In their recent book Deaths of Despair and the Future of Capitalism, Anne Case and Nobel economics prizewinner Angus Deaton, both emeritus economists at Princeton University, show that the death rate for middle-age whites without a college degree bottomed out in 1999 and has risen since. They attribute the increase to drugs, alcohol, and suicide. Their data on deaths are impeccable. They are careful not to attribute the deaths to some of the standard but problematic reasons people might think of, such as increasing inequality, poverty, or a lousy health care system. At the same time, they claim that capitalism, pharmaceutical companies, and expensive health insurance are major contributors to this despair.
The dust jacket of their book states, “Capitalism, which over two centuries lifted countless people out of poverty, is now destroying the lives of blue-collar America.” Fortunately, their argument is much more nuanced than the book jacket. But it is also, at times, contradictory. Their discussion of the health care system is particularly interesting both for its insights and for its confusions. In their last chapter, “What to Do?” the authors suggest various policies but, compared to the empirical rigor with which they established the facts about deaths by despair, their proposals are not well worked out. One particularly badly crafted policy is their proposal on the minimum wage.
This is from “Blame Capitalism?“, my review of The Deaths of Despair and the Future of Capitalism,” in Regulation, Fall 2020.
Another excerpt:
To understand what is behind the increase in the death rate, the authors look at state data and note that death rates increased in all but six states. The largest increases in mortality were in West Virginia, Kentucky, Arkansas, and Mississippi. The only states in which midlife white mortality fell much were California, New York, New Jersey, and Illinois. All four of the latter states, they note, have high levels of formal education. That fact leads them to one of their main “aha!” findings: the huge negative correlation between having a bachelor’s degree and deaths of despair.
To illustrate, they focus on Kentucky, a state with one of the lowest levels of educational attainment. Between the mid-1990s and 2015, Case and Deaton show, for white non-Hispanics age 45–54 who had a four-year college degree, deaths from suicide, drug overdose, or alcoholic liver disease stayed fairly flat at about 25–30 per 100,000. But for that same group but without a college degree, the deaths in the same categories zoomed up from about 40 in the mid-1990s to a whopping 130 by 2015, over four times the rate for those with a college degree.
Why is a college degree so important? One big difference between those with and without a degree is the probability of being employed. In 2017, the U.S. unemployment rate was a low 3.6%. Of those with a bachelor’s degree or more, 84% of Americans age 25–64 were employed. By contrast, only 68% of those in the same age range who had only a high school degree were employed.
That leads to two questions. First, why are those without a college degree so much less likely to have jobs? Second, how does the absence of a degree lead to more suicide and drug and alcohol consumption? On the first question, the authors note that a higher percentage of jobs than in the past require higher skills and ability. Also, they write, “some jobs that were once open to nongraduates are now reserved for those with a college degree.”
I wish they had addressed this educational “rat race” in more detail. My Econlog blogging colleague Bryan Caplan, an economist at George Mason University, argues in his 2018 book The Case Against Education that a huge amount of the value of higher education is for people to signal to potential employers that they can finish a major project and be appropriately docile. To the extent he is right, government subsidies to higher education make many jobs even more off-limits to high school graduates. Yet, Case and Deaton do not cite Caplan’s work. Moreover, in their final chapter on what to do, they go the exact wrong way, writing, “Perhaps it is time to up our game to make college the norm?” That policy would further narrow the range of jobs available to nongraduates, making them even worse off.
On the second question—why absence of a degree leads to more deaths of despair—they cite a Gallup poll asking Americans to rate their lives on a scale from 0 (“the worst possible life you can imagine”) to 10 (“the best possible life you can imagine”). Those with a college degree averaged 7.3, while those with just a high school diploma averaged 6.6. That is not a large difference, a fact they do not note.
