1. “Economic and Social
Indicators of Development”
Economic and social development can be called as sustainable development. Sustainable
development has been defined in many ways, but the most frequently quoted definition is
from Our Common Future, also known as the Brundtland Report:
"Sustainable development is development that meets the needs of the present without
compromising the ability of future generations to meet their own needs. It contains within it two
the concept of needs, in particular the essential needs of the world's poor, to which
overriding priority should be given; and
the idea of limitations imposed by the state of technology and social organization on the
environment's ability to meet present and future needs."
All definitions of sustainable development require that we see the world as a system—a
system that connects space; and a system that connects time.
When you think of the world as a system over space, you grow to understand that air
pollution from North America affects air quality in Asia, and that pesticides sprayed in Argentina
could harm fish stocks off the coast of Australia.
And when you think of the world as a system over time, you start to realize that the decisions
our grandparents made about how to farm the land continue to affect agricultural practice today;
and the economic policies we endorse today will have an impact on urban poverty when our
children are adults.
We also understand that quality of life is a system, too. It's good to be physically healthy, but
what if you are poor and don't have access to education? It's good to have a secure income, but
what if the air in your part of the world is unclean? And it's good to have freedom of religious
expression, but what if you can't feed your family?
The concept of sustainable development is rooted in this sort of systems thinking. It helps us
understand ourselves and our world. The problems we face are complex and serious—and we
can't address them in the same way we created them. But we can address them.
2. II. CONTENTS
What is Development?
Though the term development usually refers to economic progress, it can apply to political,
social, and technological progress as well. These various sectors of society are so intertwined
that it is difficult to neatly separate them. Development in all these sectors is governed by the
same principles and laws, and therefore the term applies uniformly.
Economic development and human development need not mean the same thing. Strategies
and policies aimed at greater growth may produce greater income in a country without improving
the average living standard. This happened in oil-producing Middle Eastern countries—a surge
in oil prices boosted their national income without much benefit to poorer citizens. Conversely,
people-oriented programs and policies can improve health, education, living standards, and other
quality-of-life measures with no special emphasis on monetary growth. This occurred in the 30
years of socialist and communist rule in Kerala in India.
Definition of Economic and Social Development
Development economics considers how to promote economic growth in such countries
by improving factors like health, education, working conditions, domestic and international
policies and market conditions. It examines both macroeconomic and microeconomic factors
relating to the structure of a developing economy and how that economy can create effective
domestic and international growth.
Social development, or social change, is the phrase that refers to the alteration of social
order within a society. It may also refer to the notion of sociocultural evolution, or ‘social
progress’. This is the philosophical idea that society always moves forward by dialectical means,
or evolutionary means.
Social Development Theory
Social development theory attempts to explain qualitative changes in the structure and
framework of society that help the society to better realize its aims and objectives. Development
can be broadly defined in a manner applicable to all societies’ at all historical periods as an
upward ascending movement featuring greater levels of energy, efficiency, quality, productivity,
complexity, comprehension, creativity, mastery, enjoyment and accomplishment. Development
is a process of social change, not merely a set of policies and programs instituted for some
specific results. This process has been going on since the dawn of history. But during the last
five centuries it has picked up in speed and intensity, and during the last five decades has
witnessed a marked surge in acceleration.
The basic mechanism driving social change is increasing awareness leading to better
organization. Life evolves by consciousness and consciousness in turn progresses by
organization. When society senses new and better opportunities for progress it accordingly
develops new forms of organization to exploit these new openings successfully. The new forms
of organization are better able to harness the available social energies and skills and resources to
use the opportunities to get the intended results.
3. Development is governed by many factors that influence the results of developmental
efforts. There must be a motive that drives the social change and essential preconditions for that
change to occur. The motive must be powerful enough to overcome obstructions that impede that
change from occurring. Development also requires resources such as capital, technology, and
Development is the result of society's capacity to organize human energies and
productive resources to meet challenges and opportunities. Society passes through well-defined
stages in the course of its development. They are nomadic hunting and gathering, rural agrarian,
urban, commercial, industrial, and post-industrial societies. Pioneers introduce new ideas,
practices, and habits that conservative elements initially resist. At a later stage, innovations are
accepted, imitated, organized, and used by other members of the community. Organizational
improvements introduced to support the innovations can take place simultaneously at four
different levels—physical, social, mental, and psychological. Moreover four different types of
resources are involved in promoting development. Of these four, physical resources are most
visible, but least capable of expansion. Productivity of resources increases enormously as the
quality of organization and level of knowledge inputs rise.
Development pace and scope varies according to the stage society is in. The three main
stages are physical, vital (vital refers to the dynamic and nervous social energies of humanity that
propel individuals to accomplish), and mental.
