Longer Life Means Less Poverty

Everybody agrees that there is more to life than money. Yet we measure living standards in rupees. Why? Because measuring non-monetary things may be important but is difficult to do. How do you measure the value of communal peace? Or democracy? We can measure social indicators like health or literacy, but find it difficult to ascribe a monetary value to them. And so debates on poverty or economic growth in India focus entirely on consumption or income.

Human beings regard life as the most valuable thing of all. Americans spend 90 per cent of their entire lifetime expenditure on health in their last year of life. Stretching out a long life by a few months more is regarded as worthy of using up a lifetime of savings.

Yet this high value of life is not reflected in any of our debates on poverty or GDP. The way we compile our statistics, India\’s GNP per capita goes up when a chicken is born, but goes down when a child is born. Why? Because we place a value only on items of consumption, which a chicken is and a child is not (save in cannibalistic societies).

A family may regard a newborn child as a boon, precious beyond compare. But our statistics will report a fall in living standards, since family income will now be distributed over one more person.

How do we quantify the enormous value we place on life? No ideal formula is known, but a new (and necessarily controversial) one comes from Prof William D. Nordhaus of Yale University. His concept of \”health income\” is defined as the amount of consumption a person will give up for increased longevity. On this basis, he computes health income in the USA.

Nordhaus estimates that health income grew much faster than GDP in the first three quarters of the 20th century, and fell short of the latter marginally in the last quarter. So, conventional data cloak a huge improvement in living standards including longevity.

In the first two quarters of the 20th century, life expectancy in the USA rose from 49 to 68. But subsequently the improvement of life expectancy decelerated, touching 75.8 in 1995.

In India, life expectancy has improved from around 27 in the 1940s to 61.1 in the 1990s. That is a huge improvement. If somebody applies Nordhaus\’ methodology to estimate health income in India, I imagine it will show a quantum jump in living standards. Once we measure poverty not just by consumption but by other things people prize, we will find a huge improvement in something they prize most of all-life.

People also prize literacy, good health, child survival. The major killers of past decades like plague, malaria and cholera have been controlled to a large extent. Infant mortality has fallen from over 250 per thousand births to 70 per thousand births. Literacy has improved from around 18 per cent in the 1940s to 65 per cent in the latest census. Our poverty statistics fail to capture these huge social improvements.

Life expectancy and literacy have improved far more rapidly than consumption in poor states. Huge disparities in income exist between the richer and poorer states. But the disparities in longevity and literacy are modest, and shrinking.

Look at the accompanying table, In 1999-00, net national income per head in Bihar (Rs 6,328) was way behind that of Maharashtra ( Rs 23,398) and the all-India average (Rs 15,562). in 1999-00. But life expectancy in Bihar (59.6 years) was only just short of the national average of 61.1 years. Infant mortality in Bihar (76 deaths per thousand births) was only slightly more than the national average of 70. The literacy gap between the most literate (Kerala, 90.9%) and the least literate state (Bihar, 47.5 %) is moderate compared with the income gap. Literacy in dirt-poor Madhya Pradesh (64.1 %) is actually higher than in relatively prosperous Andhra Pradesh (61.1).

So, we need to recast the debate on poverty, considering not only consumption but other things of value. Above all we should consider the value of life, the most precious thing of all.

Source: Economic Survey 2001-2.
Income per capita is technically NNP/head for 1999-00.