Life Expectancy, Medical Testing, and Human Capital Investment

Becker Brown Bag Lecture by Emily Oster - April 18, 2013

When facing a grim diagnosis of a life-shortening incurable disease, ignorance may be bliss—or at least a desirable— state and knowledge will change your life choices, according to research by Emily Oster, a faculty member with the Institute’s Chicago Price Theory Initiative.

With access to health information expanding dramatically in recent decades, economists wonder, do people want information about the risks of developing a disease? Once they have it, how will their behaviors change?

Emily Oster

Oster, an associate professor of Economics at Chicago Booth, found that those at risk for Huntington’s disease typically don’t want to know whether they carry the gene for this devastating condition. She shared her findings with Chicago Booth MBA students at a Becker Brown Bag lecture on April 18, 2013

Huntington’s is a degenerative neuromuscular disorder that destroys muscle coordination and has cognitive effects. Symptoms typically appear between age 30 and 50, leading to death around age 60. If one parent has Huntington’s, there is a 50 percent chance of inheriting the gene, and all who carry the gene develop the disease. There is no significant treatment and no cure.

A relatively inexpensive test has been available since the Huntington’s gene was isolated in 1993. Yet In a study of 1,000 people who had one parent with the disease, demand for the genetic test was very low, Oster found. “Only 5 percent undergo testing,” she said. This is consistent with findings for similar untreatable diseases, but much lower than testing for breast cancer genes.

Once people do know they carry the gene, however, they make different life choices. Facing a shortened life span, they are less likely to invest in higher education but have children earlier.

Testing increases as symptoms begin to develop and the chance of a positive result is higher. “The group most likely to be tested is the group with symptomatic scores indicating they almost certainly have the disease. In other words, those most likely to be told bad news are most likely to seek it out.”

“Economists want to know why people are resistant to testing,” Oster said. “That is inconsistent with economic models that hold that more information is better, and it’s also important for policy.”

Oster offered a possible explanation: ignorance is bliss. She theorized that people avoid testing because they value anticipation—the period of not knowing their fate. “If you are untested, you can decide what to believe, and make choices in accordance with those beliefs,” she explained. “Those choices have long-term consequences. Eventually, the truth comes out, and if you have the wrong beliefs, you will have made wrong life decisions.”

“The flip side is that you enjoyed this valuable anticipation period living your life as if all is fine. A true rational utility-maximizing person may choose not to know because value of clinging to optimistic beliefs outweighs the risk of making the wrong decision.”

This could explain why more people seek testing when the disease becomes apparent. “As it becomes more likely you are sick, the benefits of testing outweigh the cost because you can’t pretend anymore,” she said.

Oster also explored behavioral differences on major life decisions among the tested and untested, focusing primarily on investment in education. Human capital theory would predict that people with the disease would be less likely to seek advanced education if they faced a shorter lifespan for that investment to pay off.

That proved true; those tested positive before age 28 were much less likely to enroll in college and 30 percentage points less likely complete a degree. Very few pursued graduate level education. Likewise, those with the disease were less likely to seek job training.

She also examined an array of financial, health, and lifestyle behaviors. One striking result was that people who knew their disease status were more likely to have children, despite the risk of passing on the gene to the next generation. “I find the fertility results very puzzling,” Oster said. “One way of thinking about this is that people are making a trade-off—the earlier they have their children the more time they will have to spend with them—and being optimistic that in the next generation we will know how to fix this.”

About the series

The Becker Brown Bag Series was created to provide an informal setting in which prominent economists can present cutting-edge research and engage MBA students in discussion. The talks highlight the practical use of economics for answering real-world questions pertinent to businesses and policy makers.

While the Becker Brown Bag Series is directed towards current MBA students, alumni, faculty, and staff are welcome to attend. Brown Bags occur one to two times per quarter, with most events being held at Chicago Booth’s Charles M. Harper Center.