Limits to Development
The concept of inherent limits to development arose mainly because past development
was determined largely by availability of physical resources. Humanity relied more on muscle-power
than thought-power to accomplish work. That is no longer the case. Today, mental
resources are the primary determinant of development. Where people drove a simple bullock
cart, they now design ships and aircraft that carry huge loads across immense distances.
Humanity has tamed rivers, cleared jungles and even turned arid desert lands into cultivable
lands through irrigation.
By using intelligence, society has turned sand into powerful silicon chips that carry huge
amounts of information and form the basis of computers. Since there is no inherent limit to the
expansion of society's mental resources, the notion of limits to growth cannot be ultimately
Three Stages of Development
Society's developmental journey is marked by three stages: physical, vital, and mental.
These are not clear-cut stages, but overlap. All three are present in any society at time. One of
them is predominant while the other two play subordinate roles. The term 'vital' denotes the
emotional and nervous energies that empower society's drive towards accomplishment and
express most directly in the interactions between human beings. Before the full development of
mind, it is these vital energies that predominate in human personality and gradually yield the
ground as the mental element becomes stronger. The speed and circumstances of social transition
from one stage to another varies.
The physical stage is characterized by the domination of the physical element of the
human personality.During this phase, society is preoccupied with bare survival and subsistence.
People follow tradition strictly and there is little innovation and change. Land is the main asset
and productive resource during the physical stage and wealth is measured by the size of land
holdings. This is the agrarian and feudal phase of society. Inherited wealth and position rule the
roost and there is very little upward mobility. Feudal lords and military chiefs function as the
4. leaders of the society. Commerce and money play a relatively minor role. As innovative thinking
and experimental approaches are discouraged, people follow tradition unwaveringly and show
little inclination to think outside of established guidelines. Occupational skills are passed down
from parent to child by a long process of apprenticeship.
Guilds restrict the dissemination of trade secrets and technical knowledge. The Church
controls the spread of new knowledge and tries to smother new ideas that does not agree with
established dogmas. The physical stage comes to an end when the reorganization of agriculture
gives scope for commerce and industry to expand. This happened in Europe during the 18th
century when political revolutions abolished feudalism and the Industrial Revolution gave a
boost to factory production. The shift to the vital and mental stages helps to break the bonds of
tradition and inject new dynamism in social life.
The vital stage of society is infused with dynamism and change. The vital activities of
society expand markedly. Society becomes curious, innovative and adventurous. During the vital
stage emphasis shifts from interactions with the physical environment to social interactions
between people. Trade supplants agriculture as the principal source of wealth.
The dawning of this phase in Europe led to exploratory voyages across the seas leading to
the discovery of new lands and an expansion of sea trade. Equally important, society at this time
began to more effectively harness the power of money. Commerce took over from agriculture,
and money replaced land as the most productive resource.The center of life shifted from the
countryside to the towns where opportunities for trade and business were in greater abundance.
The center of power shifted from the aristocracy to the business class, which employed
the growing power of money to gain political influence. During the vital stage, the rule of law
becomes more formal and binding, providing a secure and safe environment for business to
flourish. Banks, shipping companies and joint-stock companies increase in numbers to make use
of the opportunities. Fresh innovative thinking leads to new ways of life that people accept as
they prove beneficial. Science and experimental approaches begin to make a headway as the hold
of tradition and dogma weaken. Demand for education rises.
As the vital stage matures through the expansion of the commercial and industrial
complex, surplus income arises, which prompts people to spend more on items so far considered
out of reach. People begin to aspire for luxury and leisure that was not possible when life was at
a subsistence level.
This stage has three essential characteristics: practical, social, and political application of
mind. The practical application of mind generates many inventions. The social application of
mind leads to new and more effective types of social organization. The political application leads
to changes in the political systems that empower the populace to exercise political and human
rights in a free and democratic manner. These changes began in the Renaissance and
Enlightenment, and gained momentum in the Reformation, which proclaimed the right of
individuals to relate directly to God without the mediation of priests. The political application of
mind led to the American and French Revolutions, which produced writing that first recognized
the rights of the common man and gradually led to the actual enjoyment of these rights.
Organization is a mental invention. Therefore it is not surprising that the mental stage of
development is responsible for the formulation of a great number of organizational innovations.
Huge business corporations have emerged that make more money than even the total earnings of
some small countries. Global networks for transportation and communication now connect the
5. nations of the world within a common unified social fabric for sea and air travel,
telecommunications, weather reporting and informationexchange.
