Life's Price Tag: Your Health, Your Wealth, Your Worth
Following our previous exploration of health inequalities, a groundbreaking study by economists Jonathan D. Ketcham, Nicolai V. Kuminoff, and Nirman Saha offers a precise economic lens on the value of life in later years.
Traditionally, economists have valued human life using a straightforward approach: assigning a fixed $10-15 million value to each statistical life saved, primarily derived from workplace risk assessments for working-age adults. However, this conventional method fails to capture the nuanced reality of life's economic value, especially for seniors.
Published by the National Bureau of Economic Research, their research reveals a nuanced approach to valuing human life, demonstrating that our economic worth is not a static number, but a dynamic calculation that changes dramatically with age, health, and individual characteristics. The study found that at age 67, an individual's life might be valued, on average, at around $930,000, but by age 87, this drops to just $123,000. In the UK, the National Institute for Health and Care Excellence takes a more frugal approach, valuing a life year at approximately £25,000, which, when multiplied by life expectancy at the relevant age, suggests that the British NHS operates on a slightly more budget conscious philosophy of healthcare.
The researchers developed a sophisticated revealed preference framework by tracking individuals' medical spending choices as a proxy for their willingness to reduce mortality risk. Their innovative methodology examined how much people were willing to spend out-of-pocket on medical services that could potentially extend their life.
Critically, the study uncovers that the value of life is not uniform. A 67-year-old in excellent health might be valued at nearly $2 million, while someone in poor health could be valued at just $600,000. This variation reflects a complex interplay of factors including health status, education, and individual potential.
The most striking finding is a potential negative feedback loop in health investment. As individuals become less healthy, their perceived value of life and willingness to invest in medical interventions declines. Those in excellent health not only have a higher life value but are more likely to take proactive health steps. Conversely, individuals in poor health may become discouraged, potentially accelerating their health decline.
Consider the potential of small, low-cost interventions that could meaningfully extend life expectancy. Something as simple as a daily 15-minute walk can reduce mortality risk by up to 22%. The cost? Essentially zero, yet the potential return in extended, high quality life years is substantial.
For investors and individuals planning retirement strategies, health should not just be a personal concern, but a form of human capital with measurable economic value worth investing in and protecting.
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