Irving Fisher and the Contribution of Improved Longevity to.pdfVIP

Irving Fisher and the Contribution of Improved Longevity to Living Standards By WILLIAM D. NORDHAUS* ABSTRACT. It is not widely recognized that conventional measures of national income and output exclude the value of improvements in the health status of the population. The present study discusses the theory of the measurement of national income, proposes a new concept called “health income” that can be used to incorporate improvements in health status, and applies the theory to data for the United States over the 20th century. It concludes that accounting for improvements in the health status would, over the twentieth century in the United States, make a substantial difference to our measures of economic welfare. I Introduction AMONG IRVING FISHER’S many contributions to economics, one that is little noted and scarcely remembered is his emphasis on the economic importance of health. For the most part, his concern was in promot- ing healthy lifestyles. In addition, he made an early (perhaps the ear- liest) estimate of the impact of mortality and morbidity on national output. This essay considers the question of how measures of economic welfare might change if they included measures of health status as well as of conventional consumption. The surprising finding is that *William D. Nordhaus is Sterling Professor of Economics at Yale University. He is a member of the National Academy of Sciences, a Fellow of the American Academy of Arts and Sciences, and is on the research staffs of the Cowles Foundation and of the National Bureau of Economic Research. He serves on the Congressional Budget Office Panel of Economic Experts and is Chair of the Advisory Committee for the Bureau of Economic Analysis. From 1977 to 1979, he was a member of the President’s Council of Economic