In one sense, there is an enormous wealth of research on the economics of longer lives. This is a byproduct of the operations of sizable pensions and life insurance industries, dependent as they are on successfully predicting future trends in life span. On the other hand, outside this somewhat narrow scope, most concerned with the gain of a tenth of a year here and the loss of a tenth of a year there, there is comparatively little economic work that is directly tied to the research and advocacy communities engaged in trying to treat aging and greatly lengthen healthy human lifespan. That will change as the longevity industry both grows and succeeds in introducing age-slowing and rejuvenating therapies into the clinic.
The paper and commentary that I point out today might be taken as a sample of what lies ahead for the economics profession. At least some economists are at present managing to convince grant-awarding bodies in their field that, yes, there is real movement towards the treatment of aging, and perhaps someone should look into how that will likely play out in markets and societies. It should come as no great surprise to the audience here that even modest gains in slowing or reversing aging have vast economic benefits when they occur across an entire population. The cost of coping with aging is vast, the cost of incapacity and lost knowledge and death due to aging equally vast. It is by far the biggest and most pressing issue that faces humanity, and now we enter an era in which we can finally start to do something about it.
Every country around the world is set to see an increase in the share of its population aged over 65. That leads to concerns about the negative macroeconomic consequences of an ageing society. However, at the same time life expectancy trends mean we are living longer and are on average in good health for longer. That should be good news for the economy. Future economic growth depends on exploiting the opportunities a longevity dividend brings and minimising the costs of an ageing society. In 2020 the ESRC awarded Professor Andrew Scott a £1 million grant to investigate an economic longevity dividend. The research program is both empirical and theoretical and is aimed at identifying the magnitude of a longevity dividend, the channels through which it operates and the policies that can be used to maximise its impact.
Life expectancy has increased dramatically over the last 150 years. These developments pose a number of important questions: Is it preferable to make lives healthier by compressing morbidity or longer by extending life? What are the gains from targeting aging itself, with its potential to make lives both healthier and longer? How does the value of treating aging compare to eradicating specific diseases? How will these gains evolve over time and be affected by demographic trends? We take an economic rather than biological perspective to answer these questions. Specifically, we use the Value of Statistical Life (VSL) approach to place a monetary value on the economic gains from longer life,better health, and changes in the rate at which we age.
VSL models have two distinct advantages for our purposes. Firstly, they are already used by a variety of government agencies to evaluate different policy measures and treatments. Secondly, by modeling how economic decisions interact with changes in health and longevity, we can analyze not just the current gains to targeting aging but how these gains will evolve in the future. The results reveal a distinctive feature of age-targeting treatments. Interactions between health, longevity, economic decisions and demographics create a virtuous circle, such that the more successful society is in improving how we age the greater the economic value of further improvements.
The study revealed that a compression of morbidity that improves health is more valuable than further increases in life expectancy. However, in order to raise economic gains, longevity has to improve too. Slowing down aging reduces the rate at which biological damage occurs and improves both health and mortality. The authors calculated a slowdown in aging that increases life expectancy by one year is worth $38 trillion, and for ten years $367 trillion!