Troubling tradeoffs in the Human Development Index

The 20th Human Development Report introduced a new version of its famous Human Development Index (HDI), which aggregates country-level attainments in life expectancy, schooling and income. The main change was to relax the past assumption of perfect substitutability between its components. Most users will not, however, realize that the new HDI has also greatly reduced its implicit weight on longevity in poor countries, relative to rich ones. By contrast, the new HDI's valuations of extra schooling are now very high-many times the economic returns. An alternative index is proposed that embodies less troubling tradeoffs while still allowing imperfect substitution. (C) 2012 Elsevier B.V. All rights reserved.