Tuesday, July 8, 2003
previous entry | main | next entry | TrackBack (0)
The 2003 Human Development Report
Powerful stuff, somewhat vitiated by the UNDP's atrocious track record in statistical methodology. [How does that matter?--ed. I'm glad you asked.]
As recently as last year, the Human Development Report used currency market exchange rates, rather than purchasing power parity (PPP) exchange rates, to measure income disparities across nations. There is a consensus among economists that PPP exchange rates are far more accurate at converting income across countries (long story short, PPP rates cover nontradeable services better). Market exchange rates drastically understate the size of developing country economies.
By using market exchange rates, the Human Development Report concluded that global income inequality was vastly increasing. In committing this methodological sin, the UNDP provided prestigious but factually incorrect ammunition for anti-globalization activists. One could go even further to argue that in muddying up the clear positive correlation between globalization and reductions in global income inequality, the UNDP set back the development debate by half a decade.
This screw-up eventually led to the creation of a UN commission to study such gross statistical whoppers, but as of last year, no change in their calculation of income inequality.
According to their web site, Jeffrey Sachs is guest editor of this year's HDR. The general consensus is that Sachs is not an idiot, and this note suggests that the 2003 report should be an improvement over its predecessors.posted by Dan on 07.08.03 at 05:07 PM