In addition to spurring technological and organizational innovation, the mental phase is
also marked by the increasing power of ideas to change social life. Ethical ideals have been with
humanity since the dawn of civilization. But their practical application in daily social life had to
wait for the mental stage of development to emerge.The proclamation of human rights and the
recognition of the value of the individual have become effective only after the development of
mind and spread of education. The 20th century truly emerged as the century of the common
man. Political, social, economic and many other rights were extended to more and more sections
of humanity with each succeeding decade.
The relative duration of these three stages and the speed of transition from one to another
varies from one society to another. However broadly speaking, the essential features of the
physical, vital and mental stages of development are strikingly similar and therefore quite
recognizable even in societies separated by great distance and having little direct contact with
Moreover, societies also learn from those who have gone through these transitions before
and, therefore, may be able to make the transitions faster and better. When the Netherlands
introduced primary education in 1618, it was a pioneering initiative. When Japan did the same
thing late in the 19th century, it had the advantage of the experience of the USA and other
countries. When many Asian countries initiated primary education in the 1950s after winning
independence, they could draw on the vast experience of more developed nations. This is a major
reason for the quickening pace of progress.
Economic development ideally refers to the sustained, concerted actions of communities
and policymakers that improve the standard of living and economic health of a specific locality.
The definition of economic development given by Professor Michael Todaro is an increase in
living conditions, improvement of the citizens self-esteem needs and free and a just society. He
suggests that the most accurate method of measuring economic development is the Human
Development Index which takes into account the literacy rates & life expectancy which in-turn
has an outright impact on productivity and could lead to Economic Growth. However, economic
development can also be measured by taking into account the GDI (gender related index).
Economic development can also be referred to as the quantitative and qualitative changes
in an existing economy. Economic development involves development of human capital,
increasing the literacy ratio, improve important infrastructure, improvement of health and safety
and others areas that aims at increasing the general welfare of the citizens. The terms economic
development and economic growth are used interchangeably but there is a very big difference
between the two. Economic growth can be viewed as a sub category of economic development.
Economic development is a government policy to increase the economic, social welfare and
ensuring a stable political environment. Economic growth on the other hand is the general
increase in the country products and services output.
Economic development will only be successful if the whole nation is willing to give their
best efforts towards its achievement. A lot of theories have been forwarded by different schools
of thought about how economic development should be achieved. Many economists have
suggested that each country should try to achieve modernization and industrialization in order to
achieve economic development.
6. There seems to be a lot of correlation between economic growth and human
development. This can be explained by a simple example in an economy. We shall consider
economic growth as a prerequisite for economic development. Assume we have a household in
an economy that ekes their livelihood from a horticultural firm. Economic growth will bring
business opportunities to the country and the effects spills over to all sectors of the economy.
The firm will increase its profits which will in turn be used to pay for their generation education,
improve the access to health care for that family and will increase the general living standard of
the family. If this effect is replicated in each household overall economic development will be
Economic development leads to improvements in many sectors of a nation. There are a
variety of indicators that economist use to measure the level of economic development in a
country. The indicators are: declining poverty rates, increasing literacy rates, declining infant
morbidity and increasing life expectancy. Economic development has to be supported by the
whole nation from economists, politicians, and also civilians. Thus it can be concluded that,
economic development leads to the creation of more opportunities in the sectors of education,
health sector, research, human development and environmental conservation. It equally implies
an increase in the per capita income of every citizen.
Economic development is the development of economic wealth of countries, regions or
communities for the well-being of their inhabitants. From a policy perspective, economic
development can be defined as efforts that seek to improve the economic well-being and quality
of life for a community by creating and/or retaining jobs and supporting or growing incomes and
the tax base.
There are significant differences between economic growth and economic development.
The term "economic growth" refers to the increase (or growth) of a specific measure such as real
national income, gross domestic product, or per capita income. National income or product is
commonly expressed in terms of a measure of the aggregate value-added output of the domestic
economy called gross domestic product (GDP). When the GDP of a nation rises economists refer
to it as economic growth.
The term "economic development," on the other hand, implies much more. It typically
refers to improvements in a variety of indicators such as literacy rates, life expectancy, and
poverty rates. GDP is a specific measure of economic welfare that does not take into account
important aspects such as leisure time, environmental quality, freedom, or social justice.
Economic growth of any specific measure is not a sufficient definition of economic
The term "economic development" is often used in a regional sense as well (e.g., a mayor
might say that "we need to promote the economic development of our city"). In this sense,
economic development focuses on the recruitment of business operations to a region, assisting in
the expansion or retention of business operations within a region or assisting in the start-up of
new businesses within a region. (See section 'regional policy' below.)
