moneyFYI
Financial Freedom Is Merely Organized Common Sense
What Kills Us
Mortality rates matter
I have often been intrigued by how people are astounded by the idea that average life expectancy is now 80 or whatever and it used to be 60.
That has a huge effect on public policy and things like government pensions and healthcare. The question is, as always, “Does an average mean anything?”
Mortality then and now.
If we go back 150 years or so, we find life expectancy to be much less. In Europe around 1880 it was 60. Today 20 years longer. Does that matter really? Averages include much more data than the single number that falls out of the calculation. Suppose we look and see that child mortality was very high. One of my great grandmothers had 7 children of whom 3 lived past age 5. My grandmother lived to be 90, but her family’s average life was 31. No child lived anything close to 31. age 3 and 58 being the closest.
- Child mortality is much lower now. Around a tenth of what it was.
- Death while giving birth was not uncommon. One of my great grandmothers died at 25.
- Work and other accidents were lethal too. Many young men died.
- The interesting one is death from infectious diseases. Diphtheria, pneumonia, typhoid, tuberculosis and the like. Here is an interesting graphic that shows the effect.
Today, deaths from infectious diseases are very low comparatively. The Spanish flu epidemic is quite clear.
A tribute to modern medicines and modern medicine practices.
The death rate from other causes stayed quite level from about 1920 to 1970 and tben it fell. Could be car safety features.
The effect on public policy.
There are some obvious ones. In no particular order.
- There will be fewer children. People don’t need large families to provide enough adults.
- Pensions should be based on survival rate from some point other than birth. Survival from age 50 today is better than it was but not so much as from birth. Heart disease treatment and reduced smoking appear to matter.
- Healthcare will cost more. Older people will be a bigger share of the population. Fewer children and more old people is hard on health care expenditures.
- Life insurance will have lower premiums.
- Disability insurance will have higher premiums. Things that used to kill you now merely disable you.
- Interest rates will tend to be low compared to the 60s through the 90s. Fewer young people. They borrow more than older people. Businesses have fewer physical assets. Interest tends to be priced on a supply and demand basis.
- People will work longer than age 60 or so. Better health. Longer need for money.
People, businesses, and governments must change
Businesses and governments should direct programs to actual and probable future conditions. People do not have the resources to build clear anticipation and should seek help from others in that regard. Executive decision making relies heavily on expectations for the future. Administration relies on the past. When the past is very different form the future, people make easy mistakes. Some mistakes won’t kill us, but all mistakes have a cost.
Always remember you will live the entirety of the rest of your life in the future. If old rules and observations do not apply, you must change your approach. As an individual, be open minded and curious. As a voter, support the people who look forward and expect the future to be quite different.
I help business owners, professionals, and others understand and manage risk and other financial issues. To help them achieve their goals, I use tax efficiencies and design advantages to acquire more efficient income and larger, more liquid estates.
In previous careers, I have been a partner in a large, international public accounting firm, CEO of a software start-up, a partner in an energy management system importer, and briefly in the restaurant business.
Please be in touch if I can help you. don@moneyfyi.com 705-927-4770
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