Handbook of Research on Cost–Benefit Analysis, Ch 19: The Value of the 1964 Surgeon General’s Report

In this chapter we extend the framework of Murphy and Topel (2003a) and Nordhaus (2003) on the benefits of medical research. Their point of departure is the striking increase in life expectancy in the United States over the last 50 years. In 1970, average life expectancy at birth was 70.8 and it was 77.8 years in 2004, a gain of about a seven years. Attributing the increase to improvements in health knowledge, medical practice and technology, they present estimates suggesting that if the dollar value of this increase is properly taken into account, medical research has been enormously productive. Indeed, Becker (2007) argues that, given underlying willingness to pay, the increase in life expectancy may be the largest single factor in the rise of Western living standards. Because life expectancy increases are not captured by standard national income accounting, this important contribution to higher living standards is hidden or at least underestimated.

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July 2009

Frank J. Chaloupka
Richard M. Peck