# Angus Deaton on Adam Smith and the Provisioning of Healthcare in America

Join me in staring at this chart. I have been doing so, on and off, for the past couple of days:

This is Figure 2 from a speech given recently by Angus Deaton at the Adam Smith Tercentenary celebrations at the University of Glasgow on June 8, 2023. I’ll have much more to say about the speech – that is the subject of today’s post – but for the moment, look at the chart.

It shows you life expectancy at age twenty-five in the United States of America (US) and Scotland (SCO). What does life expectancy at age twenty-five mean? Well, what does life expectancy at any age mean?

Life expectancy at a certain age is the mean additional number of years that a person of that age can expect to live, if subjected throughout the rest of his or her life to the current mortality conditions (age-specific probabilities of dying, i.e. the death rates observed for the current period).

https://ec.europa.eu/eurostat/statistics-explained/index.php?title=Glossary:Life_expectancy

In simple English, if you made it to the age of twenty-five as an American man in the year 1990, you could expect to live an additional fifty-one years from there on in (see the chart on the left).

Except for two problems.

The first problem is that the number, while indeed improving over time, started to drop off a little before 2020. A little before 2020, note, so this is not the pandemic we’re talking about.

And the second problem is a much bigger one. The red line in the chart on the left that I have been talking about is the red line at the top. That is the line for men in the United States with a BA degree.

The red line at the bottom of the chart – the life expectancy at age twenty-five for men in the United States without a BA degree – that red line is the one that I have not been able to stop thinking about. Here’s why:

1. It is lower than the line for those with a BA throughout the entire period of analysis. US men without a BA degree have had lower life expectancy at twenty-five for the last thirty years.
2. The life expectancy for this cohort at twenty-five started to drop off in 2010 – a full decade prior when compared to those with a BA degree.
3. Not only has that drop-off not been arrested, it has accelerated a little before 2020. The data is probably even worse post 2020, but Angus Deaton has chosen to stop at 2020, since the topic of his speech isn’t the effects of the pandemic.

Outcomes over intentions, always remember. It doesn’t matter what the intentions were in 1990 or have been since then. Whatever they may have been (and are), the outcomes show that something, somewhere has gone wrong.

What has gone wrong? Can it be fixed? If so, how? Why should an Indian blogger care about this when there are so many other problems more specific to India?

I’ll answer each of these questions in turn, but I’ll begin with the last of these first.

For the same reason that an Indian blogger should care about what South Korea got right in the 1950’s when it comes to industrial policy. Because we should aim to try and replicate policies that have worked in other parts of the world, while being mindful of the opportunity costs of these policies. And by the same token, we should aim to try and avoid policies that have not worked in other parts of the world, while being mindful of the opportunity costs of not implementing those policies.

The second half of the last sentence in the paragraph above is quite something to think through, but we’ll get to it later on.

Being a student of the Indian economy requires you to be a student of economic policies the world over, and that over the years.

Not just what has gone wrong, of course, but also why has it gone wrong.

It is here that we get into the deep and tricky part of the ocean. Tricky because the diagnosis of a problem depends upon your ability to reason things through. Your ability to reason things through is in turn dependent upon:

1. How well you know you know your facts
2. How well you are able to analyze them in order to reach a conclusion
3. How familiar you are with the developments within the subject being analyzed
4. The tools and theories being used for analysis.

Let’s take the first three of these as a given in this specific instance, and so too the first part of the fourth. It is the second part of fourth point that Angus Deaton focusses upon.

What are we analyzing here? The fact that life expectancy at twenty-five for American men is declining, and that the decline is worse among men without a BA degree. What theory should we advance for trying to understand why this has happened?

There can be many, but let’s cleave them into two parts for now.

Theory 1: There is too little government support when it comes to the provisioning of healthcare in the United States of America.

Theory 2: There is too much government support when it comes to the provisioning of healthcare in the United States of America.

The good news is that one hundred percent of economists upon reading this have gone “Aha! Exactly!”

The bad news is that some of them said so upon reading Theory 1, and some of them upon reading Theory 2.

So which is it? Why so, and how do we know?

I wouldn’t be much of an economist if I didn’t have an answer to this question. But more importantly, I wouldn’t be much of a teacher if I didn’t give you an overview of both theories. That is exactly what I plan to do over the course of the next two days, so stay tuned.

## 3 thoughts on “Angus Deaton on Adam Smith and the Provisioning of Healthcare in America”

1. […] is a continuation of yesterday’s post, and in this post, I seek to come up with the best libertarian arguments for why healthcare markets […]

2. Avi says:

Isn’t the category BA vs non-BA a little weird? I mean, I still get secondary education vs not, or college graduate vs not. Why BA specifically? What does ‘not BA’ include?
Perhaps something obvious that I am missing?