Wednesday, February 10, 2010

Why I Hate This Graph

The following is a common relationship shown between life expectancy and health expenditure. Most use this to argue that those with nationalized health care systems, namely Canada, are more effective than the US, who despite high health expenditure carries a lower life expectancy.

I hate this graph for several reasons. Let's first ignore the idiot who tried to draw a linear curve through the dots. Also, let's ignore that most countries enjoy lower cost for American health technology because the U.S. population's higher price for care subsidizes their access. The problem with this health expenditure and life expectancy relationship even asks the wrong economic question.

Most view economics as a machine. You input labor and resources and you get productivity and growth. The job, therefore, of economic policy is to optimize labor and resources to get higher productivity and growth. In this view it should seem matter of fact that output should come from input. Spending more on health should yield greater health.

Economics and health economics for that matter is emphatically not a means of optimizing scarce resources. The question of any economic order is how to create the infrastructure and property rights such that those who innovate take existing inputs of production and create new value.

1 comment:

Troy Camplin said...

Let us also ignore the fact that the U.S. defines infant mortality differently from the rest of the world, meaning we show much greater "infant mortality" simply because we count stillborn infants, while the rest of the world does not. This necessarily increases our "infant mortality" numbers and lowers our "life expectancy." It would help if we were counting the same things.