Health vs. wealth

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The Economist reports this week on new research on the relationship between Health and Wealth. The long and the short of it is that improvements in health don't necessarily lead to higher incomes, as counterintuitive as that sounds at first. (As always, the causation may be running the opposite direction - higher incomes lead to better health.) In one of the papers, researchers from MIT looked at the impact of medical advancements like penicillin that improved health in developing countries but clearly were not the result of improved incomes in developing countries. They found that income per head dropped despite improvements in life expectancy.

According to the Economist, the researchers offered this explanation:

The reason was that increased life expectancy led to a higher population using a limited stock of things like land and capital, thus depressing income per person. Over time, reduced fertility, more investment and the entrepreneurial benefits of having more people could reverse some of this, but the data suggested that reductions in fertility in particular took a long time.

There seems to be another possibility that has been left unexamined, however. Let's assume for a moment that there is a very uneven distribution of innate ability (e.g. physical strength) in a population. If these medical innovations were of disproportionate benefit to those at the lower end of the distribution, then the overall productivity of a country might very well drop even as life expectancy increased.

Of course, data crunching would not capture this phenomenon - at least not for the 1950s - since we don't have numbers on innate ability. But is seems to me at least as plausible as the explanation offered by the researchers (or, at least the one summarized by the Economist - I haven't had a chance yet to look at the papers).

I should be clear that I'm not suggesting that improving health is a bad thing. Health is an important end in and of itself. As the Economist points out, "[i]t may be best to make a case for improving health because it is a good thing in itself, rather than on the basis of presumed economic benefits that may not appear for generations."

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Ryan Hahn

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