The ‘Troubling Tradeoffs’ Paradox and a Resolution

22 Pages Posted: 28 Aug 2017

See all articles by Eduardo Zambrano

Eduardo Zambrano

California State Polytechnic University, San Luis Obispo - Economics

Date Written: September 2017

Abstract

Ravallion ([Ravallion, M., 2012a]) argues that the Human Development Index (HDI) embeds questionable tradeoffs between the dimensions used to compute the index. To alleviate these problems he proposes the adoption of one of the indices developed by Chakravarty ([Chakravarty, S., 2003]). In this paper I identify the following paradox: while the Chakravarty indices clearly exhibit more sensible tradeoffs than the HDI, the HDI produces more sensible rankings than the Chakravarty indices. To solve the paradox I identify the axioms behind each methodology responsible for the unintuitive tradeoffs and rankings and illustrate how to develop an index with these questionable axioms removed. This approach can result in methodologies that exhibit more intuitive tradeoffs by design, as it seeks inputs from the public as to what those tradeoffs ought to be, and produces rankings that are more in line with what the HDI wishes to measure: human development and capabilities, as conceptualized by Sen ([Sen, A., 1985]).

Keywords: capabilities approach, Human Development Index, measurement of human development

JEL Classification: D63, I31, O15

Suggested Citation

Zambrano, Eduardo, The ‘Troubling Tradeoffs’ Paradox and a Resolution (September 2017). Review of Income and Wealth, Vol. 63, Issue 3, pp. 520-541, 2017. Available at SSRN: https://ssrn.com/abstract=3026857 or http://dx.doi.org/10.1111/roiw.12235

Eduardo Zambrano (Contact Author)

California State Polytechnic University, San Luis Obispo - Economics ( email )

Orfalea College of Business
San Luis Obispo, CA 93407
United States
805-756-5327 (Phone)
805-756-1473 (Fax)

HOME PAGE: http://calpoly.edu/~ezambran

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