ECONOMICS - Chapter 2 (FYJC)

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Chapter 2: QUALITY OF
HUMAN LIFE
Introduction
A country is formed by the
people living in it.
When it is said that there
is development in the
economy,
it
should
obviously mean that the
quality of life of the
people in the economy is
improving.
Measurement
Previously
of
Economic
Development
Previously, economic development Gross
of any country was measured by National
gross national product and per Product
capita income
Per Capita
were Income
However, other factors
completely ignored and only
monetary or economic aspect was Other
given extreme importance.
Factors
–
Measurement of Economic Development - Recent
Recently there are two approaches developed by economist
to measure economic development in terms of quality of
life:
Physical quality of
life Index (P.Q.L.I)
Human
Development Index
(H.Q.I)
Physical quality of life
Index (P.Q.L.I)
Meaning of Physical Quality of Life Index
 Quality of life refers to overall well-being of people of a
country.
 It does not depend on economic factors but on sociopolitical factors like :
Environment
Social Security
National Security
Political Freedom
Overall Infrastructure
Indicators of P.Q.L.I
 Physical Quality of Life Index (P.Q.L.I) was developed by famous
economist Morris David in 1979 for 23 developed and developing
countries.
 Morris David used the following three indicators to prepare a
composite index known as Physical Quality of Life Index:
Life Expectant
Rate (L.E.I)
Infant Mortality
Rate (I.M.I)
Basic Literacy
Rate (B.L.I)
Indicators of P.Q.L.I
Life Expectant Rate
Infant Mortality Rate
Basic Literacy Rate
Any person above the age
of 7 year who can read
and write in any one
language with an ability to
understand it is
considered as literate
Average number of
year a person is
expected to live
Number of infants
dying within one
year of their birth
out of every 1000
births
As per 2011 Census
As per 2011 Census
As per 2011 Census
66.8
years
47 per
1000
74.04%
Calculation of P.Q.L.I
For each of the indicator, the performance of
individual country is rated on a scale of 1 to
100 where 1 represents the worst
performance and 100 represent the best
performance
Formula to obtain P.Q.L.I =
Example: Suppose, the L.E.I. for India is rated as 75, the I.M.I is
rated as 40 and B.L.I. is rated as 65, then the P.Q.L.I will be ?
Answer: 60 [(75+40+65)/3]
What are the advantages and limitation of P.Q.L.I ?
Physical Quality of Life Index (P.Q.L.I) is a composite indicator to
measure economic development of a nation.
P.Q.L.I is based on three indicators i.e. Life Expectancy Rate, Infant
Mortality Rate and Basic Literacy Rate
Advantage of P.Q.L.I :
Smart Code: AHEAD
A - Aspect of welfare has been considered
H - Helps the government for analysis
E - Easy to compare
A - Also Considers Distribution
D - Data required is easily available
Advantages of P.Q.L.I
A H E A D
Aspect of welfare has been considered
The three indicator i.e. life expectancy rate, infant
mortality rate and literacy rate very well represent
the welfare of the people of the country. A country
wherein all the three indicators are good can be
said to be a developed economy
Advantages of P.Q.L.I
A H E A D
Helps the government for analysis
P.Q.L.I helps to government to
understand the overall welfare in the
economy and how well its welfare
policies are being implemented. This
helps the government to take
corrective action.
Advantages of P.Q.L.I
A H E A D
Easy to compare
The method followed to measure
P.Q.L.I is standard for all the
countries. Therefore, it can be
used to make comparison
between countries and this helps
the relatively underdeveloped
countries to take corrective
measure.
Advantages of P.Q.L.I
A H E A D
Also Considers Distribution
The P.Q.L.I considers the distribution
of welfare in the country. A country
cannot have a high average of
literacy rate, life expectancy and low
infant mortality rate unless a large
part of the population is covered by
the
benefits
of
economic
development.
Advantages of P.Q.L.I
A H E A D
Data required
available
is
easily
The data relating to all the
three indicators is easily
available in the census report.
Therefore, measurement of
P.Q.L.I is a simple.
Limitations of P.Q.L.I
Smart Code: MAN
M - Many other factors have been ignored
A - All factors have been given equal importance
N - Not a proper measure of economic
development
Limitations of P.Q.L.I
M A N
Many other factors have been ignored
P.Q.L.I ignores many factors which
influence the quality of life such as
employment, housing, justice, social
security as well as human rights.