In addition to economic models, the needs of constituency groups guide economic
developer's actions. For example, a local economic developer working out of a mayor's office
may act towards decreasing unemployment by attracting businesses with large labor needs (call
centers). The economic developer working for the chamber of commerce dominated by banks,
real estate agents and utilities will recruit manufacturers with large capital investments (steel and
chemical plants). The economic developer working for the state manufacturers association will
lobby for more workforce training money. The economic developer working for a university will
7. concentrate on business start-ups, specifically those based on intellectual property developed by
the university (biotech).
In its broadest sense, economic development encompasses three major areas:
1) Policies that governments undertake to meet broad economic objectives such as price
stability, high employment, expanded tax base, and sustainable growth. Such efforts include
monetary and fiscal policies, regulation of financial institutions, trade, and tax policies.
2) Policies and programs to provide infrastructure and services such as highways, parks,
affordable housing, crime prevention, and educational programs and projects.
3) Policies and programs explicitly directed at job creation and retention through specific
efforts in business finance, marketing, neighborhood development, small business start-up and
development, business retention and expansion, technology transfer, workforce training and real
estate development. This third category is a primary focus of economic development
The concept of economic development is often misunderstood. Many times the term is
confused with economic growth to define any type of money generating activity in the
community. To further cloud the issue, there is no one prescription for economic development
that will full-fill the needs of all communities. Successful economic development is a process
that fills different needs for different communities at different times. Its success is often case
specific, depending on the development goals, implementation and funding resources available.
Communities need to thoroughly understand the process before jumping onto the economic
development bandwagon. The results of misunderstanding the process can be misunderstanding
by the community and political gridlock in the bureaucracy.
It can be defined as "a sustained community effort to improve both the local economy
and the quality of life by building the area's capacity to adapt to economic change". This
definition suggests a distinction between economic growth and economic development.
Economic growth represents an increase in jobs and income in the community. It refers to the
expansion of total economic activity in the community. While economic development can
involve job and income growth, it also involves sustainable increases in the productivity of
individuals, businesses and resources to increase the overall well being of residents and
maintaining or even enhancing the quality of life. Economic development refers to the
enhancement of economic activity in the community. Economic growth is generally a short run
concept while economic development is a long term commitment. To illustrate this point, say
there are an increasing number of jobs in a local economy. This may represent economic growth,
but if the new jobs do not pay wages that residents can afford to live on, the growth may not
represent economic development. However, this short run economic growth could also be a short
run objective of a long-term plan of economic development.
Strategies for Community Economic Development
The strategies a community selects for its economic development effort depends on the goals,
values and resources available to the community. There are five general categories of strategies
for local community economic development.
Improve Efficiency of Existing Firms: As firms become more efficient, they become
more competitive in the regional, state and national markets. The greater their efficiency,
the more revenue they can bring into the local economy. In addition, the ability to stay
competitive is a firm's best guarantee of being able to stay in business and expand.
Efficiency is just as important to firms industries with declining employment. The most
efficient firm can survive the longest. An example of a community action to assist
8. businesses in improving their efficiency would be organizing educational programs to
strengthen the management capabilities of existing firms.
Improve Ability to Retain and Capture Dollars: In every community, self employed
individuals, workers, retirees and businesses of all types control substantial amounts of
money with which they make purchases. Every one of these dollars spent in the
community adds to the community's employment and income. At least some of these
dollars will be re-spent in the community adding additional employment and income. In
contrast, dollars spent outside the community do not add to the community's employment
and income. From another perspective, thousands of people pass by most communities on
highways or to visit nearby tourist attractions each year. The dollars spent locally by
nonresidents can be as valuable to the local economy as those generated by the exports of
raw materials or manufactured goods. Improving the community's ability to retain local
expenditures and capture nonresident dollars will enhance the local economy. Examples
of community actions to improve retention and capture dollars include: a) Surveying
consumer needs and buying habits to identify market potential, and b) Developing
appropriate promotion and advertising programs to generate more purchases by non-local
Attract New Basic Employers: In order to initiate economic activity, a community needs
to have some businesses that bring in outside revenues through the sale of their products
or services outside of the local economy (basic employers). Attracting new basic
employers will not only add employment and income directly to the local economy, but
also indirectly through re-spending with other local businesses. Basic employers can
include manufacturers, tourism attractions, financial firms, computer services,
warehouses and state and federal government agencies. An example of a community
action to assist in attracting new basic employers would be developing inventories of
local industrial, office and commercial sites along with information on public services
and available labor.
Encourage Business Formation: There is a continuing need for new businesses to meet
the changing demands resulting from population growth or evolving goods and services
(video recorder, outpatient care or fast food for example). A new business start-up can
mean new income and employment as well as expanded trade with other local businesses.