And note their novel argument for why improved health care, better entertainment through the internet, and more convenience don’t count in people’s real wages:
So, what are the culprits behind the deaths of those without college degrees? Case and Deaton blame the job market and health insurance. Jobs for those without college degrees do not pay as much and do not generally carry much prestige. And, as noted above, Case and Deaton mistakenly think that real wages for such jobs have fallen. Some economists, by adding nonmonetary benefits provided by employers and by noting the amazing goods we can buy with our wages such as cell phones, conclude that even those without a college degree are doing better. Case and Deaton reject that argument. They do not deny that health care now is better than it was 20 years ago, but they write that a typical worker is doing better now than then “only if the improvements—in healthcare, or in better entertainment through the internet, or in more convenience from ATMs—can be turned into hard cash by buying less of the good affected, or less of something else, a possibility that, however desirable, is usually not available.” They continue, “People may be happier as a result of the innovations, but while it is often disputed whether money buys happiness, we have yet to discover a way of using happiness to buy money.”
That thinking is stunning. Over many decades, economists have been accused, usually unjustly, of saying that only money counts. We have usually responded by saying, “No, what counts is utility, the satisfaction we get out of goods and services and life in general.” But now Case and Deaton dismiss major improvements in the happiness provided by goods and services by noting that happiness cannot be converted to money. That is a big step backward in economic thinking.
Read the whole thing.
READER COMMENTS
Phil H
Sep 16 2020 at 7:56pm
On the utility issue… isn’t the point that money enables the exchange of goods, and so brings them into the measurable sphere? So that real value can be measured?
There’s something a bit perverse about an argument in which real people are killing themselves with drugs and alcohol, and an economist averts his eyes and says, “Nonsense! They should be having Fun(TM). Look at all the Fun(TM) things that MegaCorp has provided for them.” Empirically, the free goods of the internet are not providing enough utility to prevent these deaths. So the only question is, can government policy do anything about them?
David Henderson
Sep 17 2020 at 10:40am
You wrote:
I said nothing of the sort. I’m quoting Case and Deaton. They’re the ones who say that happiness cannot buy money. So they’re taking as given, whether they’re right or not, that these things create happiness. Remember that they’re trying to explain “deaths of despair.” Thus the book’s title. We don’t generally think of people being happy and in despair at the same time.
Phil H
Sep 17 2020 at 7:58pm
Either the improvements in healthcare, entertainment, etc. provide increased utility, or they don’t; either the increase in utility should be regarded as equivalent to an increase in real income or it shouldn’t.
From the fact that a certain group of people now seems to experience despair at higher rates, it seems clear that for these people, the internet etc. is not providing greater utility. This means that even if the goods you cite are providing on average more utility, they should *not* be counted as increased income, because they do not provide utility at a fixed rate, as convertible currencies do. Ten bucks is always worth ten bucks, to all people, at all times. But these goods are apparently worth different amounts to different people; but they cannot be exchanged in any way. That makes them fundamentally unlike money.
David Henderson
Sep 17 2020 at 8:01pm
You write:
Then take your argument to the people you’re disagreeing with: Anne Case and Angus Deaton.
KevinDC
Sep 18 2020 at 10:53am
Hey Phil –
A few thoughts. You wrote:
I’m a little hazy on what you’re asking here, but if you’re asking if that’s the point of using money according to economists and for the purpose of economics analysis, then no, that’s not the point. And if that’s not what you’re asking…then feel free to ignore that little tidbit 😛
The conclusion does not follow from the premise. The most this would show is that the internet and modern medicine etc haven’t provided a large enough boost in utility to offset the disutility caused by various sources of despair. It doesn’t show that these things don’t provide greater utility, period. To say these things don’t provide greater utility is to say you could find someone in despair, ban these things from their life, and they’d be completely unaffected. But if you think that banning these things from their life would make them even worse off, then it follows that these things do, in fact, provide greater utility.
This is just flat out false, and rests on an elementary economic error. Convertible currency absolutely does not “provide utility at a fixed rate” – money is as subject to the law of diminishing marginal utility as anything else. To say currency “provides utility at a fixed rate” and that “ten bucks is always worth ten bucks, to all people, at all times” misses this very basic point. It would imply that ten dollars for a broke homeless person who desperately needs something to eat is worth exactly the same, and provides the same “fixed rate of utility”, as it would if those ten dollars went to Jeff Bezos. But that’s obviously false. Ten dollars provides much greater utility to a starving person than a zillionaire.
