terms of production and commodities but
in terms of people's lives and
development it has grand claims to
putting people back at the center of the
development process rather than the
market it's great claim as an
improvement to GDI as a measure of
welfare is that it's a composite measure
looking at health and education as well
as income so it measures progress by
using a concept of development much
broader than that allowed by the GDP in
a moment we'll use our statistical
knowledge to see how it's calculated the
nice thing about the Human Development
Index is that it's simple to measure and
very easy to understand it takes a value
between zero and one where zero is utter
misery and one is some kind of utopia
not only does the index vary between
countries it varies over time
for example India has been developing
rapidly and moving up the rankings China
too has developed fast it's now a
country moving up towards the middle of
the HDI rankings so let's choose China
to see how the HDI is arrived at before
we do so we have to be clear about what
we mean by the geometric mean which is a
particular kind of mean average which
indicates the central tendency or
typical value of a set of numbers it's
similar to the arithmetic mean which is
what most people think of with the word
average except that here the numbers are
multiplied and then the nth root where n
is the count of numbers in the set of
the resulting product is taken for
instance the geometric mean of two
numbers say two and eight it's just the
square root of their product that is we
multiply 2 times 8 and take the square
root to give us 4 that's another example
the geometric mean of the three numbers
for one and one over 32 is the cubed
root of their product which would give
us a half the cubed root of 4 times 1
times 1 over 32 equals a half now we can
see how the HDI is measured the first
step is to create sub-indices of each of
the dimensions we have to set minimum
and maximum values or goal posts in
order to transform the indicators in two
indices between naught and one
once we have the minimum and the maximum
values we can calculate the sub-indexes
using the following formula
the dimension index is given us the
actual value minus the minimum value
over the maximum value minus the minimum
value
and then the actual HDI score is a
geometric mean of these three dimension
indices and the three indices are life
education and income and they are
equally weighted each having a weight of
a third
the minimum values are set at 20 years
for life expectancy nought for both
education variables and a hundred and
sixty three dollars for per capita gni
the maximum values are set to the actual
observed maximum values of the indicator
in whatever country they happen to be
let's see how that works out for China
the table shows the Chinese indicators
now the first step is to calculate the
life dimension index and the life
expectancy index is 73.5 as you can see
in the table for China minus 20 the
minimum value over 83.2 which is the
observed maximum value which in this
case happens to be for Japan minus
twenty our minimum value
and if we work that out it gives us
naught point 847 for China
now step two is to calculate the
education dimension index let's see how
we do that we take first of all the mean
years of schooling index which is 7.5
the Chinese value showed in the table
minus 0 / 13.2 which is the observed
maximum value which in this case happens
to be for the USA minus 0
which gives no point five six eight now
we need the expected years of schooling
index which is 11.4 for China minus zero
over 20.6 the observed maximum which in
this case is Australia minus zero which
gives us nor point 553 now we work out
the education dimension index which we
find by taking nor point 5 6 8 x naught
point 5 53 and now we take the square
root of that
so we then take that value minus 0 / nor
point 9 51 which is the observed maximum
value which in that case happens to be
New Zealand minus zero
which gives us an education dimension
index of 9.5 89
now we calculate the income dimension
index and here we use logs of the income
data
so the income index gives us the log of
7 to 63 that's the from the Chinese data
in the table minus the log of 163 which
is the observed minimum value which
happens to be in Zimbabwe
over the log of 10 8 to 11 that's the
maximum observed value for the United
Arab Emirates minus the log of 163
and that gives us a value of naught
point 584 for the Chinese income index
so our final step is now to calculate
the Human Development Index by combining
these three sub-indices so the HDI is
given in the following way we multiply
nor point 847 by northpoint 589 by
northpoint 584 and then take the cubed
root of their product and it gives us
not point 663
so this HDI value for China puts it well
below the Scandinavian countries in the
rankings but well above many less
developed nations even if you think that
HDI is an improvement over using
national income statistics this is a
problem and the problem is that it's
still essentially arbitrary why are we
choosing this particular set of weights
rather than another there's also the
problem that it's still a mean average
within a society there can be huge
variations in experience of health
education and living standards in much
the same way that mean average wealth
data tends to hide a very uneven
distribution of wealth do you see the
use of the Human Development Index as
being a better way than national income
accounts of trying to assess the level
of income that people have now really I
mean it's it's hard as in the right
place that is it's trying to get at
things like health and education any
income but it doesn't have a method or
has an arbitrary method of combining
them into a single index it usually
waits them equally the changes equally
and then adds them together and that
doesn't make any any any economic sense
doesn't make any happiness sense you
have to think of a way how can we do
that in a way that's grounded in some
kind of basic analysis economic or
statistical analysis and there are ways
to do it what I don't like about the
human development in diseases they've
been developed is that they do it in
arbitrary way it's not based on anything
the United Nations recognizes the
limitations of HDI and is trying to do
something about it one particular recent
change has been with regard to the
distribution of income so they've tended
to move HDI down in countries where
income disparity is considerable it's
often the case that his economies grow
from low levels there's a widening
income disparity this happened in
Central and Eastern Europe after the
apps of communism there something
similar may well now take place in China
we started by saying that GDI has real
problems as an indicator of well-being
but so does HDI unless we know what
we're measuring we won't know what
significance to attach to any measure of
well-being but at least if we understand
the statistics we know exactly what
those limitations are you might like now
to do your own HDI calculations for your
own particular country
you