Reporting on a study recently published in Science, Nicholas Wade of The New York Times writes that the study's authors "say they have identified a set of genetic variants that predicts extreme longevity with 77 percent accuracy." (See Wade's report here and a report by Robert Lee Hotz of The Wall Street Journal here.) So, we may soon be able to find out whether we can expect to live to be a hundred, barring accidents or extreme disregard for healthy living.
Should this scientific breakthrough be of interest to an economist from a purely economic point of view? How, if at all, would economic activity be affected if we could know how long we'd likely live?
Prof. N. Gregory Mankiw of Harvard has in his blog raised a bunch of interesting questions on how health insurance companies and financial firms selling annuities may use gene-based forecasts of a client's longevity.
In this post I will discuss a possible link between gene-based longevity forecasts and economic inequality. I fear that the steady rise in economic inequality that has been seen in the United States since the seventies may worsen when people are able to obtain reliable forecasts of their longevity.
Why, you may ask, should reliable longevity forecasts lead to higher economic inequality? Simple: Because there is a link between how long we can expect to live and how willing we would be to invest in ourselves.
For many of us, spending a lot of time and money on education is a bit of a drag. Sure, some of us enjoy going to school, listening to lectures, doing the homework assignments, and taking all those tests. But for most of us education is worth it simply because all that up-front sacrifice of time and money can be expected to lead after graduation to better jobs, higher salaries, and more desirable mates.
Similarly, although some of us may actually enjoy exercise for its own sake, most of us endure the tedium of exercise only because it may in due course lead to better health, flatter abs, and perhaps a more fulfilling sex life.
In short, these kinds of investments in what economists call human capital require us to make sacrifices up front in exchange for delayed gratification. If the future payoff is larger than the current sacrifice, we make the investment. Otherwise, we don't. Economists believe that investments in human capital are driven by this cold-blooded comparison of costs and benefits.
And this is where longevity enters the picture. Someone who knows that she will have a long life will naturally expect to enjoy the fruits of an early investment in human capital for an extended period. Consequently, she will very likely invest heavily in her education. Conversely, someone who finds out that he has a mere fifteen years to live will probably not want to spend eight years and a huge amount of money to earn a medical degree.
In other words, those with the genes for a long life will invest heavily in human capital and enjoy long, well-paid, and fulfilling lives. Those without the genes for a long life will invest less in human capital and have shorter, poorer, and ultimately less fulfilling lives. In this way, economic inequality will probably increase as a result of improved gene-based longevity forecasts.
(Before going any further I need to make a slightly wonkish detour. Strictly speaking, the introduction of a new inequality-raising factor into the mix of causal factors that affect inequality does not guarantee an increase in inequality. It all has to do with what statisticians call correlation or covariance. Let's consider a world with just two people, Al and Betty. Suppose Al is rich and Betty is poor. Now assume scientists—from another world!—do their genetic tests and reveal that Betty has the genes for long life and Al doesn't. Following the logic of the paragraphs above, Betty will get richer and Al poorer, thereby actually reducing inequality. So, you see that merely introducing a new causal factor that by itself raises inequality does not guarantee an increase in overall inequality. However, as there is no presumption one way or the other about how the effect of longevity information on inequality is related to the other factors that also affect inequality, I will loosely assume that the causal chain described in the previous paragraph does indeed raise inequality.)
This rise in economic inequality will be less pronounced in countries—such as those in Western Europe—where education at all levels is paid for by the government. In such a country, a person who finds out that he will not live long—and therefore will not benefit for long from education—will have less reason to quit school because, after all, the fees are being paid by the government. But even here, the student does bear some of the costs of education such as the tedium of attending the lectures and the time spent studying, doing homework, etc. So, even in these caring societies a person with not long to live will be unlikely to invest heavily in his or her human capital.
Note also that when the government pays for education, the longevity-related dilemmas simply get shifted from the individual to the state. Genetic information on longevity now becomes an ethical dilemma for the state. Should the government spend tons of money educating someone who will have a short life? Economic efficiency considerations would say "No." But ethics is a whole different ball of wax on which economists have little to say. An efficiency-driven society would benefit greatly from gene-based longevity forecasts, because such a society would be able to allocate its limited resources efficiently instead of 'wasting' it on costly investments in short-lived people who will not be around long enough to benefit very much from the education. But again, few societies will ignore the ethical dilemmas and choose to be guided entirely by efficiency.
Apart from government funding of education, another factor that will restrain the rise in economic inequality resulting from the availability of gene-based longevity forecasts is what economists call depreciation.
I have a terrible memory. I have to read a book or journal article over and over and over in order to retain an understanding of the main ideas therein. In econospeak, the depreciation (or wear and tear) rate of my human capital is very high. If we were all as memory challenged as I am, longevity differences would not lead to big inter-personal differences in human capital investment. You may live longer than I, but since both you and I quickly forget what we learn today, we will both benefit to the same extent from what we learn today. Therefore, you will have no greater incentive to invest in education than I. Therefore, our longevity differences will not add to any inequality in our incomes.
Let me end this post by making a brief pronouncement on something I know little about: biology. The availability of gene-based longevity forecasts may have big effects on humankind through Darwinian natural selection. To the extent that longevity genes are heritable, those who are lucky enough to have the long-life genes will be more desirable as mates and will enjoy greater reproductive success. Those without the long-life genes may end up decimated by a lack of mating opportunities (unless they have some compensating attribute). And for such people, it will not help to hide one's genetic information. Those who do have the long-life genes will happily advertize their genetic information. So, anyone concealing their information will quickly be branded a short-lived person and shunned by potential mates.
Life can be cruel!
