The power of improvisation. Directed improvisation.

There is no shortage of ‘best practices’ or ‘one-size-fits-all’ solutions in a development economy. Free trade, democracy, institution building, you name it. The Washington Consensus has reigned in the decades since the 1990s. Now the Beijing consensus is emerging.

Yuen Yuen Ang dismisses such solutions and suggests that there is no universal prescription. Her one-sentence summary is “Poor and weak countries can escape the poverty trap by first building markets with weak institutions and, more fundamentally, by crafting environments that facilitate improvisation among the relevant players.” She explores this idea through studying how China managed to achieve and sustain economic development after Mao. The country employed this approach, which allowed the to achievement of economic growth in complex circumstances. Yuen Yuen Ang call this approach ‘directed improvisation’ where central reformers direct and local state agents improvise. It taps local knowledge and adapts to the local circumstances, while aiming at an overarching goal. The resulting transformative process has displayed three distinct patterns. It is broad, bringing systemic changes despite incremental reforms. It is bold, unusually entrepreneurial but also attracts corruption-prone bureaucrats. Finally, it is uneven, with wide regional disparities coexisting with national prosperity.

The Government nurtured what Yuen Yuen Ang calls ‘directed innovation’ through variation, selection and niche creation. To promote variation, central reformers allowed local agents to flexibly implement central mandates according to local conditions. This has been done through deliberate creation of grey zones, as too much leeway could create chaos. Hence, Central bodies clearly delineated these zones of local improvisation. They imposed red lines around local administration, denoting things which are prohibited and risk very severe punishments; and black lines for things which must be delivered, again at the risk of severe punishment in the case of non-performance. The rest was in a grey zone, open for innovation and adaptation to local conditions. Selection was promoted by clearly defining and rewarding success within bureaucracy, of the type in the black lines discussed above. Central reformers clearly communicated the criteria for success to lower levels and ranked localities, and closely looked for what has worked and what didn’t. Successful models and approaches then became central policy, scaled up and replicated throughout China. For instance, the famous Township and Village Enterprises (TVEs) were neither prescribed, nor anticipated by central reformers, as Deng Xiaoping himself admitted. They grew up out of local experimentation at that stage of the reforms, as best fit to local needs and conditions, to produce growth spurts, and centrally imposed restrictions for the of non-acceptability of private property. The diversity of China provided the raw material for innovation, resulting in niche creation for different localities. Regional diversity thus turned from liability into a collective advantage.

The methodology Yuen Yuen Ang used is a mapping of the ‘coevolutionary process’, with whole Chapter (1) and Annex (A) devoted to the description of the methodology. She does not engage into construction of sophisticated regression models, torturing data in the elusive quest for causality out of correlation. Neither does she stick to small N approach, looking through messy and overcomplicated set of variable for a single case (By the way, enquiring reader could find great discussion of cultural differences between small N versus big N approaches in “A Tale of Two Cultures: Qualitative and Quantitative Research in the Social Sciences” by Gary Goertz and James Mahoney). Hence, no oversimplification and no messy non-reductionist approach to complexity. Rather, a complex approach, which captures a non-linear, co-evolutionary process, in reduced form. She tracks changes in the related systems of economy and institutions, over the time. Throughout the book, she dives into examples of Forest Hill, Blessed County and Humble County in China, which are archetypes of various types of localities in China. In her methodological annex she extends this approach to two additional cases of tax-less finance in United States of America in the 1880s and raise of Nollywood in Nigeria.

The three ‘I’s haunting development economics, according to Esther Duflo, are a conceiving Ideology, often derived out of Ignorance, that is perpetuated as a result of Inertia (see also “Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty” by Abhijit Banerjee and Esther Duflo). More and more we do recognize the complex nature of issues we face with, the inadequacy of opaque models pushing correlation for causality, and the lack of Silver Bullet solutions. However, we are yet to find the instruments for handling complexity in a meaningful way. The book by Yuen Yuen Ang is an excellent starting point for this intellectual inquiry.

Sustainable Human Development Index: What exactly we try to measure?

Twenty years ago Rio Summit raised global issues of ecological concerns and sustainability. This year Rio+20 conference will take an overview of past two decades and suggest program for the future we want.

