National accounts of economic output and prosperity, such as gross domestic product (GDP) or net domestic product (NDP), offer an incomplete picture of economic well-being. Building on previous work to improve estimates of the levels of economic output at a given point in time, this paper proposes a new methodology to measure economic fluctuations over time that incorporates monetized changes in health. We apply the new methods to U.S. and global national accounts over the past 50 years. In particular, we incorporate into an expanded measure of GDP the dollar losses associated with mortality. We treat mortality and morbidity as depreciation of human capital analogous to how net domestic product (NDP) treats depreciation of physical capital. Because mortality tends to be pro-cyclical, fluctuations in standard GDP are in part offset by human depreciation; booms are not as valuable because of greater mortality, and recessions are not as costly because of lower mortality. Consequently, when the depreciation in health is monetized and incorporated into the business cycle, fluctuations in the United States and elsewhere appear milder than commonly measured. We find that several “recessions” during the past 50 years were not actually recessions, and that adjusting for mortality, on average, reduces the severity of both U.S. and international recessions by more than 2% of GDP and reduces measured fluctuations around trend by 30%. Our results offer new perspectives on Keynesian style fiscal- and monetary policies intended to counteract the cycle: boosting output in recessions could generate another burst in mortality.

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