It can also capture sales that might otherwise go to other communities. An example of a
community action to assist in business formation is to provide counseling and intensive
education for those interested in forming new businesses.
Increase State and Local Funding: A community may want to strive to get back some of
the dollars taxed away by the state and federal government and perhaps acquire tax
dollars from other areas of the state or nation. State and federal agencies can be major
employers providing good paying jobs. In addition, they have a variety of programs that
provide funding to local governments and residents. Social security, Medicare and
Medicaid payments are major sources of personal income in most communities.
Communities may want to at least be aware of the importance of state and federal
government funding to their local economy and consider the potential for expanding this
funding. An example of a community action to increase state and federal government
revenues is developing procedures to actively monitor government programs to obtain
assistance whenever it is appropriate.
A Toolbox for Community Economic Development
In community economic development, the regional economist has at his/her disposal a set of
tools to analyze the regional economy to determine the economic development needs of the
community. These tools include:
9. Impact models: Can be constructed on the county, regional, state or level national.
Models show how dollars flow through the economy and the impact in a change in the
level of economic activity.
Budgeting for public services: Changes in the level of economic activity will result in
changes in demand for public services. Budgeting can be used to forecast changes in
Business retention and expansion: These programs can target specific businesses to
retained or expanded in a region.
Industry targeting: Communities can select what types of businesses that they would like
to attract and make the resources available to them.
Social Development Overview
Putting People First
In social development, we adopt an approach that focuses on the need to “put people
first” in development processes. Overcoming poverty is not just a matter of getting economic
policies right - it is also about promoting social development, which empowers people by
creating more inclusive, cohesive, resilient, and accountable institutions and societies.
Sustainable development requires balancing the needs of present and future generations
and has become a rapidly growing global concern. Three critical factors - economic, ecological,
and social - take a central place in discussions of growth and poverty-reduction. Social
sustainability is a critical aspect of achieving long-term development that significantly improves
the lives of the world’s poorest people.
Development experiences from client countries of both the International Bank for
Reconstruction and Development (IBRD) and the International Development Association (IDA)
have shown that overcoming poverty requires more than getting economic policies right. Many
of these societies are torn by conflict, fragility and violence, or beset by inequality of opportunity
based on gender, race, ethnicity or other factors. Governance problems such as corruption and
lack of citizen voice and engagement afflict many societies and nations, undermining public
participation in decision making that affects communities’ futures.
There are several challenges affecting the World Bank’s client countries, such as: the
issue of social inclusion, enabling the vulnerable and marginalized segments of society to have a
say in defining their development paths; the increasing global consciousness of the challenge of
climate action and its social dimensions; an increasing focus on the problems of "fragility" - of
countries, states and societies - and the implications for poor people; increasing urbanization and
its impact on developing societies; and revolutionary changes in information and communication
History of Economic Development
Economic development originated in the post war period of reconstruction initiated by
the US. In 1949, during his inaugural speech, President Harry Truman identified the
development of undeveloped areas as a priority for the west:
“More than half the people of the world are living in conditions approaching misery.
Their food is inadequate, they are victims of disease. Their economic life is primitive and
stagnant. Their poverty is a handicap and a threat both to them and to more prosperous
10. areas. For the first time in history humanity possesses the knowledge and the skill to
relieve the suffering of these people ... I believe that we should make available to peace-loving
peoples the benefits of our store of technical knowledge in order to help them
realize their aspirations for a better life… What we envisage is a program of development
based on the concepts of democratic fair dealing ... Greater production is the key to
prosperity and peace. And the key to greater production is a wider and more vigorous
application of modem scientific and technical knowledge."
There have been several major phases of development theory since 1945. From the 1940s
to the 1960s the state played a large role in promoting industrialization in developing countries,
following the idea of modernization theory. This period was followed by a brief period of basic
needs development focusing on human capital development and redistribution in the 1970s. Neo-liberalism
emerged in the 1980s pushing an agenda of free trade and Import Substitution
In economics, the study of economic development was borne out of an extension to
traditional economics that focused entirely on national product, or the aggregate output of goods
and services. Economic development was concerned in the expansion of people’s entitlements
and their corresponding capabilities, morbidity, nourishment, literacy, education, and other
socio-economic indicators. Borne out of the backdrop of Keynesian, advocating government
intervention, and neoclassical economics, stressing reduced intervention, with rise of high-growth
countries (Singapore, South Korea, Hong Kong) and planned governments (Argentina,
Chile, Sudan, Uganda), economic development, more generally development economics,
emerged amidst these mid-20th century theoretical interpretations of how economies prosper.
