A Historical Balanced Human Development Index

Abstract

The Human Development Index (HDI) can be interpreted as a paternalistic social welfare function, derived directly from social indicators rather than from individual preferences. Although it ranks countries on the basis of aggregated measures, the HDI lacks a clear cardinal interpretation unless an objective meaning is assigned to the concept of human development. Drawing on the Atkinson-Kolm-Sen analytical framework, this paper introduces the Balanced Human Development Index (BHDI), which shifts the focus from the overall level of human development to its internal structure. The BHDI measures how closely observed outcomes approach the human development possibility frontier. While it remains paternalistic, the BHDI provides a consistent cardinal interpretation and allows for meaningful comparisons across countries and over time – even in contexts where the absolute HDI values are less informative. The BHDI index is governed by a single parameter that reflects the degree of aversion to imbalances across the different dimensions of human development. Its trajectory is not necessarily monotonic, even when the individual well-being dimensions are positively correlated. As a result, the BHDI reveals historical patterns that remain hidden when relying solely on the HDI. To illustrate its potential, this paper presents BHDI estimates for a selection of countries, using a comprehensive dataset provided by Leandro Prados de la Escosura.