(I suppose if we wanted to delve into the semantics, you could make the statement “ten bucks is always worth ten bucks, to all people, at all time” true if you define “ten bucks” in that statement as solely defining money as a unit of account. In that case, the statement becomes true, but it’s only true trivially. It would reduce to saying “The quantity of currency represented by ten dollars is equal to the quantity of currency represented by ten dollars.” This is not terribly useful or insightful information. If you want to talk in terms of how much ten dollars is worth to different people in a way that makes the statement useful or meaningful then we need to use more than a tautological reduction.)
JFA
Sep 16 2020 at 8:48pm
“Those with a college degree averaged 7.3, while those with just a high school diploma averaged 6.6. That is not a large difference, a fact they do not note.”
This could be a huge difference, but it all depends on the distribution of responses. You can’t really take an average of an ordinal measure. This has some data on reported personal happiness (https://news.gallup.com/poll/276503/happiness-not-quite-widespread-usual.aspx). 79% of those with “high school or less” report being very or fairly happy, compared to 90% of those with some college or more. You can say that’s only ~10 percentage points less but that also means that not having any college is associated with twice the probability of not reporting being very/fairly happy.
One thing that should be noted is that there are fewer and fewer people with only high school education. It could be that the types of people who would only have a high school diploma today have always been miserable, but since more people in the past had only a high school diploma, you couldn’t see it in the data when broken out by education.
Philo
Sep 16 2020 at 11:50pm
“You can’t really take an average of an ordinal measure.” This is a cardinal measure (at least, that’s how it’s intended).
JFA
Sep 17 2020 at 7:15am
“On the second question—why absence of a degree leads to more deaths of despair—they cite a Gallup poll asking Americans to rate their lives on a scale from 0 (“the worst possible life you can imagine”) to 10 (“the best possible life you can imagine”).” These types of questions are ordinal. This is just like asking someone to rate their health or happiness on a scale of 1 to 5 that corresponds to poor, fair, good, very good, and excellent. On these scales the top number does not necessarily mean that the person is 5 or 10 times better off than the bottom number. I couldn’t find the exact question, but I would also like to know whether the respondents were actually shown the numeric scale or were just shown the verbal options (my guess as a survey statistician and methodologist is that it is the latter, but I’d have to see the survey documentation to know for sure).
JFA
Sep 17 2020 at 9:03am
Scratch what I said. Thinking about it a little more, this can probably be interpreted as a cardinal measure, though I think the distributions of the responses would be more informative than the average.
JFA
Sep 17 2020 at 8:19am
To reiterate the compositional effect of education groups: In 1993, 55 percent of those over 25 in the US had at most a high school diploma. In 2019, 37 percent of those 25 or over in the US had at most a high school diploma. These groups are not comparable across time spans of more than a few years. Also, those people who were in the low education group before are also now spread through the other education groups.
The changes in mortality are driven by white males 25-34 and white women 25-54 (https://statmodeling.stat.columbia.edu/2017/03/30/aggregate-age-adjusted-trends-death-rates-non-hispanic-whites-minorities-u-s/). If lack of college degree is the issue, then you wouldn’t expect that overall change since the percent of white men 25-35 with a college degree has increase since 1990 (~25% in 1990 and ~36% in 2015) and the percent of white women 25-35 with a college degree has increased since 1950 (~25% in 1990 and ~45% in 2015). And this just highlights my point that the composition makes a difference. Given the large increase in whites with college degrees, we might expect that the outcome differences would differ by education level, but what really needs to be explained is the overall change (which we would not expect).
Floccina
Sep 17 2020 at 11:47am
This is a big error. I once saw a study that showed the alarming result that the life expectancy of females who did not finished high school had plummeted. Today very few females do not finish high school and one significant reason for a females not finishing high school today is bad health.
AMT
Sep 17 2020 at 8:53am
“People may be happier as a result of the innovations, but while it is often disputed whether money buys happiness, we have yet to discover a way of using happiness to buy money.”
How can someone who won a nobel prize say something so utterly stupid? “Those stupid, poor, peasants with their worthless “happiness!”
Thanks for this review, now I know to never, ever read anything by either of these people.
