The Mental Health puzzle, part IV: the economic hypothesis.

In three previous parts, I posed the puzzle of the measured increase in mental health problems (depression, anxiety, and obesity) across the Western world since the 1950s and briefly discussed the pros and cons of the main cultural explanation doing the round. Here I want to discuss the mainstream ‘economic explanation’.

The mainstream economic explanation is to simply take for granted that people are rationally choosing their risks of becoming mentally unhealthy later in life and hence that the increase in mental health problems must reflect increased benefits of those risks and reduced costs. People are then obese because they want to be obese and they are depressed and anxious because they got unlucky in that they took decisions that entailed a high risk of these problems and lost.

There is a lot to be said for this kind of brutal cost-benefit rationale.

For one, the health system has become inclusive in that many of the costs of mental health problems are borne by the community.

In 2006 for instance, I already calculated that the average obese American cost 2000 dollars more in terms of health costs than non-obese Americans and that these costs primarily came at the expense of others, ie they were not borne by the obese themselves. Furthermore, the health effects of obesity and in particular reduced length of life has since the 80s been overcome, mainly by the widespread use of statins. Hence the obese now live about as long as everybody else, a clear reduction from the point of view of the individual in terms of the negative consequences of obesity.

Similar things can be said about anxiety and depression and other mental health problems: sufferers are no longer told they are crazy and locked up, but are now much more looked after with much more resources flowing towards them. They are still not pleasant conditions to suffer from, but the private costs have clearly come down, increasing the payoff for those who would rationally take risks that might lead to depression and anxiety. Prozac and other medical interventions have made these mental health problems more bearable, thus increasing the incentives to risk them.

If you think about the direct costs and benefits, the same story emerges. The actual food costs of becoming obese has of course declined, and so has the payoff to being physically fit since less jobs than before demand physical fitness. Similarly, labour laws now make it more difficult to fire people who are depressed or anxious, and generous government welfare programs take in millions of people in these categories, effectively reducing the monetary costs on individuals and their families from these mental health problems.

Within this approach, there are a variety of multipliers that create a long-run lag between changed monetary incentives and behaviour. One of those multipliers is for instance the marriage market, which would initially penalise the few who are mentally unhealthy (a thin market problem) but in the longer run adjusts as the market is flooded by the mentally unhealthy. Similarly, adjustments in terms of the design of buildings and consumer items to cater for the mentally unhealthy (such as clothing lines for the obese or convenience outlets for those too anxious to go out in the open) take time, again creating a lag between initial changes in monetary incentives and the behaviour of whole groups.

The policy prescriptions of this mainstream economic approach to mental health is basically the exact opposite of where policy is going: from the mainstream economic perspective, one would advocate a ‘tough love’ approach to all of these diseases: one would allow health insurers to charge the obese more for their insurance; one would reduce the monetary compensation flowing to sufferers from depression and anxiety; and one would encourage the use of fitness and mental health tests as a valid selection tool for employers. The policy reality is clearly in the exact opposite direction so from a mainstream economic perspective one should expect nothing but worsening mental health outcomes in decades to come as our societies reward the mentally unhealthy more and more.

The problems with this economic approach are again in terms of plausibility and policy prescription.

In terms of plausibility, the main problem is to find some benefit to these mental health problems that makes it rational to risk them. Which choices that lead to higher risks of depression, for instance, have a possible payoff making the risk worthwhile? I dont know of any such choices, since everything that is good for economic outcomes (education, savings, fitness, mental discipline) is usually associated with lower risks of mental health rather than higher risks.

Indeed, to depict obesity as a rational choice maintained for decades by individuals is rather odd. You see, whilst life is no longer shorter for the obese, it is not pleasant either. Obesity is still associated with reduced physical fitness, reduced libido, erectile dysfunctions (particularly if lots of medicines are involved), diabetes, and social stigma. In which weird world could that be a choice that a fully rational and calculating individual would take? Not the world we live in, and the same can be said for the other mental health problems; the model of rationality simply doesn’t fit them.

The economic approach also has great difficulty rationalising the cross-sectional variation; there is for instance little reason why mental health problems should be higher in the cities than in smaller communities, why the same change in economic incentives should have played out so differently over countries, etc.. Via ad-hoc trickery one might fill in the cross-sectional puzzles, but it’s a stretch.

In terms of policy, the basic prescript of course fails the democratic test: with large proportions of the population now suffering personally or indirectly (via family members) from mental health problems, the point where politicians can advocate a tough economic line on mental health sufferers has long since past. It’s a non-flier. So from a mainstream economic perspective one would not hold out much hope for reducing the mental health decline seen in recent decades. Indeed, one would expect worse to come.

Author: paulfrijters

Professor of Wellbeing and Economics at the London School of Economics, Centre for Economic Performance

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