Two weeks ago I pointed readers toward evidence that the value of health care is small. Now Arnold cites Murphy and Topel claiming that the present value of a cure for cancer is $50 trillion. What gives? Here’s what my health economics guru Robin Hanson has to say:

Your quote and the abstract say nothing I object to. Yes, of course, living longer has a vast value, and we would be willing to pay lots to get more. The problem occurs when they consider a cost benefit analysis, and then basically assume that all this gain is due to medical care (p.32):

Net Gains: Deducting the Rising Costs of Medical Care
To be economically worthwhile the benefits of health improvements must offset the costs of achieving them. These costs have two basic components. The first is the up-front cost of developing new health-improving technologies or infrastructure, which takes the form of medical research and development expenditures, broadly defined. The second is the cost of actually implementing new procedures and treatments, which is a flow of direct health care expenditures. These costs can either rise or fall as a consequence of technical advances, depending on the nature of the advance and the nature of demand for medical services.

On p.34 they clarify:

We actually measure the value of increased longevity and changes in medical expenditures from all sources. This may cause us to either overestimate or underestimate the true social value of health care advances. First, changes in medical expenditures include expenditures that raise the “quality” of life, which we ignore, so we may underestimate true social gains. Second, some current medical expenditures are investments in health that produce future benefits, so costs incurred in one period may yield measurable benefits later. Expenditures during our period of study may yield future benefits, leading to an underestimate of net gains, or benefits that we observe may be the outcome of past events, which causes an overestimate. Finally, some observed gains may be due to things unrelated to direct medical spending—cleaner air or water, for example. We don’t count the costs of these things.

Then on page 38, then include an estimate for the value of quality of life gains. Bottom line, they assume all health gains are due to medicine.

End communication.

Think of it this way: What is your willingness to pay to live forever? I’d happily pay all my earnings in excess of $10,000 in perpetuity – a present value of millions of dollars.

OK, but what is your willingness to pay for a bottle of medicine that a spammer says will let you live forever? I wouldn’t pay a penny.

Are doctors no more credible than spammers? That’s going too far. But the bottom line is that life is precious, but at least on average, medicine is not.