Limitations of P.Q.L.I
M A N
All factors have been given equal importance
P.Q.L.I is a simple average of literacy rate, infant mortality rate
and life expectancy rate i.e. all the factors have been giving
equal weight age. However, it is difficult to understand the
rationale behind giving equal importance to all factors.
Limitations of P.Q.L.I
M A N
Not a proper measure of economic development
P.Q.L.I. does not explain the structural change in the
economy of a country. Moreover, it does not at all
consider economic or monetary concept. Hence, it is a
poor measure of economic development as well as
economic growth.
Conclusion
Inspite of these drawbacks, P.Q.L.I. is considered
as an improvement over traditional measure of
economic welfare. However, recently developed
Human Development Index (HDI) is a better and
more refined version of P.Q.L.I.
Human Development
Index
What is Human Development ?
 United Nations Development Programme has defined human
development as a process of enlarging peoples’ choices and their
level of well-being.
 Human Development is measured by constructing Human
Development Index (H.D.I)
 According to Human Development Report, the three most
important choices of people are:
To lead a long and
To acquire knowledge To enjoy a decent
healthy life
standard of living
Importance of Human Development
Human development is extremely important and it
depends on much more than just growth of income.
Importance :
1. It is an End
2. Helps to control population
3. Increases efficiency
4. Other resources are better utilized
5. The society becomes healthy and safe
6. Conservation of environment
Importance of Human Development
It is an End
Helps to control population
Increases efficiency
Other resources are better
utilized
The society becomes healthy
and safe
Conservation of environment
Economic growth is the means
and human development is an
end. Economic growth enables
an economy to improve human
condition and enlarge the
choices of the people which
finally
lead
to
their
development.
Importance of Human Development
It is an End
Helps to control
population
Increases efficiency
Other resources are better
utilized
The society becomes healthy
and safe
Conservation of environment
Human development includes
providing better education
facilities. Educated people
understand the benefits of
having a small family. Increased
medical facilities help to
reduce the infant mortality
rate.
Importance of Human Development
It is an End
Helps to control population
Increases efficiency
Other resources are better
utilized
The society becomes healthy
and safe
Conservation of environment
With human development,
there is an improvement in
health,
nutrition
and
education. This helps to
increase
efficiency
and
productivity of labour.
Importance of Human Development
It is an End
Helps to control population
Increases efficiency
Other resources are The utilization of resources
better utilized
highly depends on
the
The society becomes healthy
and safe
Conservation of environment
efficiency of the human
resource. Since, the efficiency
of labour increases, other
resources are also better
utilized.
Importance of Human Development
It is an End
Helps to control population
Increases efficiency
Other resources are better
utilized
The society
becomes healthy
and safe
Conservation of environment
Educated people who are
bestowed with proper rights do
not get involved in anti-social
activities like riots, terrorism,
robbery etc. Therefore, a safe
and healthy society is created
Importance of Human Development
It is an End
Helps to control population
Increases efficiency
Other resources are better
utilized
The society becomes healthy
and safe
Conservation of
environment
Educated people are aware
about the negative effect that
over population, deforestation,
heavy industrialization etc have
on the environment. Therefore,
they make an extra effort to
save the environment.
What is Human Development Index ?
 Human Development is measured by constructing Human
Development Index (H.D.I)
 The Human Development Index (HDI) is a composite statistic of
life expectancy, education, and income indices used to rank
countries.
It was created by :
Pakistani economist Mahbub ul Haq
and Indian economist Amartya Sen
in 1990 and was published by the United Nations Development
Programme
How is Human Development Index calculated ?
H.D.I. makes it clear that income cannot be considered as a yardstick
for measuring human development because well-being depends on
use of income and not on level of income
For constructing H.D.I, we have to prepare index number for each
of the three dimensions of human development.
Sr. No
Dimension
1
Long and healthy life dimension
2
Knowledge dimension
3
Standard of living dimension
Index
Life Expectancy Index
Education Index
GDP per capita
Note: Education index is weighted average of adult literacy rate as well
as the primary, secondary and university enrollment ratio.
