A Happiness Economics-Based Human Development Index for Germany (1920-1960)

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Abstract

The United Nations’ Human Development Index (HDI) has become an important tool for measuring and comparing living standards between countries and regions. However, the HDI has also attracted a fair share of conceptual criticism. Starting from Andrea Wagner’s historical estimations of a HDI for Germany in the interwar and early post-war period, we take up part of that criticism by implementing ...

Abstract

The United Nations’ Human Development Index (HDI) has become an important tool for measuring and comparing living standards between countries and regions. However, the HDI has also attracted a fair share of conceptual criticism. Starting from Andrea Wagner’s historical estimations of a HDI for Germany in the interwar and early post-war period, we take up part of that criticism by implementing three essential modifications to the mode of calculation. We test how far they alter our picture of the relative living standard in the Weimar Republic, the Third Reich, and the Federal Republic of Germany. First, we replace the arithmetic mean by the geometric mean, which is said to solve the problem of perfect substitutability; second, we extend the HDI by an additional fourth dimension measuring economic and political freedom – an important, though neglected, dimension; and third, as the perhaps most crucial conceptual intervention, we develop weighting schemes for the partial indices that are theoretically backed by happiness economic research. Thus, we challenge the common, but arbitrary fundamental assumption that all partial indices receive equal weights. Our results show that the HDI for Germany reacts very sensitively to conceptual interventions, making it difficult to use it for the intertemporal and international comparison of living standards. We also find that the proposed modified HDIs allow for a re-evaluation of the living standard in interwar Germany; and in contrast to what the reference estimations on the HDI for Germany say, there is a profound discontinuity between the Third Reich and post-war Germany in terms of living standards.