There are reasons to be optimistic, and they rest not on science fiction but within the badly misnamed “dismal science,” economics.
Forget the talk of recession. The world is about to enter a new era in which miracle drugs will conquer cancer and other killer diseases and technological and scientific advances will trigger unprecedented economic growth and global prosperity.
Pie in the sky optimism? Perhaps. But there are reasons to be optimistic, and they rest not on science fiction but within the badly misnamed “dismal science,” economics.
To understand why economics triggers such optimism, imagine that there are two deadly diseases. One disease is relatively rare, the other common. If you had to choose, would you rather be afflicted with the rare or the common disease?
If you don’t want to die, it’s much better to have the common disease. The reason? The cost of developing drugs for rare and common diseases are about the same, but the revenues aren’t. Pharmaceutical companies concentrate on drugs with larger markets because larger markets mean more profits.
As a result, there are more drugs to treat diseases with a lot of patients than to treat rare diseases, and more drugs means greater life expectancy. Patients diagnosed with rare diseases — those ranked at the bottom quarter in terms of how frequently they are diagnosed — are 45% more likely to die before age 55 than are patients diagnosed with more common diseases.
So imagine this: If China and India were as wealthy as the U.S., the market for cancer drugs would be eight times larger than it is today.
Of course, China and India are not yet as wealthy as the U.S., but their economies are growing rapidly, and with them, the market for new drugs. Cancer is now China’s leading killer, with spending on treatment increasing by 17% per year. To be close to the Chinese market, AstraZeneca and Novartis are building major research facilities in China, which will benefit patients everywhere.
Like pharmaceuticals, new computer chips, software and chemicals also require large research and development (R&D) expenditures. As India, China and other countries become wealthier, companies will increase their worldwide R&D investments. Most importantly, as markets expand, companies and countries will put to work the greatest asset of all for the betterment of mankind: brain power.
Amazingly, there are only about 6 million scientists and engineers in the entire world, nearly a quarter of whom are in the U.S. Poverty means that millions of potentially world-class scientists today spend their lives trying to eke out a subsistence living, rather than leading mankind’s charge into the future. But if the world as a whole were as wealthy as the U.S. and were devoting the same share of population to research and development, there would be more than five times as many scientists and engineers worldwide.
People used to think that more population was bad for growth. In this view, people are stomachs — they eat, leaving less for everyone else. But once we realize the importance of ideas in the economy, people become brains — they innovate, creating more for everyone else.
New ideas mean more growth, and even small changes in economic growth rates produce large economic and social benefits. At current income levels, with an inflation-adjusted growth rate of 3% per year, America’s real per capita gross domestic product would exceed $1 million per year in just over 100 years, more than 22 times higher than it is today. Growth like that could solve many problems.
In the 20th century, two world wars diverted the energy of two generations from production to destruction. When the horrors ended, the world was left hobbled and split. Communism isolated much of the world, reducing trade in goods and ideas — to everyone’s detriment. World poverty meant that the U.S. and a few other countries shouldered the burdens of advancing knowledge nearly alone.
The battles of the 20th century were not fought in vain. Trade, development and the free flow of people and ideas are uniting all of humanity, maximizing the incentives and the means to produce new ideas. This gives us reason to be highly optimistic about the future.
Republished with permission from the Independent Institute.
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As wonderful as that all sounds, I don't see how it is especially well supported by the "dismal science". The "free movement" of third world workers into first world countries, all of which operate under income redistribution schemes, is almost sure to have great benefits for third world workers, but not as much for the first world ones. Likewise, subsidizing an exploding elderly population due to increased longevity through advances in science in medicine will also be an economic nightmare. That's completely ignoring the social and cultural impact of larger populations, scarcer resources, and internationalism. That's not to say there's nothing to be optimistic about, but we also shouldn't be naively over-optimistic.
Comment by Patrick Mulligan | February 1, 2008
Having been attacked by a 1 per 100,000 illness I can appreciate your comments. But why is it that we are so obsessed with health? Even conflating well being with insurance our politicians imply that the lives of the “poor” will be shortened without HillaryCare. So what? Are we not the most healthy generation and the most healthy country in history? OK, maybe there are a few places in the world that are better, but basically we are pretty well off. It was almost unknown in my grandparents’ time to be without a child who had died young or a sibling who died well before retirement age. Now every town has an old folks home, or two, full of bodies of people being kept alive well past the point of knowing who they are or where they are. Each of these bodies takes up medical resources in the form of beds, pills, doctors, nurses, and social workers, and custodians at a rate many times that of a 35 year old.
At the same time we kill millions of unborn babies every year while complaining about co-pays for a 1 year old and spending a fortune to extend the life of a deformed child from 3 to 6. None of this makes any sense and no one seems to be able to talk about it. Let’s get back to understanding that life is a finite gift from God.
Oh, and don’t get me started on how those beginning a productive life at 25 and retiring at 55 compares to those that lived only 50 years ago. It reminds me of the guy that said he wanted a job that started at noon and ended at 1 PM with an hour for lunch. At least he was smiling when he said that.
Comment by Ivan Ivanovich | February 1, 2008