The perfect composite index does not exist (but we have to use it)

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The perfect composite index does not exist (but we have to use it).pdf

Abstract: Composite indices are increasingly recognized as a useful tool for measuring complex and multidimensional phenomena, such as development, poverty, quality of life, well-being, globalization, competitiveness, freedom, and so on. Technically, a composite index is a mathematical combination of a set of indicators representing the different dimensions of a phenomenon to be measured. The idea of summarizing a complex phenomenon into a single number is not straightforward, as it implies both theoretical and methodological assumptions that must be carefully evaluated to avoid producing results of dubious analytic rigor. One of the main criticisms of composite indices is that their simple "big picture" results may lead users to draw simplistic analytical or policy conclusions. Methods for constructing composite indices are proposed, taking into account appropriate methodologies for different areas of application.