David Henderson
Sep 17 2020 at 2:53pm
You wrote:
You’re welcome. I wonder, though, whether that’s too strong a statement. I’ve read some very good work by Deaton.
Hayden Rear
Sep 17 2020 at 8:59am
It’s clear to me that education matters to health in many respects, including happiness. It’s also a signal of greater health. If you have a good primary education, you are more likely to go to college and feel a part of society. If you get laid off and don’t have any options, you’re more likely to be depressed and an alcoholic, and eat mcdonalds everyday.
The teacher’s unions steal from the children, and the leaders look the other way for a paycheck. It isn’t a good investment for the private sector because it’s too far into the future. It isn’t a good investment for the government because of the special interest groups. Our society isn’t a good investment for our society.
David Henderson
Sep 17 2020 at 10:41am
JFA makes a good point above about compositional effects. Too bad that Case and Deaton didn’t explore that.
Fred_in_PA
Sep 17 2020 at 12:36pm
I hesitate to comment since I’ve only read reviews of Case & Deacon, but . . .
All this seems to assume that everyone enjoys the same level of ability; that the distribution of IQ’s couldn’t possibly be a bell curve.
(Or maybe that there is a bell curve, but that college has become so debauched that being profoundly retarded won’t stop you from earning a doctorate: We’ll now give any Tin-man a diploma. And thus the advantages granted the credentialed are unjustified.)
Under factory capitalism, a simple man, if he could follow instructions, could make a lot of (let’s say, steel) which is worth a lot of money which then justified his being paid well.
But we’ve largely gotten rid of such, where the machinery and the system (esp., management) largely supplanted the need for greater cognitive skills. (We thought such jobs in-humane, and besides, we don’t like paying capitalists for the use of their capital. I wonder if taxing capital doesn’t at least partly explain our shift to being a service-based economy, where the worker is backed by little capital (and his/her productivity is consequently hard to improve — so his/her wages are slow to grow).)
Unfortunately, we didn’t get rid of the people of limited ability who used to fill those jobs.
(There is still, of course, the problem of why this seems only to be affecting the white population.)
JFA
Sep 17 2020 at 1:24pm
I don’t think that’s quite right. Chances are the IQ distribution has either remained unchanged or shifted to the right via the Flynn effect. To make this about IQ, you would have to show that measures of IQ have decreased in the particular groups driving the increased mortality (white males aged 25-34 and white females aged 25-54).
“Unfortunately, we didn’t get rid of the people of limited ability who used to fill those jobs.” It doesn’t seem unfortunate to not “get rid of people”.
Fred_in_PA
Sep 17 2020 at 1:41pm
You are, of course, correct; “getting rid of people” probably requires crimes against them. My point is, instead, that we self-righteously took steps that (oops!) got rid of their jobs without ever considering what would happen to them.
As for declining IQ’s in the affected group, I should think that likely: If we have 50% of the population without college, and we then take the most capable 15% and send them to college, the average in the lower 35% would seemingly have to fall. Yes?
JFA
Sep 17 2020 at 3:17pm
In terms of the composition of the educational attainment groups, that’s correct; the smarter ones from the lower education group are the marginal college graduates and the lower education group will have a lower average IQ after 20 or 30 years of increased college attainment, but the overall population distribution would not have shifted to the left. What I’m pointing out is that if the only change is the composition of groups and college provides a protective effect, as college attainment increases, we should see a decrease in mortality for the whole group (college grads and non-grads) because you are moving people from the non-college group to the college group. What we see is the opposite: the whole group of white males 25-34 and white females 25-54 saw mortality increase. In order for IQ to explain the decrease in those groups, the population distribution (not just the distribution in the subgroups) would have had to shift left. If college does provide a protective effect against misery, then there is an increased misery in the non-college group that is unexplained by the changing composition of the education groups and offsets the decrease in misery that those marginal college graduates obtain.
Fred_in_PA
Sep 17 2020 at 9:02pm
Perhaps I’m confused. You say,
“the whole group of white males 25-34 and white females 25-54 saw mortality increase”
I didn’t think that was what Case & Deaton said. Rather, I thought they claimed deaths of despair went up among white males 25-34 and white females 25-54 who did not go to college, but not among those white males 25-34 and white females 25-54 who did.
