Friday, September 17, 2010

Speaking of country rankings

The HDI has a hidden implication pointed out by the World Bank’s Martin Ravallion as long ago as 1997. Imagine the reaction to this hidden implication if they publicly announced it:
The UNDP announced today that they consider a human life in the USA to be 70 times more valuable than human life in the Democratic Republic of the Congo.
The other consequence of this hidden implication is that rich countries will get A LOT of credit for higher life expectancy (and not much for income). Scandinavia does very well on the HDI because its life expectancy is higher by 1 or 2 years than the US, even though US income is higher. Bryan Caplan suggests:
Scandinavia comes out on top according to the HDI because the HDI is basically a measure of how Scandinavian your country is. 
There’s an alternative to constructing murky indexes with dubious assumptions. This would be to be use people’s actual choices to infer which places are better. ... Instead of the US News convoluted rankings, why not just ask a student admitted to both Texas Tech and Harvard which one they would pick (or DID pick).  These are called “revealed preference rankings” and have actually been done for colleges.
Instead of Human Development Indexes, why not just ask migrants where they would choose to live (or do actually choose to live): US or Iceland? Iceland has a much higher HDI, but actually has out-migration, whereas I think there are a few people trying pretty hard to get into the US.

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