Economics of mental illnesses

Abstract

This paper is a literature review on the effects mental illnesses have on individuals' economic performance in the short and long-term. I will be doing a systematic review of the direct and indirect costs and how exactly they are formed analysing how mental illnesses affect one’s risk awareness, decision making and loss of potential and using behavioural economics as a tool to understand why precisely these effects are seen. These will then be used to take a more specific look at how and why they affect particular parts of life such as education, work and employment, family and social life, poverty and lost healthy years. By doing so, we can better understand the aggregated costs estimated by studies already conducted. This paper aims to better inform the reader on the sheer size of the negative impact caused by mental illnesses, in doing so, raising awareness and understanding of the matter. The cost of mental illnesses varies between countries, but a consistent cost of 3%-5% of countries GDP can be seen. Most of the costs are due to lost healthy years and an increase in absenteeism and presenteeism. Tremendous treatment gaps ranging from only 10%-50% of mentally ill people getting help, varying between countries. This paper also touches on the matter of incentives to invest in mental health and how some studies have shown a cost-benefit ratio of 2-3 on investments into mental health.