Towards a more ‘Sustainable’ Human Development Index: Integrating the environment and freedom

Abstract The Human Development Index (HDI) is one of the most widely used composite indicators of socio-economic development. However, the HDI is at the cross-roads. In order to retain its flagship role in the development arena, many scholars have called from the HDI to reinvent itself by adding sustainability dimensions. The aim of this paper is to introduce the Sustainable Human Development Index (SHDI), based on Multidimensional Synthesis of Indicators (MSI) – a new class of indexes that can be used for monitoring Sustainable Human Development (SHD). The approach we propose aims to address two primary issues regarding the HDI. The first issue involves the integration into the SHDI of two important sustainability-related dimensions that are missing in the HDI; namely, the environment and freedom (defined here in terms of political rights and civil liberties). The second issue focuses on the method of aggregation using the new class of indexes proposed. We aim to expand on the three standard HDI dimensions while avoiding problems associated with the geometric mean that tends to collapse to zero. In doing so, we manage to retain the same theoretical intuitions of the post-2010 HDI approach, i.e. to penalize the heterogeneity of outcomes. Moreover, we rely on the flexibility of the MSI approach to develop another index, the Environmentally-centered Sustainable Human Development Index (ESHDI), which puts the environmental dimension at the core of the analysis. In the first part of the paper we introduce the theoretical debate on the multidimensionality of the HDI, and consider the two new dimensions of sustainability, as well as the MSI aggregation approach. In the second part, the SHDI and the ESHDI are introduced, tested through a simulation analysis, and are compared with the HDI geometric mean using 2013 data. The simulations and the results of the empirical analysis show how the new class of indexes provide a more flexible approach to the procedure of aggregation, especially when the number of dimensions increases and/or when there is the need to stress the importance of one or more dimensions. The introduction of the two environmental and freedom sustainability dimensions greatly increases the potential of the HDI to address the SHD paradigm by capturing two core issues for the humanity and its common future.