Saturday, May 20, 2006

Big gains from cancer cure

In a forthcoming Journal of Political Economy paper (previewed here) Kevin Murphy and Robert Topel (M&T) estimate the value to the US of curing cancer would be $50 trillion. Even reducing overall cancer risks by 1% could be valued at nearly $500 billion. These figures are large but cancer killed 570,000 Americans last year.

According to M&T:

'We distinguish two types of health improvements - those that extend life and those that raise the quality of life'

'As the population grows, as incomes grow, and as the baby-boom generation approaches the primary ages of disease-related death, the social value of improvements in health will continue to rise'.

Many critiques of rising medical expenditures focus on life-extending procedures for persons near death. By breaking down net gains by age and gender, Murphy and Topel show that the value of increased longevity far exceeds rising medical expenditures overall. Gains in life expectancy over the last century were worth about $1.2 million per person to the current population, with the largest gains at birth and young age. Again, according to M&T:
'An analysis of the value of health improvements is a first step toward evaluating the social returns to medical research and health-augmenting innovations'

'Improvements in life expectancy raise willingness to pay for further health improvements by increasing the value of remaining life'.
M&T also chart individual values resulting from the permanent reduction in mortality in several major diseases - including heart disease, cancer, and diabetes. Overall, reductions in mortality from 1970-2000 had an economic value to the US of $3.2 trillion per year.

I have not seen a full preprint but this looks like exciting research.

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