Analyzing Multidimensional Well-Being

Chapter 7An Exploration of Some Composite and Individualistic Indices

7.1 Introduction

A composite index is a summary statistic giving a comprehensive picture of dimensional indices associated with a dashboard, a portfolio of dimension-by-dimension metrics, constructed for a multidimensional evaluation task. In other words, it is a real-valued representation of dimensional indices. In some situations, dashboards corresponding to two social matrices may possess the ability of ranking the underlying matrices to judge whether one of them performs better than the other with respect to the purpose for which the dashboards have been designed. However, the ranking is possible only when the dimensionwise changes are unidirectional. In contrast, the composite indices can rank the matrices unambiguously since each of them is a real number, which clusters the information available in a social matrix in terms of a real number by employing some given aggregation principles. Hence, a composite index has this comparative advantage over a dashboard (see (Stiglitz et al., 2009).¹ While a composite index employs aggregation, first at the level of individuals in a dimension and then across the dimensions, in an individualistic index, the process of aggregation is reversed (Kolm, 1977).

A prominent example of a composite index is the human development index (HDI), proposed by the United Nations Development Program (UNDP) in (UNDP, 1990) and is computed and made available annually since then in ...