BPEA | 1997: Microeconomics

Measuring the Health of the U.S. Population

David M. Cutler and
(Cambridge, MA.--Monday, July 28, 2003)   David M. Cutler is Professor of Economics, Associate Dean of the Faculty of Arts and Sciences and John L. Loeb Professor of Social Sciences.  Staff Photo by Rose Lincoln/Harvard University News Office
David M. Cutler Otto Eckstein Professor of Applied Economics - Harvard University
Elizabeth Richardson
Elizabeth Richardson Harvard Universitv

Microeconomics 1997

VALUING THE HEALTH of the population is central to forming public policy for health care. It is frequently asserted that the marginal productivity of the medical system is low, so limiting overall medical spending would improve welfare. But gauging the productivity of the medical sector requires measuring the output of the medical system, which cannot be done without valuing the health of the population. Similarly, resource allocations must often be made within the medical sector: Should more be spent on research for the young or the elderly? Should the focus be on prevention or cure? But these decisions cannot be made without knowing the output of medical spending-in short, its health consequences. A great deal has been written from the private perspective about changes in the distribution of wealth and income over the past several decades. But utility depends on health as well as consumption, and to capture the utility consequences of recent changes in the economy, health must be valued as well. 3 Finally, the relationship between health and economic behavior is often of interest. Are the sick elderly more likely to retire than the healthy elderly? How is this relation changing over time? To answer these questions requires measuring health and its changes over time.