A great piece from Adam Davidson:
“When gross domestic
product was first defined, in the nineteen-forties, by the economist Simon
Kuznets, the goal was to find one simple measure that could serve as a
thermometer for the economy: when the number rose, things were probably going better
than when the number fell. Kuznets, of course, knew that this was an
oversimplification, but a helpful one. Of all the countless ways people make
and spend money, Kuznets identified three categories that he believed could
cover everything: consumption, investment, and government spending. (He also
included exports and subtracted imports, to limit G.D.P. to economic activity
within one country, but that’s another story.) When he devised the number,
health-care expenditure was minuscule, making up about 0.4 per cent of the
over-all G.D.P. There seemed no reason to carve it out as its own category.
Today, health spending makes up more than seventeen per cent of G.D.P. That
spending is divided into the major categories. You “consume” cancer treatments
or a checkup or a week in the hospital. A hospital might invest in a new M.R.I.
machine or a cardiac-treatment wing. And the government spends money through
Medicare, Medicaid, and the Department of Veterans Affairs, among other ways.
Health care is the single largest government expenditure by quite a lot,
typically nearly double the defense budget. However, dividing health
expenditures into these categories misses an important economic reality:
health-care spending has a substantial impact on every other sort of economic
activity.”