Health and the Economy in the United States, from 1750 to the Present

PWP-CCPR-2013-011

Abstract

This review discusses theories of the health transition and examines how the health transition occurred in the United States, including changes in the distribution of health by socioeconomic status. I bring new data to bear on an extensive array of health indicators -- mortality, height, BMI, birth weight, and chronic conditions. I investigate the role in the health transition played by rising incomes and by scientific advances and their application and I will argue that the preponderance of the evidence shows that scientific advances have played an outsize role in the United States. I will examine how these scientific advances, which during the health transition took the form of expensive sanitation projects, were implemented. Fear of infection provided the political support for the financing of these projects, even when the poor were the primary beneficiaries. Because more recent scientific advances have taken the form of therapies targeted to chronic disease and because the importance of behavioral factors has grown, political support for expenditures aimed at the poor is likely to be lower. I will argue that while improvements in health raise productivity, these improvements are not necessarily a precondition for modern economic growth. The nature of the economy in which these improvements occur also matters. The gains to early life health are largest when the economy has moved from “brawn” to “brains” because this is when the wage returns to education are high, leading the healthy to obtain more education. Although the causal effect of education on health is still unclear, those who obtain more education may be better able to take advantage of new medical knowledge and therapies as they age. Analyses and theories of health therefore need to treat health as a dynamic variable. The review also suggests that future health can continue to improve provided that innovation continues. How to finance this innovation remains an issue, but in a rich society the value of even marginal improvements in health is higher than the value of the dramatic mortality declines of the health transition.