Calculating Human Development Index
In order to calculate the index, the following formula has been
derived:
Dimension Index =
Actual Value - Minimum Value
Maximum Value - Minimum Value
For the purpose of maximum value and minimum value, the
following table has been provided:
Indicators
Life expectancy at birth (years)
Adult literacy rate (%)
Combined gross enrollment (%)
GDP per capita (PPP US $)
Source : Human Development Report 2005.
Maximum
Value
85
100
100
40,000
Minimum
Value
25
0
0
0
Calculating Life Expectancy Index & H.D.I
Eg. If the actual life expectancy in India is 66 years, then the
life expectancy index will be calculated as follows:
Life Expectancy Index = 66-25 / 85-25 = 41/60 = 0.68
Finally, HDI is calculated by taking an average of three
dimension indices:
Life Expectancy Index + Educational
H.D.I =
Index + GDP Index
3
Classification of countries on basis of HDI
Human Development is measured by constructing Human Development
Index (H.D.I). The Human Development Index (HDI) is a composite statistic
of life expectancy, education, and income indices used to rank countries.
According to Human Development Report, 2005, different countries
are classified into 3 group of the basis of HDI in the following
manner:
Sr. No
Group
1
High HD group
2
3
Medium HD group
Low HD group
Range
Example
0.8 and
Norway, USA, Japan
above
0.5 to 0.8
China, Sri Lanka, India
Less than 0.5 Pakistan, Bangladesh
Limitations of Human Development Index
Human Development is measured by constructing H.D.I.
The Human Development Index (HDI) is a composite
statistic
of
life
expectancy,
education,
and
income indices used to rank countries
Limitations :
1. Many Factors are ignored
2. Problem of inequality is ignored
3. Imperfect index
4. Arbitrary use of Weights
Limitations of Human Development Index
Many Factors
are ignored
Problem of
inequality is ignored
Imperfect index
Arbitrary use of
Weights
Some critics are of view that
many indicators of human
development such as infant
mortality, nutrition, security
are totally neglected
Limitations of Human Development Index
Many Factors are
ignored
Problem of
inequality is
ignored
Imperfect index
Arbitrary use of
Weights
Since HDI is an overall
average, it reflects the
entire economy as a whole.
HDI of a country neglects
the problem of inequality. It
treats all people and all
regions at par
Limitations of Human Development Index
Many Factors are
ignored
Problem of
inequality is
ignored
Imperfect
index
Arbitrary use of
Weights
Dimension
Long & Healthy
Life
Indicators
Life
Expectancy
at birth
Dimension
Index
Health
Index
Knowledge
Mean yrs
of
schooling
expected yrs
of schooling
Education
Index
Decent std
of living
GNP per
capita
Income
Index
Human Development Index
According to Prof. Amartya Sen, a
Nobel Laureate, the HDI is an
imperfect index which tries to catch
complex
reality
of
human
development in one simple number
Limitations of Human Development Index
Many Factors are
ignored
Problem of
inequality is ignored
Imperfect index
Arbitrary use of
Weights
The HDI uses weighted
average but it does not have
any fruitful impact on
measurement. The use of
weights is arbitrary
Human Development Index of India
 India ranks 136 among 186 countries on its Human
Development Index (HDI) as per the Human
Development Report 2013 published by the United
Nations
 The HDI value of India is 0.647
 China has been ranked much higher than India
 The reason for the low ranking is obvious as India
compares poorly with other countries on indicators such
as life expectancy, education and per capita income
Indicators for Human Development Index of India
Life Expectancy
As per the Human Development Report, 2011, the life
expectancy in India is 65.8 years (65.77 for males, and
67.95 year for females). When compared to European
countries, it is very low.
Literacy Rate
The literacy rate in India in 2011 was 74.4% (82.14%
for males and 65.45% for females). This is much lesser
than developed nations. Also, average number of a
years spent by a person in school is 10.3 years in India
compared to global average of 15 years
Poverty
There are still 400 million people in India below the
poverty line. A lot of people do not have access to
clean water and proper sanitation facilities
Human Development Index of India
Over 20 years since the beginning in 1990, HDI value has
increased more than double i.e. from 0.301 to 0.647. We
are currently in the medium HDI group and it will take us a
long time to reach the high HDI group.
Human Development Index Value In India (only for your
reference)
Year
1990
2002
2010
HDI Value
0.301
0.577
0.647
Source – Human Development Index Report 2013
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