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Born Lucky, Live Long?

Posted By Barry Ritholtz On January 11, 2004 @ 10:42 pm In Finance,Media | Comments Disabled

The Washington Post [1] reports today that a Dutch study has found:

“People who happen to be born in good economic times live longer than those who aren’t and the apparent payoff from an economically fortuitous birthday lasts a lifetime, according to a team of European researchers.”

Um, no.

I haven’t seen the raw data from the study, but I did read through much of the actual IZA report [2]. There appears to be some glaring potential flaws in this study, the most notable of which is this: Is there a causal relationship between economic expansions and mortality? Or are these merely two unrelated issues occurring contemporaneously?

I can pair all kinds of unrelated phenomena with a positive correlation, but that doesn’t mean that one causes the other. Imagine a group of school superintendents in California noticing that when Las Vegas gambling receipts rise, school budgets go also go. Should they try to increase Las Vegas tourism as a method of improving their own budgetary situations — or, is the same underlying factor responsible for both? It’s more likely that an expanding economy both improves state budgets for schools and enhances people’s abilities to take vacations.

Applying the same logic to the 19th century Dutch study: Is it possible that epidemics had a negative impact on both mortality and economic expansions? One would imagine that productivity slows and the sale of goods and services decreases during widespread health crises. (You don’t consume or produce much while dead or incapacitated). How much did people’s fear of contracting a serious or mortal disease during infectious outbreaks curtail their economic activity?

One can even imagine conversations like this:

“What? Go to the market today? Are you daft, man? Don’t you know there is an out break of cholera/smallpox/influenza/fill in the blank?”

I suspect the better question is this: “Did widespread epidemics in the 19th century cause both an increase in mortality and decrease in economic activity?”

Some studies (See Prof. Chris Ruhm of UNC [3]) conclude the exact opposite relationships — i.e., good times make you sick. I haven’t correlated these studies either, but I am always wary when two extremely complex phenomena are “demonstrated” to have a causal relationships. Life tends to be more complex than that.

Sources:
The GOP Problem With Women (Born Lucky, Live Long) [1]
Richard Morin
Washington Post, Sunday, January 11, 2004; Page B05

http://www.washingtonpost.com/wp-dyn/articles/A5050-2004Jan9_2.html

See also Department of Economics at the University of North Carolina at Greensboro [3]

“Good Times Make You Sick”, Journal of Health Economics, Vol. 24, No. 4, July 2003, pp. 637-658.
“Does Drinking Really Decrease in Bad Times?,” Journal of Health Economics, Vol. 21, No. 4, pp. 659-678.
“Are Recessions Good For Your Health?,” Quarterly Journal of Economics, Vol. 115, No. 2, May 2000, pp. 617-650.
“Deaths Rise in Good Economic Times: Evidence From the OECD”

Hat tip to Marginal Revolution [4]


Article printed from The Big Picture: http://www.ritholtz.com/blog

URL to article: http://www.ritholtz.com/blog/2004/01/born-lucky-live-long/

URLs in this post:

[1] Washington Post: http://www.washingtonpost.com/wp-dyn/articles/A5050-2004Jan9_2.html

[2] IZA report: http://www.iza.org/index_html?mainframe=http%3A//www.iza.org/iza/en/webcontent/personnel/photos/index_html%3Fkey%3D164

[3] Prof. Chris Ruhm of UNC: http://www.uncg.edu/bae/people/ruhm/

[4] Marginal Revolution: http://www.marginalrevolution.com/marginalrevolution/2004/01/have_your_durin.html

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