Abstract
In this paper, I suggest the use of non-conventional models of choice and production, to underlie the construction and employment of index numbers. I recommend the use of the model of production proposed by Georgescu-Roegen and a model of choice, that acknowledges the existence of irreducible criteria. Also stressed, are the distinction between flow and stock and between funds’ services and flows of goods, that are produced or consumed in transformation activities. Flows can frequently be associated to production activities. Therefore, one can apply principles derived from Production Theory. The corresponding implications, with respect to the choice of index numbers, are discussed. Another conclusion of this paper, is the necessity of considering index numbers, associated to the satisfaction of basic needs, in the design of social programs. Poverty indices are also discussed to illustrate some of the points raised in the paper.
Keywords:
Development indicators; Sen poverty index; poverty measurement