This is the group I was referring to as those “simple men (& women)” who used to have those factory jobs. Now perhaps doubly handicapped because of the lower average IQ in the group.
JFA
Sep 18 2020 at 6:28am
I’m not sure they comment on males verses females, they just talk about middle-aged whites. Here’s a link that showing the age-adjusted mortality for all age groups broken down by race and gender: (https://statmodeling.stat.columbia.edu/2017/03/30/aggregate-age-adjusted-trends-death-rates-non-hispanic-whites-minorities-u-s/).
Case and Deaton claim that the group that has faced rising mortality is middle-aged non-college grads, but it is also the case that the overall mortality for white males aged 25-34 and white females aged 25-54 has increased (Case and Deaton were widely criticized a few years ago for not breaking up the middle-age group by sex, since it was only white females who seem to see rising mortality in the middle-aged cohort). Those 2 things can be true; but in order for an increase in non-college grad mortality to cause an increase in the mortality measured at the group level (college grads and non-college grads), the mortality of the non-college grad group has to rise so fast that it outweighs their decreasing share of the group population and the alleged protective effects that college has on the increased number of college grads.
We would expect rising mortality for the non-college grad group just through changing composition, but we wouldn’t expect that rise to be so large as to cause an increase in the over mortality of the age group. That’s why I don’t think IQ explains much if any of the increase in mortality.
Fred_in_PA
Sep 17 2020 at 1:30pm
Sorry. It’s the scarecrow who gets a diploma.
nobody.really
Sep 18 2020 at 10:00am
Right. The Tin Man merely got a heart so he could be “happy.” But did anyone check on how this change affected his income? Of course not. ‘Cuz we have yet to discover a way of using happiness to buy money.
Damn wizards….
David Seltzer
Sep 17 2020 at 6:17pm
Case and Deaton are careful not to attribute deaths to inequality. Yet they claim that capitalism contributes to this despair. Query. Does one infer the former from the latter?
David Henderson
Sep 17 2020 at 8:03pm
I don’t know. I did the best job I could do of carefully reading, understanding, and stating their argument. They simply do a poor job of explaining deaths from despair.
Alex
Sep 17 2020 at 9:59pm
How about the possibility that people with college degrees are much less likely to suffer from mental illness? And the increase in death of despair could be attributed to more widespread use of very toxic drugs such as fentanyl?
JFA
Sep 18 2020 at 6:39am
“And the increase in death of despair could be attributed to more widespread use of very toxic drugs such as fentanyl?” I think this is the more likely culprit. Since most of those deaths aren’t in old people and since younger cohorts have a relatively low level baseline of mortality, the increased mortality from drug overdose deaths is going to show up pretty keenly in the groups that take those drugs.
As far as mental health, there has been an overall increase in the mortality for white males 25-34 and white females 25-54, even though college degree attainment as increased for those groups (see my comment above). Case and Deaton claim that all the increase in mortality is coming from the college non-grads. If poor mental health were the cause, it would have had to deteriorate for college non-grads a whole lot in order for that to affect overall group mortality. It’s certainly possible though.
Jon Murphy
Sep 18 2020 at 10:09am
Is that the case? This is just my personal observation, so take it for what its worth, but I’ve seen way more mental illness issues, and subsequent alcohol and drug abuse, since entering academia than I ever did outside.
Thomas Hutcheson
Sep 18 2020 at 11:04am
The novel insight of the Case-Deaton argument for me (which seems rather obvious after the fact) is that the curious US system of subsidizing health insurance by encouraging employers to “provide” health insurance as part of employee compensation, has the effect of discouraging employers from creating lower-paying jobs. The system acts in a sense like a minimum wage (like our equally curious system of financing Medicare and Social Security a wage tax) with the same employment- discouraging effects.
David Henderson
Sep 18 2020 at 12:03pm
Interesting point.
I took extensive notes on the book and read every footnote. I don’t recall their making that point. That doesn’t mean they didn’t make it. Can you point me to the page number where they say it? Thanks in advance.
