What is the difference between human and economic development?

My answer on Quora:

When economic development is inclusive, the two can be thought to go hand in hand. This is largely because there is no precise definition of economic development. For example, take the Cambridge Dictionary’s definition:

The process in which an economy grows or changes and becomes more advanced, especially when both economic and social conditions are improved.

This definition is as broad as it comes. An economy that “grows” or “changes” or becomes more “advanced” means a lot of things. In the study of economic development, variables of interest include GDP growth, factor accumulation (including human capital which depends on education, experience, etc.), policy frameworks (like government subsidies to promote strategic sectors or public investment in infrastructure, health and education), strength and quality of institutions, and others.

Human development is a concept created to try to group all these factors into one place. The UN’s Human Development Index is made up of three dimensions: (1) Long and healthy life, (2) Knowledge, and (3) A decent standard of living. To improve the standard of living in a country, you often need an educated and healthy population. To acquire knowledge, you often need to invest resources and be healthy. To live a long and healthy life, you need to know what that entails and have the means to live that way. All three dimensions depend on each other. To this end, the concept of economic development and human development can be thought of in much the same way.

On the other hand, a useful distinction can be drawn from the two. If economic development occurs within a few sectors or segments of the economy, then broad-based ‘human development’ may not directly follow. For example, a country can pursue an industrial policy focused on manufacturing to drive growth and develop from low income to middle income without much need for skilled labor or investments in health and well-being. Such cases risk running into a middle-income trap. You can only go so far without developing effective institutions that help level the playing field and bring everyone on board. Daron Acemoglu of MIT and James Robinson of the University of Chicago brought this research into the mainstream with their book Why Nations Fail (summary).




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