ProgressVote: Summary of composite index-problems

Main problems with composite indices
What dimensions to use

The constructor of a social-progress index must decide which dimensions to use. This is an arbitrary choice. The Human Development Index, for example did not consider “inequality” as separate aspect of development (arbitrary?), now it was just added (arbitrary?).

What proxies to use

Dimensions of social progress cannot be measured directly, one needs proxies. But is life expectancy or infant mortality a better proxy for health? Indices “pick one”.

What weights to attach

Given dimensions and proxies the big question is: What weights to attach to each of them in composing the index. HDI, for example, picks 1/3 for each dimension, Yourtopia suggests people would not.

Non-marketed values

The urge for an indicator of development beyond-GDP arises due to the inability of markets to adequately measure all values. Composite indicators, however, need money-valuations to have everything in one unit. Techniques exist (1,2) for hence creating simulated market-valuations (shadow prices) but are regarded as generally problematic.

More info

 * Stiglitz, Sen, Fitoussi et al (2009); e.g. p. 237ff
 * Ravallion (2010), here in blog version

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