Thomas Hutcheson
Sep 19 2020 at 9:30am
I have not read the book. I think I got the idea that they said it from an interview. It’s very unlikely to be my own genius insight. 🙂
Warren Platts
Sep 19 2020 at 5:43pm
I must say that the banter here comes off as rather Antoinettish: “The people have no factory jobs!””Then let them eat Iphones!” I am reminded of an antebellum apologist who said, “Slaves ought to be happy with their lot because, after all, the economists are in agreement that slaves are not unpaid, they simply get paid in kind–worth about $4.57 per hour by my reckoning.” Nobody bothered to ask the slave if he would rather have the $4.57 to buy his own food, clothing, and shelter as he saw fit.
As for Dave’s suggestion that at least a partial remedy would be to get rid of zoning regulations, it is precisely in those regions most affected (LA, San Francisco, New York, Chicago) where, apparently, the working class do NOI suffer from (significant) numbers of deaths of despair. Meanwhile, in Arkansas, Kentucky, Mississippi, and West Virginia, housing is inexpensive. If we go by that correlation, we need MORE zoning regulations!
Anyway, you don’t have to look far to find the root cause. If you need a correlation, look at factory jobs over the time period. Samuelson in 2004 (1940 actually) warned us this was going to happen: that free trade & mass immigration would lead to the immiseration of U.S. blue collar workers. Indeed, Ricardo himself, by 1817, had it figured out:
“The natural price of labour, therefore, depends on the price of the food, necessaries, and conveniences required for the support of the labourer and his family….
“The market price of labour is the price which is really paid for it, from the natural operation of the proportion of the supply to the demand; labour is dear when it is scarce, and cheap when it is plentiful….
“It is when the market price of labour exceeds its natural price, that the condition of the labourer is flourishing and happy, that he has it in his power to command a greater proportion of the necessaries and enjoyments of life, and therefore to rear a healthy and numerous family….
“When the market price of labour is below its natural price, the condition of the labourers is most wretched: then poverty deprives them of those comforts which custom renders absolute necessaries. It is only after their privations have reduced their number, or the demand for labour has increased, that the market price of labour will rise to its natural price.”
There it is: according to mainstream economic theory, when the market price for labor is below the natural price of labor, Malthusian effects are predicted to occur. And the observed prediction is actually much worse than described above: I think it was one of Autor’s papers where they showed that the decline in birth rates was like three or four times the decline in survivorship. Thus the demographic effects of the immiseration of the white working class are worse than the death rates would suggest.
Ricardo not only tells us what is wrong, he also tells us why it is wrong: the market price of labour is determined by the supply of labour and the demand for labour: “labour is cheap when it is plentiful.”
Thus, the solution (if 600,000 unnecessary deaths are really a problem–one wonders based on some of the comments above) is obvious: maybe put the brakes on mass immigration and maybe stop requesting our workers to compete against foreign workers who make $2/hour and whose governments employ unfair mercantilist trade policies.
Just a thought..
Nathan
Sep 20 2020 at 9:55pm
Maybe the book gets the causal factor backwards. In the past, getting a college degree might have been a sign of someone planning well for the future. Today, it’s more likely a sign of someone who cannot envision a future in which they have the agency to plan anything.
In other words, the type of person who would do well in an environment that encourages adventure or risk, but requires some initial encouragement by peers to make an action, does badly in an environment where the symbols of adventure and risk (a college degree, moving state to attend a school, taking out a loan, etc) are no longer risky at all, they are low bar status quo options.
Middle-age Europeans tend to desire adventure more than their other ethnic peers. Many of the greatest European explorations were completed by middle-age men. The internet was the last great unexplored world. And in an era of global capital, most small businesses are essentially just deniable R&D for the major conglomerates. There is no real chance of building anything great commercially.
Going to college is part of the plug-and-play life, it’s the equivalent of reading the instructions on the back of an IKEA box. It is the simulacrum of adventure and risk, not the real thing. That might be fine for certain enthnicities like the Asian community, who don’t appear to really enjoy sailing or oceangoing adventure like Europeans do. But a life of following instructions is not really all that exciting for middle-age European men.
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