The Health of Nations: The Contribution of Improved Health to Living Standards

61 Pages Posted: 28 Feb 2002 Last revised: 26 Oct 2010

See all articles by William D. Nordhaus

William D. Nordhaus

Yale University - Department of Economics; Cowles Foundation, Yale University; National Bureau of Economic Research (NBER)

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Date Written: February 2002

Abstract

Nations generally measure their economic performance using the yardstick of national output and income. It is not widely recognized, however, that conventional measures of national income and output exclude the value of improvements in the health status of the population. The present study develops a methodology and presents preliminary estimates of how standard economic measures would change if they adequately reflected improvements in health status. The study first discusses the theory of the measurement of national income, examines some of the shortcomings of traditional concepts, and proposes a new concept called 'health income' that can be used to incorporate improvements in health status. The study next discusses how the proposed measure fits into existing theories for measuring and valuing consumption and health status. The study applies the new concepts to data for the United States over the twentieth century and concludes that accounting for improvements in the health status would substantially increase the estimated improvement in economic welfare for the U.S. over the twentieth century.

Suggested Citation

Nordhaus, William D., The Health of Nations: The Contribution of Improved Health to Living Standards (February 2002). NBER Working Paper No. w8818. Available at SSRN: https://ssrn.com/abstract=302579

William D. Nordhaus (Contact Author)

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Cowles Foundation, Yale University ( email )

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