An Unhealthy America: The Economic Burden of ... - Milken Institute

An Unhealthy AmericaMilken InstituteV: Long-Term Forgone Economic Growth andIntergenerational ImpactsA. IntroductionWhile the indirect impacts of chronic disease, reflected in lost workdays, disability, and reduced employee productivity,are substantial, the intergenerational impacts on economic growth are likely to be much greater. Yet there has beenlittle research to quantify the long-term effects of poor health on human and physical capital formation, or therestrictions imposed on U.S. economic growth.Since the early 1990s, the determinants of economic growth have been the subject of renewed study. Most of theexplanations fall under the umbrella of the “endogenous growth” theory. This theory is based on the observation thatthe factors that influence economic performance are determined within the model and interact with one other. 87 Othervariables and model specifications have been attempted, but only a few endogenous models have been found to bestatistically significant in explaining growth. 88Human capital is recognized as an important component of growth, but researchers have only recently begun toexamine the role of health as another component. As a result, we are now seeing greater interplay between the fieldsof health economics and macroeconomics, as well as a growing awareness of the endogenous relationships betweenhealth, human capital formation, and economic performance. Most of the research has been centered on infectiousdisease in developing economies. But in developed countries, where deaths from infectious and parasitic disease havegiven way to deaths from chronic and degenerative disease, the economic impacts have received less attention—partlybecause they have been harder to discern empirically.Economic growth depends on the stock of human capital (a well-trained work force) and continued investments ineducation and work-based learning and training procedures. Economic Nobelist Gary Becker offers an insightfulsummation of the way knowledge drives innovation:“The continuing growth in per capita incomes of many countries during the nineteenth and twentiethcenturies is partly due to the expansion of scientific and technical knowledge that raises theproductivity of labor and other inputs in production. The increasing reliance of industry onsophisticated knowledge greatly enhances the value of education, technical schooling, on-the-jobtraining, and other human capital.” 89Improved health also leads to greater investment in education, resulting in higher levels of human capital. In turn,wealth increases, and a virtuous cycle of economic growth is born. But investing in health requires a broad-based87. Romer, Paul. “Endogenous Technological Change. Journal of Political Economy.” October. 1990, p. 71–102.88. López-Casasnovas, Guillem, Berta Rivera, and Luis, Currais. “Health and Economic Growth: Findings and PolicyImplications.” (Cambridge: The MIT Press, 2005), 2.89. Becker, Gary. Human Capital and the Economy: Proceedings of the American Philosophical Society, Vol. 135 No. 1 (March1992) p. 85–92.[ 167 ]