The Life Quality Index (LQI) is a calibrated compound social indicator of human welfare that reflects the expected length of life in good health and enhancement of the quality of life through access to income. The Life Quality Index combines two primary social indicators: the expectancy of healthy life at birth, E, and the real gross domestic product per person, G, corrected for purchasing power parity as appropriate. Both are widely available and accurate statistics.
Basic concept
The three components of the Life Quality Index,L, G and q reflect three important human concerns: the duration of life in good health, the creation of wealth, and the time available to enjoy life. The available lifetime to enjoy income from wealth creation acts as a multiplying factor upon the value of that wealth. Conversely, the amount of income one has to enjoy over the lifetime acts as a multiplier on the expected duration of life.
Unlike the United Nations’ Human Development Index (HDI), the LQI is derived based on considerations of the economics of human welfare. The HDI has been used primarily to rank nations in order of human welfare (development, quality of life). In contrast to the HDI, the LQI can also serve as an objective function for optimizing risk management practices and setting national or corporate goals to guide effective allocation of society’s scarce resources for the mitigation of risks to life or health. The LQI provides an important criterion for determination of net benefit to society – or a corporate entity - for improving the overall public welfare by reducing risks to life in a cost-effective manner.
In the accounting and assessment of human development, we can view the role of individuals as the principal means, or contributors, to development as well as the ends. For example, the productivity of an individual contributes directly to the aggregate wealth creation in a society. However, the income so generated (to whomsoever it may accrue) increases the capacity of society to provide the necessary means such as the required infrastructure (hospitals, schools, clean water, safe roads and structures). The adequacy of the infrastructure in turn benefits the individual via access to quality health and environment, education and means for cultural expression and enrichment. The LQI is a tool for enhancing our decision-making capacity to promote a rational basis for the management of risks to life and health. It brings into a sharper focus the choices and trade-offs we have to make between the costs incurred to support extension of life and its linkage to the creation of productive wealth available for the allocation of scarce resources.
Formulation
The mathematical expression for the Life-Quality Index is: LQI = LGq, showing the LQI as a function of L, the health-adjusted life expectancy (HALE) at birth and G, the Gross Domestic Product (GDP) per person. The parameter q is a constant either based on time-budget studies available for many countries (approximately equal to 1/5 for developed nations) or upon equal marginal utility of the growth of L and G easily available for all countries and can be updated when necessary.
Societal Capacity to Commit Resources (SCCR) The LQI has been used to determine an acceptable level of expenditure that can be justifiably incurred on behalf of the public interest in exchange for a small reduction in the risk of death that results in improved life-quality for all. This limit of benefit can be considered as the societal capacity to commit resources to sustainable risk reduction. Suppose a portion of GDP, dG, is invested in implementing a program that affects public risk, thus modifying the life expectancy by a small amount dL. There is a net benefit if there is a net increase in LQI, dL. This criterion can be derived from the definition of L as: dL/L + qdG/G > 0, from which the limit of benefit, the Societal Capacity to Commit Resources (SCCR) to sustainable risk reduction, follows as: SCCR = G/(qL).
In conjunction with an actuarial life table the SCCR serves to evaluate life-saving interventions in place of the discredited “value of a statistical life.” Using data from the United Nations Development Programme (UNDP) for years 2000-20 for calibration and growths of L and G[6], Table 1 shows the 2023 values of LQI, dimensionless normalized to equal 1.00 for the World in year 2000, and the LQI rank for the 40 most highly developed countries. Table 2 gives 2023 values for country groupings defined by the UNDP for the HDI.
Table1. Life Quality Index 2023 rankings and values (World LQI2000 = 1.000)