One of the issues related to ecology and sustainability is measurement. This is not just a matter of curiosity, to establish «sustainable development goals» we should have good enough metrics and indicators of sustainable development (as someone nicely put it «You never have to be ‘absolutely sure’ of something. Being ‘reasonably certain’ is enough»). Unfortunately, until now we have no commonly agreed set of indicators or one «sustainable human development index», despite of many efforts in this area—WorldBank Adjusted Net Savings, Yale Environmental Sustainability Index, UNU Human Sustainable Development Index, just to mention few.

One principal issue in «sustainable development» measurement, in my mind, is conceptual non-clarity what exactly are measuring: development or sustainability? And what sustainability means? If we would like to have «sustainable [human] development index», it should take both—achieved level of development and ability to sustain achieved level. Looking to either of these aspects is not enough. One could get high on «development» scale, but it says nothing about possibility to go on with this achievements (resemble Greece current crisis, isn’t it?). On the other hand, lower level of «development» could lay on more solid ground, which make it more sustainable.



Soon after Rio Summit Armenia start working on incorporation of sustainability aspects in Human Development Index. Resulting proposal with examples for two countries (Armenia and Georgia) was published in 1995. Proposed «Sustainable Human Development Index» adds fourth environmental component to three initial dimensions of human development, health, education, and living standards. Environmental component itself includes two sub-components—environmental state of a territory (4 indicators), and the environmental evaluation of human activities (7 indicators).

In the framework of Rio+20, Armenia is organizing side event to discuss possible options for Sustainable Development Index Methodology. We helped armenian team in structuring the approach to sustainable HDI in the light of recent development—changes in HDI index introduced in 2010, and extended approach to sustainability, which goes beyond ecological aspects only.

We started work with stepping back and asking a number of big questions:

  • What is the purpose of the index: Global or National?
  • What is the way of integrating the environmental aspects?
  • What is approach to sustainability: narrow (environment only) or broad (in all areas)?
  • What is the type of sustainability: weak (e.g. WorldBank Adjusted Net Savings) or strong (e.g. Ecological Footprint)?
  • What are the links to other human development indexes and indicators?
  • What is weighting procedure: for dimensions and indicators?
  • How we do attribution of the ecological damage—by place of production or by consumption?

Without properly addressing these questions, one could risk to end up with strange figures in hands and unexpected interpretation of index. The resulting proposal for Sustainable Human Development Index answer all of them.

In design of Sustainable Human Development Index we decided to give priority to national relevance, while keeping in mind necessity for international (or at least regional) comparisons. We decided to take a broad approach to sustainability, looking on ability to sustain not only natural environment, but also economic and social ones. Fourth dimension was added to the Human Development Index, to incorporate state of environment, as we value «ability to live in clean and balanced natural environment», in the same way we value abilities to «live long and healthy life», «being educated and having access to knowledge», and «enjoying decent standards of living». Resulting Extended Human Development Index (EHDI) includes only indicators of status of natural environment in five areas: quality of water, quality of air, state of soils, state of biodiversity, and habitat. This index says us what we achieved, without saying how it was achieved.

To answer the question how it was achieved and if we could maintain achievements, we added separate tier to the index—sustainability. Indicators in this tier says about ability to sustain achieved level (i.e. do we have debt big enough to threat our current wealth?) in all four dimensions of human development (including natural environment). These indicators penalize or reduce achieved level—if you have extremely high water withdrawal level your currently nice environment will disappear, as it happened with the Aral Sea. Resulting index is Affordable Human Development Index (AHDI), which should be judged against Extended Human Development Index (EHDI), looking how big is part of development (what we achieved), which is lost due to non-sustainability (how we achieved). The same approach is used, by the way, in Inequality-adjusted Human Development Index (IHDI), where HDI achievements (what) are penalized for inequalities (how).

«Yes, but…»—the question you will hear all the time you present some indicator or index. Indeed the broad picture of the world cannot be captured in one indicators or index, however perfect it could be. To put indexes in broader context, we included a broader set of «context» indicators—how much Government spend on education, health, environment? Do country have environmental protection institutions? What is the quality of education (as judged by PISA test results)? These things are very important, but are not hard enough to make their way into index.

Clearly, there are many questions to address to be ‘reasonably certain’ about the index. Trends in index, cross-country comparisons, approach to CO2 emission and energy efficiency of economies are just few of them.


This is a short outline of approach to sustainable human development measurement, which will be presented at Armenia side event at Rio+20 conference, alongside with calculations for a number of countries in Europe and Central Asia Region. I hope to see more developments in this area after the Rio+20 conference.

This article is also available in Russian.