I have to consider why we are so in love with GDP. In one of my previous articles I did hint about the non-prevalence of certain factors to the needs of the real human being. Alright, lets set apart the GDP. Is the larger determinant of welfare,HDI (Human Development Index), a perfect indicator ?
HDI might look like a good indicator for the general wellness of the population but what goes as a fallacy is that most of the countries with high HDI are countries that are developed. Iraq has a GDP growth rate of over 40% but its HDI could be a reverse scenario. Development may be one thing while the goals of development maybe another. Our current indicators stress on the development.
Where does development lead us to ?
Until the indicators are output oriented, calculating the total output in a period of time development will mean manufacturing of both tangibles and intangibles. As a contrast with what human development contributes to the basic understanding of the welfare in the society, GII (Global Innovation Index) presents us a different story. The high income countries have a median innovation lower than the developing countries. This can draw two analogies for us.
1. The capital investment – innovation ratio is higher in the developing countries than in developed countries or the countries with higher incomes.
2. This can be a result of the booming communications between dissimilar regions.
This represents how GDP and HDI indicators can be partly misleading when gauging the economy.
Can Global Innovation Index really gauge it all ?
Though the GII cannot be a complete measurement of all welfare and production combined, innovation does reflect a multiplicity of effects. Per Capita Innovation is somewhere where the health systems, education systems, traditional upbringing, social environment, the desire to develop, harmonious political climate can all affect the development in a country. (Albert Einstein can very well NOT be born in a war torn Somalia.)
This will also require classifying patent rights into certain levels.
Level 1 : No. of patents granted
Level 2 : No. of patents that cannot be put to revolutionary usage and thus disqualify themselves to be worth a patent right.
Level 3 : No. of patents applied by individuals with relation to their age (i.e) the value of ideation in ratio with the age of the applicant or with the education of the applicant
Now when we have to define the Per Capita Innovation we can say :-
PCIn = Level1 / Total Population × Level 2 / Total Population × Level 3 / Total Population
When we are able to analyze how much of the real brain work a citizen contributes to the country, which I cite as development, we can begin to forecast the changes that economy will foresee, the changes in its entrepreneurial ventures, climate effects on humans (a post on this soon) etc. The real problem of many indexation methods are that they continue to fail taking aspects which are vital and the Per Capita Innovation can be a better way to approach economic strength than a complete welfare or a production based index .