Healthier and Wealthier

Thank you to those who commented on my first post yesterday! Before I begin my formal post for today, I wanted to make sure I responded to questions about how average life span went from around 18 years in the cro-magnon era to around 80 years today.

Tragically, the majority of children used to die before the age of 10 years. This was mainly due to infectious diseases, poor nutrition, and sanitation problems. Discoveries such as antibiotics, vaccines, vitamins and indoor plumbing led to humanity’s rapid gains in life expectancy.

What this means is that, for most of history, gains in human life expectancy were made at the beginning, not the end of life. It is true that older people have always been part of society, but they were less numerous and more weathered than today’s seniors.

As life expectancy rose, so did the number of older people, and that was when chronic diseases such as heart disease, cancer, and Alzheimer’s made their way into our common vocabulary. But that is not the end of the story. Rather, it is the beginning of a new chapter where humanity takes on ill health and death at later ages. Indeed, those efforts have already had an impact on the growth of life expectancy.

Historian Jim Oeppen and demographer James Vaupel point out that “in the second half of the 20th century, improvements in survival after age 65 propelled the rise in length of people’s lives.” There is more on this in chapter 2 of my book, so instead of taking more word space here, I would refer you there to read more.

Now, once the human project to extend health spans at later ages gets more momentum and we are living past 100, perhaps to 150, how might that change the economy?

Economist Julian Simon was famous for arguing that “the ultimate resource is people – especially skilled, spirited, and hopeful young people endowed with liberty – who will exert their wills and imaginations for their own benefit, and so inevitably they will benefit the rest of us as well.”

One immediately notices that he specifically mentions young people. One of the reasons for this is that young people are generally healthy, and have the energy to pick up big projects and run with them. They are also often doing things for the first time, which potentially gives them a different perspective from those who have been in the field for a while.

So how will longer health spans change our stock of human capital? First, and perhaps most importantly, ‘healthy’ directly implies better and more productive human capital. This is perhaps an obvious conclusion, but it wasn’t until relatively recently that researchers began investigating whether health actually creates wealth.

For many years, it’s been clear that there is a positive correlation between health and wealth, but it was most commonly thought that wealth creates health. While it is certainly true that the rich can afford to take better care of themselves, it is now known that health also begets wealth. Put another way, poor health causes a decline in productivity for the simple reason that it’s very difficult to work effectively when you’re in ill health, thereby increasing the chances of falling into poverty.

In their paper titled the “Health and Wealth of Nations,” Harvard economist David Bloom and Queen’s University economist David Canning explain that, based on the available research, if there are “two countries that are identical in all respects, except that one has a 5 year advantage in life expectancy,” then the “real income per capita in the healthier country will grow 0.3-0.5% per year faster than in its less healthy counterpart.”

While these percentages might look small, they are actually quite significant, especially when one considers that between the years of 1965 to 1990, countries experienced an average per capita income growth of 2% per year. When countries only have an average growth of 2%, an advantage of 0.5% is quite the boost.

Now, those numbers are based only on a 5 year longevity advantage. What if a country had a 10, 20, or 30 year advantage? The growth may not continue on a linear basis, but if the general rule holds – a jump in life expectancy causes an increase in economic growth per capita – then having a longer-lived population would facilitate enormous differences in economic prosperity.

This helps to explain why there is a movement among some academics and activists to urge Congress to spend more on anti-aging research in order to create what they call a “longevity dividend.”

For instance, public health professor S. Jay Olshansky argues that slowing aging by only three to seven years would, “simultaneously postpone all fatal and nonfatal disabling diseases, produce gains in health and longevity equivalent to cures for major fatal diseases, and create scientific, medical, and economic windfalls for future generations that would be roughly equivalent in impact to the discovery of antibiotics in the 20th century.” His enthusiasm is justified, given that economists have demonstrated that improvements in health were a major contributor to well-being over the 20th century.

In 2006, University of Chicago economists Kevin Murphy and Robert Topel painstakingly calculated that, for Americans, “gains in life expectancy over the century were worth over $1.2 million per person to the current population.” They also found that “from 1970 to 2000, gains in life expectancy added about $3.2 trillion per year to national wealth.”

These enormous numbers represent a spectacular accomplishment in terms of benefits. Indeed, it could be said that longevity gains are really the best thing humans have ever accomplished.

There is more to be said about human capital and longevity (consider that innovation is a late-peak field) so if you want to read more, I suggest looking at chapter 6 of 100 Plus.

Tomorrow, I will post about how greater longevity might affect family relations.