How, in fact, do we measure the degree of progress of a country? What factors should be considered by the indexes to define a country’s level of development? These two questions motivated the 21-year-old Sofia Lucena Cavalcanti, from Pernambuco, a student in the 4th semester of the Economics Undergraduate Program at Insper, to write a Scientific Initiation work entitled Humanization Process of Economic Development Measurement. The work aimed to find an ideal index or, at least, close to what can be considered ideal for measuring development.

 

As Cavalcanti wrote in her project, which was supervised by Professor Luciana Yeung, the Gross Domestic Product (GDP) and the Human Development Index (HDI) are contested “not because of economic inefficiency, but because of the disregard of items that are important to understand, in fact, the progress of a population”.

 

Ms. Cavalcanti explains that, even though the GDP is considered the most relevant index globally, it represents only the flow of production and services from a place in a given period. It is calculated as the sum of the final value of goods and services produced generally in a year. GDP therefore leaves out issues such as quality of life, health and education. “There are countries that are successful in these areas, showing a degree of development, but they are not among the richest”, Cavalcanti observed.

 

The HDI, which, in practice, ends up complementing the GDP, brings social data, considering income (associated with GDP per capita), education (education levels of the local population) and health (with an approach centered on the quality of life).

 

“But there is a catch: the HDI covers only a few aspects that influence development”, Cavalcanti analyzes. “Public safety, for example, is not considered. People don’t feel good in a country with a high murder rate”, she exemplifies. In terms of health, the HDI, in her view, should encompass issues such as nutrition and basic sanitation. “Brazil and Mexico are far behind in sanitation, with millions of people without access to this fundamental resource. This deficiency needs to be included in a progress index,” she concludes.

 

The ranking of happiness

 

Annually, the World Happiness Report, a publication by the UN Sustainable Development Solutions Network, highlights the happiest nations in the world. For this, it considers healthy life expectancy, GDP per capita, social support in times of difficulty, the degree of corruption and the level of social trust, generosity, and freedom. The data comes from global population surveys from around 150 countries. Finland appears at the top of the ranking of the 2022 edition, followed by Denmark, Iceland, Switzerland, and the Netherlands.

 

“I used the data from this happiness report as input for my index,” Cavalcanti explains. The difference is that she chose to use happiness as one of the factors that influence well-being. “Welfare is comprehensive because it brings together elements of interaction with the State, such as access to quality public services, including security and sufficient income to be included in society, in addition to the criteria considered by the World Happiness Report.”

 

Cavalcanti warns, however, that it is impossible to include all the elements and cites the Indian Amartya Sen, winner of the Nobel Prize in Economics in 1998, who participated in the creation of the HDI, alongside the founder of the index, the Pakistani Mahbub ul Haq. “Sen himself already said that the HDI would not be the first or the last index, since there will always be factors to be considered, bearing in mind the evolution of society in this context”. “Nowadays, with the technology of algorithms, we can measure an endless amount of elements.”



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