Also, economist Albert O. Hirschman, a major contributor to development economics, asserted
that economic development grew to concentrate on the poor regions of the world, primarily in
Africa, Asia and Latin America yet on the outpouring of fundamental ideas and models.
It has also been argued, notably by Asian and European proponents of Infrastructure-based
development, that systematic, long term government investments in transportation, housing,
education and healthcare are necessary to ensure sustainable economic growth in emerging
Indicators for Economic Development
Economic development refers to the process
by which a community, nation or region of the
world raises its living standards. Often, this
involves transforming the area's economy from
one based on agriculture to a modern industrial
system. Economists, demographers, sociologists
and public policy makers rely on multiple
indicators -- economic and social -- to gauge the
pace of economic development.
1. Gross Domestic Product
o You obtain per capita gross domestic product, or GDP, by dividing the total value
of goods and services produced within a country or region by its total population.
The Development Economics Web Guide observes that per capita GDP figures
often illustrate large differences between modern industrial powers and
developing nations. The website also cautions that certain issues affect the
indicator's reliability. These include issues related to measuring output in
countries where some production, such as subsistence farming, may go
11. unmeasured, which underestimates overall GDP. In addition, governments that
collect the data use different collection methods and may have an incentive to
overvalue national output.
2. Life Expectancy
o People residing in modern developed nations generally have longer lifespans,
measured in years, than those in poor, underdeveloped countries. As an example,
the Development Economics Web Guide contrasted life expectancies in the
United Kingdom, Ghana and Zambia. U.K. residents had a life expectancy
averaging nearly 78 years, far ahead of Ghana's 56.6 and Zambia's 41. Factors
affecting life expectancy include poverty, adequate food supplies and disease. An
increase in life expectancy points to improved social and economic conditions.
o The economies of many underdeveloped nations depend heavily on agriculture. In
contrast, developed countries have high levels of industrial employment. The
British Broadcasting Corporation reported that low levels of agricultural
employment indicate higher economic development. The BBC reported that only
2 percent of the British work force work in agriculture, while agriculture employs
72 percent of Vietnam's work force. A decline in agricultural employment over
time may indicate a region or nation undergoing a process of development.
4. Cars and Telephones
o Motor vehicles and telephones are necessary modes of transportation and
communication in developed economies. The BBC reported that the numbers of
cars and telephones per 1,000 people provide helpful indicators of a country's
level of development. An increase in the number of people who own such goods
suggests growing prosperity and a developing economy.
About Leading Economic Indicators
The International Economic Development Council defines economic development as an
“activity that seeks to improve the economic well-being and quality of life for a community, by
creating and/or retaining jobs…” The World Bank is the primary international organization that
measures economic development on a national and global scale. Of the more than 2,000
indicators it uses to assess development, five measure it the most directly.
Economic Policy and Debt
There are three main subcategories in this class: "Balance of Payments," "External Debt"
and "National Accounts." Indicators measure capital and financial accounts, as well as the
current account and reserves. You'll find measures of foreign direct investment here, statistics for
foreign trade and remittances, and development assistance the country receives. This category
also includes measures of purchasing power parity.
12. Financial Sector
There are five subcategories under this heading. "Assets" and "Capital Markets" are the
two most general, and they include bank capital and market capitalization. The "Exchange Rates"
subcategory includes measures of inflation. "Interest Rates" covers the lending interest rate, the
deposit interest rate and the interest rate spread. The fifth subcategory, "Monetary Holdings,"
includes measures of liability and the money supply.
This subcategory covers income distribution and poverty. Poverty is measured nationally
and separately as a percentage of rural population and urban populations. Income distribution is
measured by quintiles and deciles. A heading called "Conflict and Fragility" measures battle-related
deaths and homicides.
Private Sector and Trade
Under the heading "Private Sector and Trade" you’ll find many indicators of the business
environment, including imports and exports measured both in dollar value and by time-study
indexes. There are statistics for tariffs here, as well as measures of travel and tourism. There are
also measures of private infrastructure investment in this section, such as investment in energy,
transportation and telecommunications.
Every year the World Bank assigns low income nations a set of ratings called "Country
Policy and Institutional Assessment." These ratings are important because they determine the
amount of money countries receive from the World Bank. You can find them under the "Public
Sector" heading. They measure many variables, including transparency, budgetary management
and environmental sustainability. Government finance is measured in this area--revenues,
expenditures and deficits. A figure measuring the percentage of seats held by women in the
national parliament is included.
The other categories of World Bank indicators include indicators that translate less directly
into terms of financial or monetary terms. They include "Education," "Environment," "Health,"
"Infrastructure" and "Labor."
Industrial production is an example of an economic indicator.
