So: the BEA just released its Q3 GDP report, showing that Q3 GDP grew at the highest annualized rate since 2023.
But hidden in that report is the fact that the largest contributing factor to this GDP growth was health care spending.
And this is the lesson I want to convey to everyone: Growth in healthcare spending should not be taken as a sign of good economic health
That's like a family saying, "We spent a lot more money than we usually do on maintenance this year, we must be doing quite well financially!"
I increasingly worry about this, because when I look at the college students in my community, I'd reckon that nearly 50% of them are pursuing jobs in healthcare. What does it say when an economy is increasingly dominated by this sector which is primarily maintenance related? It suggests that fewer and fewer resources are being put into creating final outputs that lead to human enjoyment, and instead more and more resources are put into troubleshooting problems. That doesn't sound like a marker of good economic health.
Worse than that -- the more that's spent, the more it's a sign that things have gone awry, given that hc spending is dominated by chronic disease spending, and chronic disease in this country is a sign of the foundations of life being hugely disordered.
HC spending is like an index fund on the poisons of modern life.
Yeh, and if a greater fraction of the population is working in healthcare, that means there's a smaller share for them to extract surplus from. Which may perniciously incentivize the industry to get more people into chronic care conditions.
You really have to zoom out from where we usually do analysis to get this.
Taking the current state as given, of course alleviating a bunch of infirmities is productive. Of course, fixing your broken down car is productive. Of course clearing the garbage from the alleys is productive.
Do you know of anyone who’s tried to create a GDP alternative that excludes maintenance type stuff. There are some tricky conceptual issues to work out.
Agreed. But if year after year you find that you're spending more and more of your resources on these activities, that's a sign something might be awry.
No, I don't know of any. But I think it would be a good idea, especially if the BEA does it, essentially like an official statement that you shouldn't take the headline GDP number as a gospel-truth summary indicator. There's a lot more nuance to this under the hood.
The big problem is that spending less upfront, knowing more maintenance is required, is almost just like buying on a deferred payment plan.
People buy cheap unhealthy food, reap the hedonic benefits, and then make up the difference in increased medical expenditures. If you drop the maintenance part, you’re missing whatever utility justified that choice.
to play devil's advocate:
If we get better at helping sick people get healthy, or extending lifespans, then presumably those people can go on to be productive in society. If spend a lot of money on cancer treatments and old age treatments and things that deal with chronic pain or mental illness, and those things result in people being more productive, shouldn't we count the money spent in that manner as the same as any other increase in efficiency?
it is clearly in an increase to productivity to have computers that allow us to do more with our time. Why wouldn't healthcare that allows us to do more with our time be the same?
I'm sure you are right with your skepticism of GDP and also with the general idea that healthcare is more like fixing broken windows than it is like some productive category, but I wonder if the logical end of such a line reasoning is that the only things that are truly productive are things that increase our productivity?
That's what makes it tricky. I haven't thought through all the nuances, but there should be some metric to tell us when there's a problem, like if you're spending more on maintenance on your car but at the same time it's breaking down more.
And, let's be honest, how many of us truly believe that growth in US healthcare is due to efficiency enhancing health procedures, vs a sicker population and/or market distortions