Harley Hahn - Economics Explained

Money and
Economics

You Can Be Part of the 1 Percent

(March 27, 2012)

Summary: To be in the 1 percent of income earners in the United States, you need to earn at least $506,000 a year. Alternatively, you can be in the top 1 percent with respect to behaviors that lead to enhanced cardiovascular health

In the fall of 2012, the Occupy movement popularized the idea that a great deal of wealth and power was concentrated in the hands of the top 1 percent of income earners. Although it might seem a bit elitist, I am wondering if you might like to become part of the 1 percent? If so, I can show you how to do it.

To begin, we have to ask: What exactly do we mean by the 1 percent? If we are referring to income in the United States, joining the top 1 percent would require you to earn at least $506,000 a year. Might this happen? Maybe yes, but probably not. Earning $506,000 a year, on demand, is extremely difficult, as it depends on too many factors beyond your control.

However, what if, economically speaking, there happened to be another "1 percent" club you could join, one that would add even more value to your life than simply raising your income? And what if being able to join was completely under your control? Indeed, such an elite group exists and, as sure as you are reading this, becoming a member is definitely within your reach. Moreover, even if you don't quite make it, there is no downside in trying.

So what is this 1 percent?

To answer that question, we need to digress for a moment to discuss an article that appeared in the March 16, 2012, issue of the Journal of the American Medical Association, "Trends in Cardiovascular Health Metrics and Associations With All-Cause and CVD Mortality Among US Adults".

(CVD stands for cardiovascular disease, such as heart disease and strokes. A metric is a way of measuring something.)

The article starts by describing seven goals the American Heart Association suggests we all meet to improve our cardiovascular health:

1. Not smoking.
2. Being physically active.
3. Having normal blood pressure levels.
4. Having normal blood glucose levels.
5. Having normal total cholesterol levels.
6. Having normal weight.
7. Eating a healthy diet.

The article discusses how effective these seven guidelines are for the general population. To study the question, the researchers correlated the how closely people followed the guidelines with how long they lived. After studying mortality statistics over a total of 14.5 years, they compared people who met no more than one of the goals with people who met at least six of the goals.

Over the time of the study, the people who met at least six of the goals had a:

• 75% lower chance of dying from cardiovascular disease.
• 40% lower chance of dying of cancer.
• 50% lower chance of dying for any reason.

Here is another 1 Percent club to which you can aspire.

Clearly, it is desirable to follow as many of these guidelines as you can. And yet, the researchers found almost everyone fell short of the ideal. In fact, the number of people who followed all seven guidelines was — you guessed it — 1 percent! So here is another 1 percent club to which you can aspire.

You and I would probably agree that it is better to not die prematurely from cardiovascular disease, cancer, or anything else. But is this really an economics issue?

The answer is yes, for several reasons.

Cardiovascular disease is the leading cause of death in the United States. Each year, it kills more than 800,000 people, accounting for 1 out of 3 deaths. (To compare, cancer kills about 500,000 Americans each year.)

The article I mentioned above estimates the annual cost of cardiovascular disease to the U.S. economy at $444 billion. The U.S. National Cancer Institute estimates the annual cost of cancer to be $125 billion. Together, those two numbers add up to well over half a trillion dollars a year. Thus, anything we can do to lower the mortality of the general population caused by either of these diseases will have a significant economic effect on the country.

But those are aggregate costs. What about the costs to you as an individual?

Heart disease, strokes, and cancer are expensive. Even with insurance, you are likely to incur high out-of-pocket costs. So much so that many people are, unfortunately, forced into bankruptcy. In addition, serious medical conditions also impose what economists refer to as an "opportunity cost": the money you lose by not being able to work while you are sick.

Conversely, if you are healthy, you are much less likely to require expensive medical treatment or hospitalization, which means you will have significantly lower personal and family expenses. You will also be able to earn and contribute a lot more to the overall economy.

In its most general sense, economics is the study of how wealth is produced, consumed, and transferred. Although economists spend a lot of time talking about money, we do recognize that not all wealth can be understood in purely monetary terms. As such, it is universally accepted that good health has a value that transcends money.

Perhaps even more important: no matter how rich you are, the most valuable resource you have at your disposal is not money, but time.

Consider the following. In 2010, Steve Jobs' wealth was estimated by Forbes Magazine at $8.3 billion. There is no doubt that, about a year later, when Jobs died of cancer at the relatively young age of 56, he was a very wealthy man, certainly a member of the top 1 percent (money) club. And yet, how much of that wealth do you think he would have been willing to give up for 10 more years of life? What about 1 more year of life? What about 10 more days of life? These are, in fact, economic questions.

To minimize your chances of your ever having to face such questions, simply follow these seven specific guidelines:

1. Tobacco: None at all in any form.
2. Exercise: 30 minutes a day.
3. Blood pressure: No more than 115/75.
4. Blood glucose: Less than 100 mg/dL.
5. Total cholesterol: less than 200 mg/dL.
6. Weight: BMI (body mass index) less than 25.
7. Diet: Vegetables, fruit, whole grains, fish, water. No sugars, no refined carbohydrates, no junk food.

So which group do you think pays better dividends:

The Money 1 Percent, which is almost impossible to join and offers you nothing but money? Or the Healthy 1 Percent, where you'll find real wealth in the form of a longer, healthier life?

To an economist, the answer is obvious.