Different River

”You can never step in the same river twice.” –Heraclitus

January 18, 2005

Quality — and Quantity — of Life

Filed under: — Different River @ 6:53 pm

It’s been the conventional wisdom for years that in the last half-century, there has been phenomenal economic growth in most countries, but the overall level of “inequality” between countries has not changed much. That is, even though the poor countries are getting richer, the rich countries are also getting richer, so that on average the rich countries are richer than the poor countries by about as much as they’ve been for a while. (The same countries aren’t all in the same “rich” or “poor” categories as before; this is for a comparison of “countries that are rich and poor now” compared to “countries that are rich and poor then” — but that’s another topic.)

Now mostly this sort of thing is measured by gross domestic product (GDP) per capita — that is, the total output of all goods and services per year in each country, divided by the total population of that country. Most people think this is a fairly good measure of the standard of living in any given country, probably because they were told so in their first economics class, or even earlier in life. This is true even though anyopne who was paying attention in economics class knows that there are all sorts of problems with measuring GDP, especially over long time periods and across countries with different types of economies. The main problem, really, is that there isn’t a really good alternative measure.

Unless you are creative. In a recent paper, Gary Becker, Tomas Philipson, and Rodrigo Soares make the obvious (now that they mention it!) point that what matters in determining the total quality of your life is not just how well you live each year of your life, but how many years you get to live. In other words, it’s not just “quality of life” that counts, it’s “quantity of life,” too.
(You know, given how much effort we all put into living longer (as well as better), it’s really surprising nobody seems to have thought of this before — but this is why Gary Becker has a Nobel Prize and most of the rest of us don’t.)

It turns out, when you take into account the increase in longevity, there actually has been a decrease in inequality between rich and poor countries over the last four decades. Much of this is due to the fact that longevity gains have been much larger in poor countries than in rich countries. In short, there has been a huge decrease in longevity inequality, and if this is properly included as part of the measure of economic well-being, there has been a decrease in economic inequality as well.

The paper is here, and the abstract is here:

GDP per capita is usually used to proxy for the quality of life of individuals living in different countries. However, welfare is also affected by quantity of life, as represented by longevity. This paper incorporates longevity into an overall assessment of the evolution of cross-country inequality, and shows that it is quantitatively important. The absence of reduction in cross-country inequality up to 1990’s noticed in previous work is in stark contrast with the reduction in inequality after incorporating gains in longevity. Throughout the post-war period, health contributed to significantly reduce welfare inequality across countries. The paper derives valuation formulas for infra-marginal changes in longevity and computes a “full” growth rate that incorporates the gains in health experienced by 96 countries for the period between 1960 and 2000. Incorporating longevity gains changes traditional results; countries starting with lower income tended to grow faster than countries starting with higher income. We estimate an average yearly growth in “full-income” of 4.1 percent for the poorest 50% countries in 1960, of which 1.7 percentage points are due to health, as opposed to a growth of 2.6 percent for the richest 50% countries, of which only 0.4 percentage points are due to health. Additionally, we decompose changes in life expectancy into changes attributable to thirteen broad groups of causes of death and three age groups. We show that mortality from infectious, respiratory and digestive diseases, congenital, perinatal, and “ill-defined” conditions, mostly concentrated before age 20 and between ages 20 and 50, is responsible for most of the reduction in life expectancy inequality. At the same time, the recent effect of AIDS, together with reductions in mortality after age 50 – due to nervous system, senses organs, heart and circulatory diseases – contributed to increase health inequality across countries.

N.B. Gary Becker writes half of The Becker-Posner Blog.

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