Economic development indicators are crucial for determining the current state of the
economy in a country and for predicting future economic developments. Four distinctive
indicators are recognized by economists --- leading, lagging, coincident and local indicators are
crucial for deriving a conclusion on the current state of economic stability in a state and for
establishing short-term economic predictions.
o Leading indicators are the elements that change before the economy and have
great economic influence. Since they are usually variables, they are quite useful
for determining economic and financial stability in short-term economic
predictions. Such factors are money income from the stock markets and index of
consumer expectations. The Conference Board of the U.S., for example,
13. emphasizes that the higher consumer confidence is, the higher the standard of
living is, which is essential for a stable economy.
o Lagging indicators are the indicators that change after the economy. If the
economy has gone weaker, lagging indicators would also weaken with time. Such
indicators are the duration of employment in different private and public sectors,
the change in labor costs and the average prime rate charged by banks. If the
banks request higher interest when lending money, this means that the public
needs financing that it could not obtain through employment, which indicates a
weakened economy. The National Bureau of Economic Research concludes in its
report that such indicators are most efficient in determining the current state of
economic activity in a country.
o Coincident indicators are the indicators that change in rhythm with the economy.
These indicators are measured in order for a conclusion on current changes of the
economy to be established. Such indicators are the gross domestic product (GDP),
industrial production and retail prices. For example, data from Bloomberg
Magazine shows that retail prices in the UK have risen significantly after the
increase in the value added tax (VAT) in the country in the beginning of 2011.
This brought negative economic development to the state as a deeper financial
recession was inflicted.
o Local indicators are indicators that are used for making predictions about the
economic development of a particular area. Many local indicators can be used for
such conclusions --- average pay-rates in the area in question and average rent
prices, for instance. For example, data from the National Public Radio shows that
among the most commonly used local indicators in the San Francisco area is the
rent of a one-bedroom flat on Craigslist.
How do we define Social Indicators?
There are a number of definitions of Social Indicators (SI). Bauer described them as
forms of evidence that help assessment of present position and future directions. The
Organization for Economic Co-operation and Development (OECD) stated that a SI is a “direct
and valid statistical measure which monitors levels and changes over time in a fundamental
social concern.” A social concern is “an identifiable and definable aspiration or concern of
fundamental and direct importance to human well-being”. Indicators may be material, such as
numbers related to economic growth, and/or immaterial, such as values or goals.Atkinson et al.
saw SI as “a parsimonious set of specific indices covering a broad range of social concerns”.
This set includes statistics similar to economic statistics of the national accounts which are
intended to provide a basis for making concise, comprehensive and balanced judgments about
the conditions of major aspects of society as accurate measures of a good society.The concept
covers interpretation of cultural signs, simple statistical measures, and complex statistical
indexes related to sets of domains.These are used to assess the effectiveness of policy in
addressing important social issues.
14. What is an indicator?
There is no single, universally accepted definition of the term ‘indicator’. This simply
reflects the fact that purpose, scope and methodology can vary greatly from one indicator, or set
of indicators, to the next. Most indicators are developed in order to describe important features of
a larger system. They are “succinct measures that aim to describe as much about a system as
possible in as few points as possible” and which “help us understand a system, compare it and
The OECD defines an indicator as “a parameter, or a value derived from parameters,
which points to, provides information about, and describes the state of a
phenomenon/environment/area, with a significance extending beyond that directly associated
with a parameter value”. The policy relevance of an indicator is one example of such extended
significance; indicators of societal progress are generally developed to inform policy decision-making
in some way.
Subjective and Objective Social Indicators
The kind of indicators chosen for empirical measurement depends on the purpose of the
measure and the underlying conceptualization. While objective social indicators are statistics
which represent social facts independent of personal evaluations, subjective social indicators are
measure of individual perceptions and evaluations of social conditions. Historically, two main
and polar efforts to operationalize welfare in general and the quality of life in particular can be
distinguished: the Scandinavian level of living approach and the American quality of life
approach. Today, the overall consensus of opinion is to base welfare measurement on both
subjective and objective indicators. This makes sense because similar living conditions can be
evaluated differently by people with different backgrounds and experiences. It is however of
particular interest how subjective and objective assessments of a person's living condition may
Objective Social Indicators
Objective social indicators represent social facts independently of personal evaluations.
Examples include: unemployment rate, poverty rate, working hours per week, perinatal mortality
rate. The Scandinavian approach focuses almost exclusively on resources and objective living
conditions as capture by objective SIs. The resources are understood as mere means that allow
the individual citizen to use them in an autonomous way. Resources are defined in terms of
money, property, knowledge, psychic and physical energy, social relations, security and so on.
