Human Development and Opportunity Costs

The creation of social opportunities makes a direct contribution to the expansion of human capabilities and the quality of life. Expansion of health care, education, social security, etc., contribute directly to the quality of life and to its flourishing.

human rights budgeting


There is every evidence that even with relatively low income, a country that guarantees health care and education to all can achieve remarkable results in terms of the length and quality of life of the entire population. The highly labour-intense nature of health care and basic education – and human development in general – makes them comparatively cheap in the certain stages of economic development, when labour costs are low.


The rewards of human development go well beyond the direct enhancement of quality of life, and include positive impacts on people’s productive abilities and thus on economic growth on a widely shared basis.


The nature of this connection is discussed in Dreze and Sen, Hunger and Public Action (1989). See also the analysis presented in World Bank, The East Asian Miracle (1993), and the extensive list of empirical references cited there. Also see the papers presented at the International Conference on Financing Human Resource Development arranged by the Asian Development Bank, on November 17, 1995; many of the papers have been published in World Development, 1998.


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Fine analyses of contrasting experiences can be found in Nancy Birdsall and Richard H. Sabot, Opportunity Forgone: Education, Growth and Inequality in Brazil (Washington D. C.: World Bank, 1993); James W. McGuire, “Development Policy and Its Determinants in East Asia and Latin America” Journal of Public Policy 1994.


Literacy and numeracy help the participation of the masses in the process of economic expansion (well illustrated from Japan to Thailand). To use the opportunities of global trade, “quality control” as well as “production to specification” can be quite crucial and they are hard for illiterate or innumerate labourers to achieve and maintain.


Furthermore, there is considerable evidence that improved health care as well as nutrition also make the workforce more productive and better remunerated. On this see Jere R. Behrman and Anil B. Deolalikar, “Health and Nutrition” in Handbook of Development Economics, edited by H.B. Chenery and T. N. Srinivasan (Amsterdam: North-Holland 1988).


Health and nutrition, Hollis Chenery, T.N. Srinivasan - Handbook of Development Economics, Vol. 1-North Holland
Health and nutrition, Hollis Chenery, T.N. Srinivasan – Handbook of Development Economics, Vol. 1-North Holland


Click to Download Health and Nutrition Chapter


There is much confirmation, in the contemporary empirical literature of the impact of education, especially female education, on reducing birth rates. High fertility rates can be seen as adverse to the quality of life, especially of young women, since recurrent bearing and rearing of children can be very detrimental to the well being and freedom of the young mother.


It is precisely this connection that makes the empowerment of women through more outside employment, more school education etc, so effective in reducing birth rates, since young women have a strong reason for moderating birth-rates, and their ability to influence family decisions increases with their empowerment.


opportunity costs

Developing an understanding of Opportunity Costs is helpful here.  Opportunity – or Alternative Costs refer to the cost of an alternative that must be forgone in order to pursue a certain action. In other words, the benefits you could have received by taking an alternative action. Before any economic or practical analysis can be completed, some sort of consideration of the Opportunity Costs must be attempted. For example, the choice between having three children, none or one child can be understood in a scheme of Opportunity Costs.


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Each scenario commands different resources and time, and brings about different outcomes.  Opportunity Costs are involved in every decision which is made and acted upon – from the micro to the macro. Simply put, the old expression ‘you cannot have your cake and eat it’ speaks of this idea in economics.


Those who see themselves as financial conservatives sometimes express scepticism about human development. There is however, little rational basis for that inference. The benefits of human development are manifest, and can be more fully accounted by taking a comprehensive view of its overall impact. What should be threatened by financial conservatism is the use of public resources for purposes where the social benefits are far from clear, such as massive expenditures that go into the military in one country after another – often many times larger than the public expenditure on basic education or health care.


Financial conservatism should be the nightmare of the militarist, not of the schoolteacher or the hospital nurse. It is an indication of the confused world in which we live that the school teacher or nurse feels more threatened by financial conservatism than does the army general. The rectification of this anomaly calls not for the chastising of financial conservatism, but for more pragmatic and open minded scrutiny of rival claims to social funds.


For the purposes of analysis, Amartya Sen recommends reading The United Nations Development Programme (UNDP) Human Development Report, 1994. It starts with:


“Behind the blaring headlines of the world’s many conflicts and emergencies, the relies a silent crisis  a crisis of underdevelopment, of global poverty, of ever-mounting population pressures, of thoughtless degradation of environment. This is not a crisis that will respond to emergency relief. Or to fitful policy interventions. It requires a long, quiet process of sustainable human development.


Sustainable human development is development that not only generates economic growth but distributes its benefits equitably; that regenerates the environment rather than destroying it; that empowers people rather than marginalizing them. It is development that gives priority to the poor, enlarging their choices and opportunities and providing for their participation in decisions that affect their lives. It is development that is pro-people, pro-nature, pro-jobs and pro-women.”


Environment and opporunity costs

Note that within this our relationship, our intimate connection with the environment and nature is included.  The cost of human development and society is inseparable from that of the world we live in.  Thus thinking and acting sustainably – that is – in such a way that we do not destroy the ecosystem of which we are a part, is of paramount importance.


As each species becomes extinct, as each terrain becomes infertile and despoiled, so we lose infinite futures of knowledge contained within those just as if we would eliminate the potential of a human being.


These cannot be expressed with financial values but only with an understanding of the value of life and consciousness. The capabilities approach must advocate for those who have no voice or opportunity, and this necessarily includes the rich relations in our natural world.


Because of the impossible burden of international debt, some countries, especially in Africa, may not be able to exercise much choice at all in determining their fiscal priorities. On this issue the need for “visionary” international policy as a part of “realistic” economic possibilities is forcefully advocated by Jeffrey D. Sachs, “Release the Poorest Countries from Debt Bondage” International Herald Tribune, June 12 – 13, 1999.


This article is primarily a digest of Amartya Sen’s work Development as Freedom (Page 144 – 145) and aims to inform the reader of the arguments running through the book surrounding education and its relation to economics and welfare.  To assist people in comparing the original text, placenotes have been studded throughout this to help you reference the original source:


Development as Freedom  by Amartya Sen

Oxford Paperbacks; New Edition (18 Jan 2001)

ISBN: 0192893300