This approach is in some respect similar to the 'capabilities approach' developed by Amartya
Sen. His notion of welfare and quality of life has been elaborated within the human development
The use of objective indicators needs to make the assumption that living conditions can
be judged to be favourable or unfavourable from the outside which requires comparing real
conditions with normative criteria like values, goals or objectives. This requires a societal and, to
some extent, political consensus about three issues: first, the welfare relevant dimensions;
second, what good and bad conditions are; third, the direction which society should take. For
some goals these three things are generally acknowledged, like the reduction of the
unemployment or poverty rate, while for example income inequality might or might not be
regarded as a social progress.
15. Subjective Social Indicators
Subjective social indicators are based on individuals ‘perception and evaluation of social
conditions. Example include: life satisfaction, job satisfaction, etc.; relevance of different life
domains, perception of distributional justice, class identification. The American quality of life
research bases welfare measurement primarily on subjective indicators and emphasizes the
subjective valuing of individuals as a final outcome of conditions and processes. The common
man is considered the best expert to evaluate his quality of life. The most important measures of
subjective well-being are happiness and satisfaction. The World Values Survey produces such
data for many countries worldwide.
The main criticism levelled at pure subjective SI approaches is that the degree of
satisfaction is partly determined by people's aspiration as seen realistic in a given society. Thus,
measuring subjective satisfaction would amount to "measuring how well they are adapted to their
present conditions".Others have underlined that subjective indicators provide valuable
complementary information for policy maker's assessment of policies outcomes and for the
selection of policy goals, and prioritization of policy goals.
Functions of Social Indicators
Generally, SI perform one or more of three functions, providing a basis for information
for decision-making, monitoring and evaluating policies, and/or searching for a common good
and deciding how to reach it. Indicators should be phrased in such a way that they can be
interpreted by the general public so that members of the community can provide feedback to
promote the development of the organization. Identifying community needs are counted as social
Indicators should also be designed so that they only show "progress" when social
circumstances have really changed. They should not be easily manipulable by political initiatives
that do not have a real impact on people's lives.
Framework of Social Indicators
Progress can be considered as a broad notion of a community’s well-being that changes
over time. While life satisfaction focuses on the subjective assessment of different elements that
affect individual lives, well-being has been used to refer to objective living conditions. Both
concepts refer to the condition of the current generation but sustainable development attempts to
consider the well-being of future generations, introducing an inter-generational dimension often
absent in other frameworks. Societal progress occurs when there is an improvement in the
“sustainable and equitable well-being of a society…” to “…encourage communities to consider
for themselves what „progress‟ means in the 21st century”.
Salvaris (2000) described a rapid growth in the development of community-based
planning projects using benchmarks and indicators to measure progress. For the past 30 years,
these projects have occurred in many countries at different levels. Five dominant features are
involved in these types of projects:
(1) the integration of the economic-social-environmental domains to respond to the well-beingof
people in a well-rounded manner
(2) the pronouncement of the benchmarks and indicators to monitor ongoing progress
(3) the participation of the community in the production of the benchmarks and indicators
(4) the acquisition of a lengthy period of time to proceed
(5) the realization of legitimate policy-making.
All of these produce an innovation with a sense of civil society
16. Social Indicators of Development
o Employment is an economic element that is closely
related to the stage of development in a particular country. The higher
the rates of employment are, the stronger the economy of a state is.
High employment rates indicate that a country has well-functioning
policies for the benefit of the public. If the rates of unemployment are
dropping, the country is developing in a positive direction. For
example, recent reports from "The Economist" highlight that increasing
rates of employment can be observed in Africa, which indicates that the
African states are undertaking a positive course of economic
o Economic growth is the growth in the economy of a state for a particular period of
time. It is essential for measuring the rates of development of countries, since it
indicates whether there are persistent economic problems or if the state has an
opportunity for a steady economic advancement. For instance, data provided by
Bloomberg.com indicates that Germany has become the most attractive place for
investment in Europe, due to its immense and steady economic growth.
o Education is the most important social factor indicating the state of countries'
development. Through education, individuals become specialists within specific
areas and can contribute skills and expertise to the economy and some particular
branches of national production. Hence the economy grows because there is no
lack of skilled labor, and the state develops in a positive direction. For example,
higher education in China is becoming more popular among young people, which
indicates that the country is developing and producing its own specialists, without
the need to import skilled workers from other countries.
Standard of Living
o The standard of living indicates the current stage of development of a state. It is
linked with the economy and the social well-being. If the economy is strong, it
ensures a high standard of living and potential for further development. For
example, Norway is among the countries with highest standard of living. It is
among the European states with the highest income per person, and the
Norwegian people are considered among the happiest populations in the world.